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Employee Rewards

What you need to know about taxes and liability when rewarding with experiences

We’ve seen first-hand the impact experiential rewards can have on your employees’ engagement and overall company culture. You can use them to celebrate employee anniversaries, reinforce company values, and even help promote a better work-life balance.

But we also know sending your people on experiences like a sunset skytour, wine tastings, or glamping trips is still a relatively new approach to employee rewards, which raises some questions.

For example, some typical queries we get about rewarding with experiences include:

  • Are employee rewards and incentives taxable?
  • How do you handle liability from employee rewards programs?
  • What’s the reward booking experience look like for my employees?

We answer these FAQs and dig into what you need to know about experiential rewards so you can feel fully prepared to partner with us and bring Blueboard to your organization. 

How do you handle liability from employee rewards programs?

From virtual golf getaways to horseback riding lessons, Blueboard gives your employees opportunities to explore their passions and try new things. 

A color photograph of two people on horseback on a sunny day outside. There are yellow sunflowers between them as they each sit on top of their horses.
Mayra S. (on right) enjoys a horseback riding lesson, an employee reward Mayra selected from the Blueboard experience menu.

However, like any activity, there can be risks, so liability must be a part of the conversation. 

Here are three ways that Blueboard addresses liability when rewarding with experiences:

1. Employees choose their rewards. 

Company events can be a fun way to recognize and celebrate your team, but they might not be everybody’s idea of a good time—which could lead to some liability concerns. In comparison, experiential rewards give your employees the power of choice. 

2. Award recipients must click on a non-editable waiver checkbox to redeem their reward. 

Once a recipient finds the experience they want to try, and before they can book, recipients must opt in and sign a booking liability waiver. Recipients sign by checking a box that acknowledges awareness of any rules and risks. This automated agreement is built into the Blueboard platform—and is a legally binding contract between the recipient and your organization—which is an additional layer of legal protection. 

3. Admins can add an additional, customized liability waiver into their Blueboard system. 

A reward recipient has to read and agree to the platform liability waiver before logging into the curated experiences menu, submitting their preferences, and filling out their profile. Blueboard’s platform liability waiver is built in and ready to use, and we recommend that as a program best practice. However, if your organization has its own liability waiver, you can add a text liability form to the Blueboard platform once approved by our legal team.

A screenshot of an online liability waiver and text that Blueboard award recipients must read and check to continue booking a Blueboard experience.
A screenshot of the Blueboard liability waiver.

Are Blueboard experiential rewards taxable? 

Employee experience rewards have an inherent cash value which the IRS can consider as compensation, making them taxable. However, safety or length-of-service rewards (i.e., anniversary awards) can be tax-exempt as long as the program meets some stringent IRS requirements.

Now you may wonder who pays the tax—the employee or the employer? Well, there are pros and cons to both options. 

Option 1: Employee pays the tax.

  • Pros: This option relieves your organization of the tax burden, which can help your bottom line.
  • Cons: Your employees would pay a percentage (that varies by an individual’s state and income tax obligations) of the value of the reward in income tax. The amount would likely come out of their paycheck after receiving their reward, which could sour the experience. The negative fallout from passing on the taxes from an experiential award could also hurt your company’s overall recognition program efforts.

Option 2: Employer pays the tax.

  • Pros: Your employees can enjoy their reward without worrying about taxes or seeing a deduction on their next paycheck.
  • Cons: You will need to increase your company’s recognition budget to cover the taxes—all Blueboard rewards are taxable.

While we don’t recommend passing the tax liability from recognition rewards to employees, if you decide to, you could phrase this information as follows:

  • “Taxes will be the responsibility of the recipient.”
  • “Applicable taxes will apply to your reward. The full value of the experience the employee chooses will be taxed as supplemental income. The taxes will be deducted from the employee's paycheck on the last payday of the month."
Blueboard best practice tip: Clearly communicate tax information regarding employee rewards early on. For example, you could socialize tax info at the recognition program launch or during a dedicated, all-company event like your next all-hands meeting.

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How does taxation work with experiential employee rewards?

Before we dive further into the world of tax liability from rewards programs, a friendly reminder that we do not provide tax advice. We recommend you work directly with your organization's payroll team or tax attorney to determine the best tax management strategy.

To maximize the impact of your experiential rewards program, we recommend that your organization pay the taxes so your employee gets the total face value of the reward. You can do this by “grossing up” the employee reward by including the taxes the employee would’ve had to pay out of pocket. So, for example, if an experiential award is worth $1000, you would “gross up” the reward value in your accounting system—in this case, by $257.54—to cover the taxes.

You can find the taxable reward value in your Blueboard Admin Tools and export this as a CSV file at any time. Grossing up at the time of issuance (when a reward is sent) is a best practice. Typically, our clients pull reports with all rewards sent and their reward values on the same cadence that they run payroll. Doing so means their payroll team can gross up taxes on a rolling basis with each payroll cycle. Consult your finance and accounting team for more details on your internal processes.

What does the booking experience look like for my employees?

When you think of all the decisions involved in booking an experience (e.g., picking an activity, finalizing a date, figuring out payment, etc.), the whole planning process can quickly get overwhelming. 

Fortunately, our Concierge service removes all of those logistical barriers. We’ll pair your award recipient with a personal Concierge who will handle all the planning and scheduling work so your employees can focus on having a great time.

Watch the video below to see the employee booking process in action or keep reading to learn more about each step in the reward redemption flow.

  1. Create an account and answer a few quick questions. To start, your employees need to enter their location, preferred time zone, preferred contact number, and personal email to create their accounts. 
A screenshot of a computer screen with questions to create a Blueboard rewards account.
Blueboard reward recipients answer a few questions and are on their way to choosing an experience.
  1. Enter a location and find experiences nearby. Once they set up their account, your employees can review a curated menu of local experiences and pick their top choices. From meditation retreats to cooking classes to parkour lessons, there’s something for everyone. 
  1. Find your perfect experience and click "Connect with Concierge.” Submit any preferences––such as preferred dates, how many people are in their party, or if they need any accommodations––and Blueboard pairs award recipients with a Concierge to guide them through the planning process. The Concierge will reach out to the recipients via phone or email to finalize all the details. 
  1. A Concierge will work with reward recipients every step of the way. A Blueboard Concierge will schedule your employee's experience with their preferred provider and help fulfill any special needs or requirements. Your employee has the final say: nothing gets booked without their confirmation.
  1. Receive the experience itinerary from the Concierge and go #blueboarding. A Concierge will send your employee an email with all the booking details, so all they have to worry about is making the most of their experience. 

A new way to recognize and reward your employees. 

While company swag or plaques can get forgotten in a desk drawer, a Blueboard experience could help your employee create memories that could last a lifetime—like climbing Mile High in Denver or touring the South Coast of Iceland

Experiential rewards are also an incredibly powerful and personal way to invest in your employees and show them that you care about them. Just think: instead of sending a generic gift card or cash bonus, you could reward a nature-loving team member with a kayak tour on the clear, sparkling waters of Lake Tahoe.

A screenshot of a LinkedIn post with text on a white background, by an employee thanking their company for a Blueboard award. There are color photographs of the employee in a kayak in Lake Tahoe, with water, mountains, and close-ups of the kayak and paddle.
Katie A. shares photos celebrating a one-year work anniversary with a Blueboard experience: a kayaking tour on Lake Tahoe, in CA.

When considering a new employee rewards platform, it’s understandable to have a few questions. Now that you’re up to speed on the legal and financial aspects of experiential rewards you can start rewarding and sending your employees on incredible, memorable experiences with Blueboard. 

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