Benefits Strategy

Wellness Rewards Programs: Points vs Dollars

Written by Gabe

Research has shown time and again that incentives are one of the best ways to support habit change, and people are noticing. In a recent survey, 60% of small businesses (see our guide on small business employee benefits) and over 90% of large businesses offered employee benefits through wellness rewards and incentives. Wellness rewards programs can use all sorts of incentive-based systems to encourage employees to make healthier choices in their daily lives (and accordingly incentive management systems to handle the administrative burden) On that note, check out these guides on benefits administration systems, and why employee benefits are important

If you’re considering implementing gym reimbursements in your workplace, here is some key information you should consider before rolling out your program.

What is a Wellness Rewards Program?

A wellness rewards program is an initiative employers use to recognize and pay people for taking actions to enhance their health and wellness. Typically, employees are incentivized to take healthy actions such as exercising on a regular basis, eating a nutritious diet, getting adequate sleep, and engaging in stress-reduction activities. Employers, insurance companies, and other organisations may offer wellness rewards programs to encourage people to make healthy choices and enhance their overall well-being. These programs usually involve collecting points or rewards for participating in specific wellness-related activities, which may then be redeemed for a variety of benefits or incentives. Gift cards, discounts on gym memberships or healthy food, or access to special events or experiences are some examples of prizes that may be offered through a wellness rewards program.

Why Employers should offer a Wellness Rewards Program?

Wellness programs that include some sort of incentive (usually points, or dollars) help move the needle on improving population health, as well as enhance the feeling of belonging in the workplace. Here are some findings that show the impact of wellness rewards programs:

  • Employees are up to ten times more likely to firmly believe that they belong at their organization when wellness programs are based on recognition.
  • Employees who say they experienced gratitude the day before are up to four times more likely to strongly agree that their employer cares about their well-being.
  • Employees who receive public recognition, or workplace rewards are up to three times more likely to believe they belong at work.
  • Employees who report that they have a digital rewards program are as much as 4x as likely to strongly agree that they have a best friend at work.

How does a wellness rewards program work?

A wellness rewards program can be established and implemented in a variety of ways. Here are some common components involved in setting up a wellness rewards program:

  1. Enrolment: In order to participate in a wellness rewards program, employees usually need to enroll by providing some personal information, and being made aware of all of the details for their given wellness rewards program. These details typically include:
    • Types of activities that are incentivized
    • How activities are tracked, and safely stored
    • How users can see their activities
    • What types of incentives are offered per activity
    • How to redeem their incentives
  2. Tracking: Participants typically track their wellness activities in order to earn incentives. Most wellness rewards programs use some sort of software in order to track activities accurately. Tracking is done in a variety of ways, such as using a mobile app, logging activities online, or submitting physical documentation.
  3. Earning incentives: Participants that complete activities are rewarded accordingly. Typically employers will reward employees for completing wellness activities, reaching certain milestones, or participating in group challenges or competitions. The types of activities that are incentivized will depend on your specific wellness rewards program.
  4. Redeeming incentives: This will depend on your set up (whether you use points, or dollars, and other factors). That being said, once a participant has earned enough rewards, they can usually redeem them for perks or incentives that administrators have set up for their wellness rewards program. When employers use rewards, they typically include:
    • Gift cards
    • Discounts on products
    • Discounts on services
    • Access to exclusive events and/or experiences
  5. Ongoing participation: Wellness rewards programs usually have ongoing participation requirements, because employers want to implement programs that will work over a long-term horizon. Sometimes employers will remove participants who fail to meet usage requirements, and may even disqualify any rewards that they have earned.
    • Side note: We don’t recommend disqualifying rewards that have been earned

A wellness rewards program’s overall purpose is to encourage people to prioritize their health and wellness by offering incentives to do so. Individuals who participate in the program and take actions to improve their well-being can earn incentives that can be utilized to improve their overall quality of life.

Are wellness rewards taxable?

A wellness rewards program may be taxable if it is a taxable fringe benefit. The IRS considers taxable fringe benefits to be any non-cash benefits that employees receive as a part of their employment, which are not a part of their regular salary or wages.

However, the tax treatment of a wellness rewards program will depend on the specific details of your program, and how it is provided to employees. Here are a few key factors that affect the tax treatment of a wellness rewards program:

  1. How the program is provided: If a wellness rewards program is available to all employees, employers may be able to exclude these earnings from their employees taxable income. However, if the program is only available to certain employees, it may be taxable.
  2. The type of rewards offered: Tax treatments will differ by the type of rewards offered. For example, if a reward (ex., gym membership) is offered to all employees, and employees pay for it on a pre-tax basis, the reward can be excluded from an employee’s taxable income. Other types of monetary rewards such as cash, or gift cards may be taxable.
  3. The location of the employee: Tax treatment of wellness rewards depends on the jurisdiction in which your given employee resides in. This is an especially important consideration in the era of remote work, where employees may be spread across various tax jurisdictions.

You should always consult with a tax professional, or refer to the local tax laws and regulation s to determine the tax treatment of any benefits you provide to employees.

Comparing using Points or Dollars for your Wellness Rewards Program

While we typically recommend giving employees rewards in dollars (or whatever currency is used in your country), many corporate wellness programs choose to employ a point system instead. For example, do you earn 10 points or $3 every time you go to the gym? Either way, employees can save up their points or dollars to get gift cards, merchandise, HSA/FSA contributions (check out our introduction to health savings accounts), paycheque contributions, health insurance discounts, or other wellness rewards; but on a day-to-day basis should they accumulate points or dollars? Each wellness incentive structure has its pros and cons. Here are some things to consider when choosing which wellness rewards structure will be right for your company’s wellness program:

Benefits of using Points

  • Different Prizes for Different Levels – A point system allows employees to save up for tangible gifts at different levels. Reach 200 points, get a gym bag; reach 500 points, get a gift card; reach 800 points and get a premium differential. This structure gives you the ability to offer different types of incentives, which can make your wellness rewards more affordable. You may want to implement an employee benefits program to administer this easily.
  • Paid Time Off – Instead of providing money or gifts, a point system can allow employees to save up for paid time off or flex time.
  • Keeps Money Out of It – Directly using finances can discourage employees if they’re low amounts. It’s more appealing to think of 50 points earning a hat, instead of 50 points earning 5 dollars. Similarly, offering charitable donations based on points can be an effective wellness reward mechanism as well. But be weary of this approach, hiding your lack of budget behind points can build resentment and distrust in the program if it doesn’t done carefully.

Benefits of using Dollars

  • Clear Value – If you had the option of getting $10 or 100 points for some activity, you’d usually take the money because you don’t know what the points are worth and you’d assume that it isn’t very much. This skepticism in points has been ingrained in us by credit card points, airline miles, and other poorly designed loyalty programs. However, one thing to consider is that with credit cards, you can use your points to get cash back, travel perks, and other valuable rewards.
    Points can have varying or even changing values, and therefore it can be unappealing. Furthermore, people usually assume that point systems mean they’ll redeem smaller rewards. That’s why providing a simple incentive in dollars makes it crystal clear and immediately valuable for all employees.
  • Immediate Gratification – Rewarding employees, especially for fitness goals, is effective because employees get immediate gratification for completing an activity. Many employees will be encouraged by earning an immediate reward for their actions, as opposed to making sense of the value of a point and the inferring the reward they get later.
  • Flexibility – Point systems can be pretty flexible, but hard earned $$$ can allow employees to put their money where they need it to go right away. Instead of saving up points to purchase a gift or paid time off, employees can use financial incentives right away to build wealth.

What do we recommend?

We ran the numbers and we see that we get higher engagement rates using dollars. So if your goal is to get the highest engagement rates possible, then we definitely recommend dollars. However, if your company is very budget conscious, points offer a fantastic alternative that limits spend while still incentivizing employees to do the right thing. Our recommendation for most companies is to offer wellness incentives in dollars and additionally use points to run wellness challenges. That way you get the best of both worlds!

Check out our guides below to implement a wellness program at your company:

Whether you decide to use a point system or offer financial incentives directly, Incentfit has your back! Incentfit’s app can show employees in real time how much they’ve earned whether it’s point or dollars. Contact us to learn how you can reward employees for healthy behaviors!

Corporate Wellness Benefit Managers having a discussion while looking at an electronic tablet.

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