Using Budget Control Pricing for Employee Recognition

Employee Recognition Budget

C.A. Short is often asked the question, “Is it possible for you to give me a total cost analysis, down to the penny for our service award program?”. Most companies are shocked when our team is able to confidently answer them and say, “Yes, we can!”. 

The reason that organizations are surprised is that most employee recognition companies use what is called an “average pricing” model when designing service award programs. C.A. Short prefers to design employee recognition platforms with “budget control” pricing. Using this method means we are able to give our partners an exact number of what they can expect to spend and provide finite examples of rewards that are within their budget. In our opinion, this “average pricing” model is antiquated and, honestly, pretty deceptive.

Cost Breakdown for an Employee Recognition Budget

Here’s how a cost breakdown typically works. Organizations will set an annual budget for years of service milestones of employees. For example, 5 years of service = $205, 10 years of service = $370, 15 years of service = $685, etc. Your cost could be as low as $180 in your 5-year level or as high as $227.  Therefore, the average price of your 5-year level is technically within your budget of $205, even though you could spend as much as $227, depending on what award the employee selects. 

Employee Recognition Controlled Budget Model

With the above example, some awards can cost more or less based on their variety and employee choice. Using the “average price” model can stay within or under your budget, but can also lead you to spend more than you’ve allocated for. See how this can be tricky and potentially budget-busting?

So, what’s the alternative? The concept of a “budget control” fixed pricing model is specifically designed to accurately predict spending, control budgets, and keep you from explaining the coverage to your CFO.

A First Look at Budget Control Pricing for Employee Rewards

How does it work? A “budget control” pricing model works the opposite of “average pricing.” Using the same per years of service milestone example above with a budget control model, all awards in the 5 year level would be $205, no matter what service award the recipient chooses. It eliminates the likely possibility that your employee will choose a higher-priced award, thus eliminating the possibility of exceeding your budget. By pricing your awards this way, you can maintain your budget, and ensure employees are receiving awards of the exact same value.

Why is this such a huge advantage? Well, a “budget control” pricing model allows you to reduce your employee recognition costs, increase employee engagement, and gain peace of mind knowing that you can now accurately budget your employee service award program.

Maintaining Fairness in Your Company Culture

With your budget set, you can accurately determine the cost you are willing and able to spend on each employee. By maintaining a standardized operation for employee recognition and rewards, employees will be given equal opportunity and incentive to provide exceptional work, effectively reducing feelings of favoritism all while boosting company morale. 

Additionally, maintaining a set budget for each employee can allow your company to make decisions on what kind of future rewards they would like to offer. Various awards with equal value can entice various employees and peak interest for all demographics in your team base. 

This blog was originally published on July 22, 2014 and updated on February 26, 2021 for accuracy.

 

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At C.A. Short Company, we are your partner for increased employee engagement resulting in increased performance outcomes to grow your bottom line. Our process and research-based platform help you engage your team in order to increase your bottom line, motivate your staff to the benefit of the entire organization, and reward your people for the positive changes they make. To request a Complimentary Consultation, please click here.

Topics: Budget Control, Employee Recognition, Service Awards, Employee Recognition Strategies

Jeff Ross, CPA, CRP, CSM

About the Author
Jeff Ross, CPA, CRP, CSM

CEO & CFO
Mr. Ross, a certified public accountant, joined the C.A. Short Company as its controller in June 1993 and was named Chief Financial Officer in November 1996. From there, Jeff was promoted to President and Chief Financial Officer, and in 2017, was appointed CEO. Before joining C.A. Short Company, Ross was employed as an accountant by Hausser + Taylor, a large public accounting and consulting firm. Jeff presently serves on the Board of Directors of 2XSalt Ministries, Charlotte, NC and is a member of North Carolina Association of Certified Public Accountants, The Ohio Society of Certified Public Accountants, and American Institute of Certified Public Accountants. Mr. Ross graduated from The Ohio State University with Bachelor of Science and Bachelor of Arts degrees in 1989.

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