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Many organisations make awards based on the length of service of an employee. Reward Heads recently carried out a survey across our Retail and Hospitality group to find out what practice is today, in the context of younger employees in particular not staying at the same employer for long periods of time. Are Long Service awards an anachronism in 2024 or do we need to refine our definition of 'long'? What are the pros and cons of making the awards? And what kind of awards are given. Let's start with some definitions.
What are Length of Service awards?
Length of service awards are programmes designed to recognise and reward employees for continued loyalty to their organisation. The rewards provided can vary widely and often include one or more of the following:
The milestones at which rewards are rewards are provided also vary widely; organisations recognise individuals for length of service at anywhere from 1 year of service to over 50 years of service, although this is generally done at five-year intervals. A minority of organisations recognise milestones below five years, and these are generally organisations where extended tenure is not widely expected. Rewards tend to increase in generosity as employees reach longer milestones.
The case for Length of Service awards
Length of service awards are a specific area of recognition so let's take a look at recognition first.
Recognition is an important aspect of ensuring employee wellbeing and engagement along with retention. Employees need to feel that their work and contributions are valued, and that what they do matters. If employees don't feel valued, they can experience burnout, decreased mental wellbeing, and become disengaged from the organisation. Burned out, disengaged employees are less productive and less likely to stay with an organisation, which can have significant business impacts.
“Recognition helps foster a supportive, positive workplace culture, keeping your employees engaged and feeling appreciated”.
Recognition can be split into several categories; financial or non-financial, manager-led or peer-to-peer, and public or private. The methods used will depend on your organisation, its culture, and its needs. Each method has its own pros and cons, and employees will have their own preferences around how they prefer to be recognised. However, regardless of the methods used, a good recognition system should provide the ability to recognise employees at different times and in different ways; it's important to recognise good work in the moment but also to recognise larger or more on-going achievements (which your organisation may want to recognise more formally).
Recognising length of service milestones recognises employees for their ongoing loyalty and commitment to your organisation. It recognises the likely substantial contributions that they have made to the organisation, potentially over many years. Length of service awards are a chance to show employees that dedicating potentially a significant amount of their working life to your organisation has value and meaning, and that your organisation has seen their ongoing dedication. In a world where staying with the same company for a large part of your working life is no longer the norm, which is especially true for younger employees, staying with the same organisation for an extended period is something worth recognising.
It's also important to consider employee retention, which recognition and thus length of service awards can play a key part in. Employees are the most important part of an organisation; without their hard work, knowledge, and skills the organisation would grind to a halt. Over an employee's working life, they learn a variety of useful skills and knowledge, the intricacies of their role, function, and the organisation, and the company culture. This information can be key to the successful functioning of the organisation, but it may or may not be written down (especially if not part of a defined process or workflow) and certain skills may not be easily replaced. So, it's vital to retain valuable employees so that skills and knowledge aren't lost and so that the organisation doesn't have to invest time and money into training new employees who then may not end up being a good fit. Continuously recognising employees for their valuable contributions and throughout their working life with the organisation helps ensure they continue to feel valued and that what they do is meaningful, making them more likely to stay and valuable skills and knowledge to stay within the organisation.
What about the case against and watchouts?
While length of service awards can be a valuable tool, they can also have unintended consequences. Firstly, there is a risk of rewarding “bums on seats” rather than genuinely valuable contribution to an organisation. Someone could stay with an organisation for a long time, but that doesn't automatically mean they're performing highly or that they're contributing in a meaningful way. There is a risk that the length of service award programme ends up rewarding those who stay in a role because they're already there, rather than those who are consistently contributing meaningful value.
Similarly, there is a risk of rewarding repetition over development. A distinction we frequently cite when discussing personal performance is the idea of having 10 years of experience versus one year of experience 10 times over. Although someone may have been with an organisation for a long time, it doesn't mean that they have continued with personal and professional development, and thus that they may not have significantly improved their skills and knowledge after their first couple years. So, there is again a risk of rewarding those who stay where they are simply because they can, rather than those actively engaged in ongoing professional development and thus widening their ability to make meaningful contributions to the organisation.
There is also a risk that staff, particularly younger staff, may not consider them aspirational and thus not particularly meaningful. Again, we no longer live in a world where it's expected that people will stay with an organisation for most of their working life and this is particularly true of younger employees. If they don't believe that they will be with the organisation long enough to receive, for example, a 10-year milestone award, then it is unlikely to be a motivating reward for them. Organisations could consider awards at earlier milestones in light of the current climate.
There is also a tax watchout - HMRC have strict rules about such awards in terms of tax and National Insurance. For example, they will only exempt an award if it meets 3 criteria: the employee has worked for you for at least 20 years, the award is worth less than £50 per year of service and you haven't given them a long-service award in the last 10 years. So you can give a non-cash award with a value of up to £1,000 for 20 years' service but not if they have received and award at 10 or 15 years. You can, of course, make any award you like, but be aware that the individual would be liable for tax via their P11D and the employer for NI. For cash awards this needs to go through payroll as normal. As ever with tax, it is more complicated than these examples suggest so needs careful consideration.
Length of Service Awards In 2024: What is the market norm?
In April 2024, Reward Heads ran a survey with our Retail and Hospitality contacts that explored length of service awards asking organisations whether they have length of service awards at all and, if so, which milestones they recognise and what rewards they provide.
“We found that almost all respondents offered length of service awards; 94% of respondents said that they did so, so very much still typical.”
We found that organisations tended to recognise milestones at five-year increments from 5 through to 30 years of service, then again at 40 years. Some organisations recognised milestones below 5 years, but these were a minority. They most frequently recognised the 1- and 3-year milestones. Again, these may be organisations where there isn't a widespread expectation of extended service.
When looking at the rewards provided, we found that the most consistently popular option for rewarding employees was vouchers or points (which can then be used to choose a gift or voucher). These are likely the most popular option because of their versatility. They can be administered through a recognition or benefits platform and they can be used to give employees a choice in their final reward. By giving employees some choice in their reward, there is a lower risk of giving them something they don't want, can't use, or that doesn't align with their values. If employees feel they received a thoughtless or generic gift, then they may feel unappreciated or that it was a simply a box-ticking exercise and thus less engaged with the organisation, which is the opposite of the intended result when providing long service awards. It also lowers the risk of an organisation spending a large amount of money on something that is then disliked or unwanted; we found that rewards with a value of £500-£1000, and even over £1000, were common (especially at later milestones), so providing the means of choosing a gift reduces the risk of the money being essentially wasted compared to if the employee is given something they don't want or like.
How can Reward Heads help?
At Reward Heads, we are experts in all things Reward. If you need help understanding how your length of service awards (and recognition more generally) compare to the market or need help developing and implementing a recognition and length of service strategy or programme, then the Reward Heads team would love to support you.
Please reach out to Victoria Milford, our CEO, at rewardsolutions@rewardheads.co.uk.
We also offer Reward coaching modules, which are designed to help expand Reward knowledge within your organisation, and have some modules specially dedicated to Recognition, Benefits, and Wellbeing here - Coaching.
Victoria Milford - CEO