IRF Market Survey: Regulatory Environment
Reference Deck
Respondents • • • • •
109
419 Respondents total Cross-section US businesses Decision-makers for non-cash rewards programs $5M or more in revenue (balanced) 106 Financial Services
110
105
90
$5 million to $9.9 million
$10 million to $99.9 $100 million to $999.9 million million
$1 billion or more
106
72
62
63
46
40 25
Business Services
Financial Services
Manufacturing/ industrial
Pharma/ Healthcare
Retail/ Wholesale Trade
Technology/ Telecommunications
Other
Overall Awareness of Regulatory Requirements Percent indicating ‘aware’ and ‘extremely knowledgeable’
67% 67%
65%
39% 38% 32%
Aware Weighted Total
Knowledgeable Financial Services Firms
Non-Financial Services Firms
Are you aware of the regulatory and tax codes that impact the business use of non-cash rewards? How knowledgeable are you regarding the regulatory and tax requirements that businesses must comply with for their non-cash reward programs?
Overall Awareness of Regulatory Requirements Percent indicating ‘aware’ and ‘extremely knowledgeable’
76% 74% 73%
57% 47% 46% 41% 33%
Aware $5 million to $9.9 million
Knowledgeable $10 million to $99.9 million
$100 million to $999.9 million
Are you aware of the regulatory and tax codes that impact the business use of non-cash rewards? How knowledgeable are you regarding the regulatory and tax requirements that businesses must comply with for their non-cash reward programs?
$1 billion or more
Confidence in Addressing Regulations Percent indicating ‘very confident’
79% 79% 77%
64%
68% 63% 66%
73% 70% 69%
60% 56%
Identified ALL relevant regulations
Understand IN DETAIL implications for Understand potential consequences of Adequate measures in place to ensure our programs failing to comply we remain compliant Weighted Total
Financial Services
Non-Financial Services
Confidence in Addressing Regulations Percent indicating ‘very confident’
80% 79%
75% 67% 66% 65%
78%
59%
Identified ALL relevant regulations
70%
74% 72% 67%
61%
Understand IN DETAIL implications for Understand potential consequences of Adequate measures in place to ensure our programs failing to comply we remain compliant
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
Program Compliance Mechanisms Explicit Policy An explicit, documented policy to guide design, approval, and execution of non-cash reward programs
58%
59% 52%
27% 8%
7%
8%
Not required for our company
13%
15%
20%
Identified as a need but not yet developed Weighted Total
19%
13%
Financial Services
Partially developed and/ or implemented Non-Financial Services
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Stakeholders Identified Clearly identified stakeholders for review and approval of non-cash reward programs
51%
31%
6%
4%
6%
Not required for our company
11%
13%
51%
32%
10%
Identified as a need but not yet developed Weighted Total
27%
55%
Partially developed and/ or implemented
Financial Services
Non-Financial Services
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Formal Review of Design Changes Formal review of any material changes in program design by compliance, legal, or audit team
57%
55% 48% 38% 31%
5%
5%
4%
Not required for our company
9%
9%
9%
Identified as a need but not yet developed Weighted Total
29%
Financial Services
Partially developed and/ or implemented Non-Financial Services
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Regular Reviews Regular reviews (annual or otherwise) by compliance, legal, or audit team
64%
62% 55%
34% 24%
4%
2%
5%
Not required for our company
9%
8%
9%
Identified as a need but not yet developed Weighted Total
22%
Financial Services
Partially developed and/ or implemented Non-Financial Services
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Explicit Policy An explicit, documented policy to guide design, approval, and execution of non-cash reward programs
64%
68%
69%
50%
21%
18% 10%
7%
4%
8%
6%
Not required for our company
12%
10%
Identified as a need but not yet developed
$5 million to $9.9 million
$10 million to $99.9 million
20%
16%
15%
Partially developed and/ or implemented $100 million to $999.9 million
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented $1 billion or more
Program Compliance Mechanisms Stakeholders Identified Clearly identified stakeholders for review and approval of non-cash reward programs
56%
61%
62%
44% 31%
32% 25%
14% 8%
5%
3%
7%
4%
Not required for our company
12% 6%
Identified as a need but not yet developed
$5 million to $9.9 million
26%
$10 million to $99.9 million
Partially developed and/ or implemented $100 million to $999.9 million
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented $1 billion or more
Program Compliance Mechanisms Formal Review of Design Changes Formal review of any material changes in program design by compliance, legal, or audit team
69% 59%
62%
50% 32%
31% 22%
7%
3%
5%
10% 1%
Not required for our company
7%
11% 5%
Identified as a need but not yet developed
$5 million to $9.9 million
23%
$10 million to $99.9 million
Partially developed and/ or implemented $100 million to $999.9 million
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented $1 billion or more
Program Compliance Mechanisms Regular Reviews Regular reviews (annual or otherwise) by compliance, legal, or audit team
72% 60%
22% 12% 4%
5%
2%
1%
Not required for our company
6%
4%
22%
63%
22%
5%
Identified as a need but not yet developed
$5 million to $9.9 million
26%
71%
$10 million to $99.9 million
Partially developed and/ or implemented $100 million to $999.9 million
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented $1 billion or more
Ultimate Responsibility for Compliance
56%
53%
56%
36% 38% 35%
40%
43% 41%
37%
37% 30%
1% Myself or another program stakeholder
Audit Team
Compliance Team Weighted Total
Financial Services
Legal
0%
1%
We don't have responsibility assigned
Non-Financial Services
Who in your organization has ULTIMATE responsibility for understanding which rules apply to your business and ensuring compliance, as needed?
2%
0%
2%
I don't know
Ultimate Responsibility for Compliance
61% 59% 62%
55% 53%
51%
48% 39% 32%
41%
38%
40%
31%
37% 36%
40%
1% Myself or another program stakeholder
Audit Team
$5 million to $9.9 million
Compliance Team $10 million to $99.9 million
Legal
2% 2%
We don't have responsibility assigned
$100 million to $999.9 million
3%
I don't know
$1 billion or more
Who in your organization has ULTIMATE responsibility for understanding which rules apply to your business and ensuring compliance, as needed?
1%
Year-over-Year Program Design Changes Percent indicating moderate to substantial program changes
32%
30%
32%
38%
37% 30%
34%
39%
38%
41% 34%
42%
39%
44%
21%
The audience included in the non-cash rewards program
Rules regarding eligible products/services/behaviors for earning incentives and rewards Weighted Total
Other earning rules or qualification requirements
Financial Services
Earning rate - the reward value The types of rewards - for associated with a given level of example, group incentive travel achievement or performance changes to merchandise/gift card
Non-Financial Services
Which of the options below best describe the extent to which the various components of your non-cash rewards programs would TYPICALLY change year-over-year?
Year-over-Year Program Design Changes Percent indicating moderate to substantial program changes
33% 35%
39%
27%
The audience included in the non-cash rewards program
42% 34%
29% 32%
35%
Rules regarding eligible products/services/behaviors for earning incentives and rewards
$5 million to $9.9 million
33%
40% 33%
Other earning rules or qualification requirements
$10 million to $99.9 million
37%
41% 42% 42%
41%
44%
40% 39%
Earning rate - the reward value The types of rewards - for associated with a given level of example, group incentive travel achievement or performance changes to merchandise/gift card
$100 million to $999.9 million
$1 billion or more
Which of the options below best describe the extent to which the various components of your non-cash rewards programs would TYPICALLY change year-over-year?
DOL (Department of Labor) Fiduciary Rule – Financial Services Firms Companies may not create or continue to use incentives that allow financial advisors to act in a manner that is not in the best interest of their client, and they must disclose all conflicts of interest, including the use of such incentives.
Percent indicating ‘aware’ and ‘extremely knowledgeable’ 92% 90% 84% 80%
Definitely applies
11%
61%
0% 15%
Might apply 13%
45% 33%
42% 38%
29%
44%
22%
Knowledgeable
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
Weighted Total
16% 16%
6% 27%
85% 58%
Aware
Does not apply
68%
67%
$1 billion or more
Weighted Total
44%
$5 million to $9.9 million
$10 million to $100 million to $99.9 million $999.9 million
• Were you aware of this rule? • How knowledgeable are you regarding the specific regulatory and tax requirements that businesses must comply with for their reward and recognition programs? • Does this rule apply to your programs?
DOL (Department of Labor) Fiduciary Rule – Financial Services Firms 6% 6%
0%
3% 3%
2% 7%
46%
32%
30%
61%
61%
$100 million to $999.9 million
$1 billion or more
2% 3%
43%
44%
54%
44%
$5 million to $9.9 million
$10 million to $99.9 million
Completely clear
Mostly clear - some interpretation is required
Somewhat clear - moderate interpretation is required
Not clear at all - completely open to interpretation
How clear do you feel each regulation is in terms of what companies must do to achieve compliance with that rule?
51%
Weighted Total
IRC Section 274(j) for Service and Safety Programs Provides preferential tax treatment for employee service or safety awards (nontaxable to employee and deductible by employer), under certain conditions. (see notes for more detail)
Percent indicating ‘aware’ and ‘extremely knowledgeable’
75% 74% 72%
Definitely applies 11%
67%
Might apply
Does not apply
9%
5%
31%
39%
60%
55%
40%
8% 29%
41% 34% 32% 30% 49% Aware
64%
Knowledgeable
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
$5 million to $9.9 $10 million to $99.9 million million
$100 million to $999.9 million
• Were you aware of this rule? • How knowledgeable are you regarding the specific regulatory and tax requirements that businesses must comply with for their reward and recognition programs? • Does this rule apply to your programs?
$1 billion or more
IRC Section 274(j) for Service and Safety Programs 4%
1%
2%
3%
14%
17%
13%
14%
40%
40%
$5 million to $9.9 million Completely clear
32%
49%
$10 million to $99.9 million Some interpretation required
29%
29%
53%
52%
$100 million to $999.9 million
$1 billion or more
Moderate interpretation required
How clear do you feel each regulation is in terms of what companies must do to achieve compliance with that rule?
Completely open to interpretation
OSHA Safety Incentive
Program Rules
Safety incentive programs cannot be structured in such a way that discourages employees from reporting work-related injuries and illnesses, such as rewarding employees for maintaining low accident rates or days without safety incidents.
Percent indicating ‘aware’ and ‘extremely knowledgeable’ 85%
Definitely applies
75% 75% 13%
Might apply
Does not apply
13%
11%
13%
21%
30%
29%
59%
58%
$100 million to $999.9 million
$1 billion or more
62% 47% 44% 41%
34%
34% 66% 52% Aware
Knowledgeable
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
$5 million to $9.9 $10 million to $99.9 million million
• Were you aware of this rule? • How knowledgeable are you regarding the specific regulatory and tax requirements that businesses must comply with for their reward and recognition programs? • Does this rule apply to your programs?
OSHA Safety Incentive
Program Rules
1%
2%
4%
2%
13%
13%
12%
13%
28%
24%
30%
43%
59%
55%
52%
$10 million to $99.9 million
$100 million to $999.9 million
40%
$5 million to $9.9 million Completely clear
Some interpretation required
Moderate interpretation required
How clear do you feel each regulation is in terms of what companies must do to achieve compliance with that rule?
$1 billion or more
Completely open to interpretation
Fair Labor Standards Act (FLSA) Overtime Rule Certain types of "discretionary" awards taxable to employees can be considered additional compensation and may trigger requirements for overtime pay. (Does not apply to non-taxable awards.)
Percent indicating ‘aware’ and ‘extremely knowledgeable’ 80%
Definitely applies
77% 74% 14% 57%
48% 45% 45%
34%
Might apply
11%
34%
Does not apply 7%
10%
32%
26%
61%
65%
$100 million to $999.9 million
$1 billion or more
29% 51% Aware
55%
Knowledgeable
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
$5 million to $9.9 $10 million to $99.9 million million
• Were you aware of this rule? • How knowledgeable are you regarding the specific regulatory and tax requirements that businesses must comply with for their reward and recognition programs? • Does this rule apply to your programs?
Fair Labor Standards Act (FLSA) Overtime Rule 13%
3% 10%
35%
37%
49%
49%
50%
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
6% 14%
31%
Completely clear
3%
Some interpretation required
Moderate interpretation required
How clear do you feel each regulation is in terms of what companies must do to achieve compliance with that rule?
3% 10%
31%
55%
$1 billion or more
Completely open to interpretation
Fair Market Value Estimation on Forms 1099 or W-2 Accurate and appropriate estimation of reward value to be included on 1099s (to independent contractors) and W-2s (to employees), particularly for merchandise or incentive travel
Percent indicating ‘aware’ and ‘extremely knowledgeable’ 83% 82% 82%
Definitely applies 14%
Might apply
11%
Does not apply 7%
10%
32%
26%
61%
65%
$100 million to $999.9 million
$1 billion or more
64%
42% 40% 37%
34%
34%
28% 51% Aware
55%
Knowledgeable
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
$5 million to $9.9 $10 million to $99.9 million million
• Were you aware of this rule? • How knowledgeable are you regarding the specific regulatory and tax requirements that businesses must comply with for their reward and recognition programs? • Does this rule apply to your programs?
Fair Market Value Estimation on Forms 1099 or W-2 6% 15%
3%
1%
2%
12%
14%
14%
21% 32% 32%
35%
62% 47%
$5 million to $9.9 million Completely clear
52%
49%
$10 million to $99.9 million
$100 million to $999.9 million
Some interpretation required
Moderate interpretation required
How clear do you feel each regulation is in terms of what companies must do to achieve compliance with that rule?
$1 billion or more
Completely open to interpretation
Sweepstakes and Lottery Rules Requirements for operating a legal and compliant sweepstakes program as opposed to a lottery, which is illegal for companies to operate. Of particular concern for companies operating incentive programs in non-employee sales channels. (see notes for more detail)
Percent indicating ‘aware’ and ‘extremely knowledgeable’
76% 74%
Definitely applies
71% 64%
18%
41% 40% 37% 31%
Might apply
18%
Does not apply 16%
18%
36%
30%
47%
51%
$100 million to $999.9 million
$1 billion or more
18% 32%
63% 50% Aware
Knowledgeable
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
$5 million to $9.9 $10 million to $99.9 million million
• Were you aware of this rule? • How knowledgeable are you regarding the specific regulatory and tax requirements that businesses must comply with for their reward and recognition programs? • Does this rule apply to your programs?
Sweepstakes and Lottery Rules 8% 8%
32%
1% 16%
32%
2%
3% 10%
12%
22%
35%
62% 50%
50%
52%
$5 million to $9.9 million
$10 million to $99.9 million
$100 million to $999.9 million
Completely clear
Some interpretation required
Moderate interpretation required
How clear do you feel each regulation is in terms of what companies must do to achieve compliance with that rule?
$1 billion or more
Completely open to interpretation
Regulatory Accommodations Program Design 45% 41% 46%
We have reworked the underlying business purpose of the program
40%
We have changed the entire design of a program (e.g., from rewards for sales to recognition/rewards for customer service)
54% 36%
40%
We have changed what rewards participants are eligible to win (e.g., merchandise instead of gift cards)
48% 38%
Weighted Total
28%
We have eliminated at least one program based on regulatory/compliance issues
37% 27%
28%
20%
13%
No changes
Financial Services
22%
We have changed rules regarding what audiences are eligible to participate (e.g., only certain types of employees or sales people cannot participate)
7%
Non-Financial Services
14%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Communications 45%
We have changed the name and description of our program(s)
50% 44%
45%
We have changed the language we use to describe the rules of the program
52% 44%
36%
Communications are reviewed by a team responsible for maintaining compliance
Weighted Total
32% 36%
Financial Services 15%
No changes
Non-Financial Services
10% 15%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Products 58%
We have changed the products included in sales or distributor/channel incentive programs
57% 58%
30%
We have changed the products that we sell
37% 30%
Weighted Total
No changes
29%
Financial Services
29%
Non-Financial Services
23%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Rewards 43%
Shifted spend from cash incentives (commissions, bonuses) to noncash rewards (merchandise, incentive travel, gift cards, etc.)
47% 42% 40%
Changed design of group incentive travel event (e.g., time in meetings, number of days, types of activities offered, destination)
44% 39% 33%
Shifted spend from gift cards to other non-cash rewards
42% 32%
Shifted spend from cash incentives and/or non-cash rewards to other intangible rewards (e.g., professional development opportunities, education, etc.)
25% 35%
24% 21% 24% 21%
Shifted spend from cash incentives and/or non-cash rewards to recognition activities (awards banquet, etc.) Shifted spend from non-cash rewards (merchandise, incentive travel, gift cards, etc.) to cash incentives (commissions, bonuses)
No changes
Weighted Total
12% 12% 12%
Financial Services 19%
Non-Financial Services
12% 20%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Reporting & Analysis 51%
Increased scrutiny on program statistics (participation, earning, etc.)
50% 51%
49%
Increased scrutiny on accounting, W2 and 1099 calculations, etc
51% 50%
21%
Increased scrutiny on program results (outcomes, ROI, etc.)
25% 20%
Weighted Total
No changes
23%
Financial Services
24%
Non-Financial Services
22%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Resources 46%
Increased dollars invested into program to pay for changes to rules/rewards
54% 45%
34%
Increased staff support for program
46% 32%
29%
Decreased spend per participant
30% 29%
16%
Increase support from external provider(s)
20% 15%
Weighted Total Financial Services 21%
No changes
14%
Non-Financial Services
22%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Program Design 36%
We have reworked the underlying business purpose of the program
55% 42%
52%
41% 39% 37% 39%
We have changed what rewards participants are eligible to win (e.g., merchandise instead of gift cards)
34%
We have changed the entire design of a program (e.g., from rewards for sales to recognition/rewards for customer service)
40% 40%
45%
$5 million to $9.9 million 26% 30%
We have eliminated at least one program based on regulatory/compliance issues
20% 22% 26% 24%
We have changed rules regarding what audiences are eligible to participate (e.g., only certain types of employees or sales people cannot participate)
No changes
9%
14% 13%
35%
39%
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
15%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Communications 44% 45% 46%
We have changed the name and description of our program(s)
55%
43% 46% 43% 45%
We have changed the language we use to describe the rules of the program
36% 34%
Communications are reviewed by a team responsible for maintaining compliance
42% 34%
No changes
$5 million to $9.9 million
$10 million to $99.9 million $100 million to $999.9 million
15% 15% 15%
$1 billion or more 19%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Products 61% 55%
We have changed the products included in sales or distributor/channel incentive programs
58% 64%
32%
We have changed the products that we sell
29% 31% 25%
$5 million to $9.9 million $10 million to $99.9 million
26%
No changes
32%
$100 million to $999.9 million
27% 30%
$1 billion or more
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Rewards Shifted spend from cash incentives (commissions, bonuses) to noncash rewards (merchandise, incentive travel, gift cards, etc.)
38% 39% 38% 39% 42% 44%
Changed design of group incentive travel event (e.g., time in meetings, number of days, types of activities offered, destination)
Shifted spend from cash incentives and/or non-cash rewards to other intangible rewards (e.g., professional development opportunities, education, etc.)
23%
27% 27%
22% 20%
Shifted spend from cash incentives and/or non-cash rewards to recognition activities (awards banquet, etc.)
No changes
48%
34% 32% 31% 35%
Shifted spend from gift cards to other non-cash rewards
Shifted spend from non-cash rewards (merchandise, incentive travel, gift cards, etc.) to cash incentives (commissions, bonuses)
48%
20% 13% 12% 15% 16%
15%
19% 19%
35%
26%
$5 million to $9.9 million
$10 million to $99.9 million $100 million to $999.9 million $1 billion or more
19%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Reporting & Analysis 49% 52%
Increased scrutiny on program statistics (participation, earning, etc.)
55% 45%
48% 49%
Increased scrutiny on accounting, W2 and 1099 calculations, etc
61% 59%
20%
Increased scrutiny on program results (outcomes, ROI, etc.)
21% 20% 24%
$5 million to $9.9 million 24%
No changes
23%
$10 million to $99.9 million $100 million to $999.9 million $1 billion or more
19% 26%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Resources 43%
Increased dollars invested into program to pay for changes to rules/rewards
48% 45% 46%
34% 24% 27% 28%
Decreased spend per participant
31% 36%
Increased staff support for program
Increase support from external provider(s)
45% 44%
17% 15% 16% 15%
$5 million to $9.9 million $10 million to $99.9 million
No changes
22% 21% 17%
$100 million to $999.9 million $1 billion or more
24%
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Challenging to Stay Compliant DOL Fiduciary Ruling
67%
58% 59% 58%
274j for Service and Safety Programs
56%
OSHA Safety
64%
55%
53% 53% 54%
FLSA Overtime
Fair Market Value for W2s and 1099s
54% 52% 54%
Weighted Total
Financial Services
54%
Sweepstakes/Lottery
Non-Financial Services
49% 55%
For those regulations you've indicated apply to your company's non-cash reward programs, how challenging have you found it to achieve compliance with that requirement?
Challenging to Stay Compliant 50%
77%
DOL Fiduciary Ruling* 70% 59% 57%
274j for Service and Safety Programs
52% 55%
54%
OSHA Safety
58% 66%
44% 51% 54% 54% 55%
FLSA Overtime
54% 53%
Fair Market Value for W2s and 1099s 48%
Sweepstakes/Lottery
81%
$5 million to $9.9 million
$10 million to $99.9 million 60%
$100 million to $999.9 million 53% 53% 52%
61%
$1 billion or more
* Financial Services Firms Only For those regulations you've indicated apply to your company's non-cash reward programs, how challenging have you found it to achieve compliance with that requirement?
General Risk Tolerance Highly risk-averse, low tolerance for exposure
Moderately risk-averse, tolerate some exposure
Weighted Total
Financial Services
Non-Financial Services
28%
22%
Moderately risk-accepting, tolerate exposure well
40%
Unconcerned about risk
21%
56%
29%
38%
10%
15%
22%
How would you assess the general approach of your company when it comes to interpreting regulatory and compliance requirements for your non-cash rewards programs? We tend to be:
6%
11%
General Risk Tolerance Highly risk-averse, low tolerance for exposure
$5 million to $9.9 million
$10 million to $99.9 million
Moderately risk-averse, tolerate some exposure
Moderately risk-accepting, tolerate exposure well
29%
41%
27%
Unconcerned about risk
20%
39%
10%
22%
$100 million to $999.9 million
35%
41%
$1 billion or more
35%
42%
12%
22%
15%
How would you assess the general approach of your company when it comes to interpreting regulatory and compliance requirements for your non-cash rewards programs? We tend to be:
2%
8%
Attitudinal 76%
The regulatory requirements for non-cash rewards programs make it difficult for us to reward and recognize good performers.
81% 75%
The regulatory requirements for non-cash programs have led to significant changes in how we design and operate or non-cash reward programs.
76% 72% 78%
67%
The regulatory requirements for non-cash programs have diminished the effectiveness of our reward programs.
64% 68%
Our company has taken a proactive approach, understanding and addressing regulatory compliance in our non-cash rewards programs before the rules are put into enforcement by the government.
88% 84% 89%
Weighted Total
For each of the statements below, please indicate the degree to which you agree.
Financial Services
Non-Financial Services
Attitudinal 80%
The regulatory requirements for non-cash rewards programs make it difficult for us to reward and recognize good performers.
72% 75% 68%
78%
The regulatory requirements for non-cash programs have led to significant changes in how we design and operate or non-cash reward programs.
74% 84% 70%
70%
The regulatory requirements for non-cash programs have diminished the effectiveness of our reward programs.
64% 68% 64%
Our company has taken a proactive approach, understanding and addressing regulatory compliance in our non-cash rewards programs before the rules are put into enforcement by the government. $5 million to $9.9 million
For each of the statements below, please indicate the degree to which you agree.
88% 87% 89% 89%
$10 million to $99.9 million
$100 million to $999.9 million
$1 billion or more
Information Resources 54%
Internal resources (training, formal policy documentation, subject matter experts)
45% 54%
48%
EXTERNAL Audit, Legal, Consulting supplier or provider
42% 49%
39%
EXTERNAL Incentive program/reward supplier or provider
34% 40%
38%
Industry-specific resources (e.g., associations for financial services firms, think-tank for pharmaceutical compliance, business advocacy groups)
37%
Incentive industry organizations (Incentive Federation, Incentive Research Foundation, SITE, Incentive Marketing Assocation, etc.)
37%
Weighted Total
38%
40% 40%
Financial Services
Non-Financial Services
Which of the below are sources of expertise and information you have found useful in remaining informed and compliant with federal and state regulations regarding non-cash rewards?
Information Resources 50%
Internal resources (training, formal policy documentation, subject matter experts)
57%
50% 58%
47% 48% 50% 47%
EXTERNAL Audit, Legal, Consulting supplier or provider
34% 44%
EXTERNAL Incentive program/reward supplier or provider
39% 45%
Industry-specific resources (e.g., associations for financial services firms, think-tank for pharmaceutical compliance, business advocacy groups)
Incentive industry organizations (Incentive Federation, Incentive Research Foundation, SITE, Incentive Marketing Assocation, etc.) $5 million to $9.9 million
$10 million to $99.9 million
31% 44% 47% 48% 40% 41% 42% 43%
$100 million to $999.9 million
$1 billion or more
Which of the below are sources of expertise and information you have found useful in remaining informed and compliant with federal and state regulations regarding non-cash rewards?
Additional Review of Data
September 1, 2017
Segmentation
What is Segmentation? Segmentation allows us to find groups of similar people when comparisons by known characteristics (e.g., firm size or sector) don’t fully explain patterns observed in the data. Segmentation is useful to understand how people cluster together based on values, attitudes, and behaviors.
Defining Our Segments Statistical analysis revealed two distinct segments among respondents. Program managers are assigned to segments based on several variables: • Degree of awareness of the 6 specific regulations addressed in this research • Degree to which they assess those regulations to apply to their company’s programs • Their self-assessed level of knowledge regarding the 6 specific regulations
‘Absolutes’
‘Abstracts’
1. Very high levels of awareness across most/all regulations
1. Moderate/low levels of awareness across most/all regulations
2. Believe multiple/most regulations apply to their company’s programs
2. Likely to say regulations may apply to their company’s programs
3. Feel extremely knowledgeable about these regulations
3. Feel somewhat knowledgeable about these regulations
Segment Profiles Statistically significant difference between segments
‘Absolutes’
‘Abstracts’
55%
45%
Percent of Survey Respondents The segments are evenly distributed - a little more than ½ of the respondents fall into the Absolute segment.
Firm Size More than 1/4 of Abstracts are very small firms, while nearly 1/3 of Absolutes are between $10 and $100 million in annual revenue.
Executive Role Absolutes have a higher proportion of program executive sponsors, as well as more C-suite and VP level respondents.
15%
32%
65%
Exec Sponsor of at least 1 program
26%
27%
48%
47%
C-Level or VP
Manager or Director
29%
22%
28%
21%
59% 32%
31%
Exec Sponsor of at least 1 program
C-Level or VP
Manager or Director
General Awareness & Knowledge Statistically significant difference between segments
Generally Aware of Relevant Regulations
Generally Knowledgeable of Relevant Regulations
Most Absolutes are aware there are regulations impacting non-cash reward programs. More than 1/3 of Abstracts are only ‘somewhat aware.’
Absolutes feel ‘extremely’ knowledgeable regarding these regulations, while Abstracts are less confident in their understanding.
2%
1%
3% 11% 38%
7%
4%
26%
31%
88%
43% 59%
66% 23%
Absolute
Aware
Somewhat aware
Abstract
Not at all aware
Absolute
Abstract
Extremely knowledgeable
Very knowledgeable
Moderately knowledgeable
Slightly knowledgeable
Overall Awareness of Regulatory Requirements Statistically significant difference between segments
Percent indicating ‘aware’ and ‘extremely knowledgeable’
88%
66%
59%
23%
Aware
Knowledgeable Absolute
Abstract
Are you aware of the regulatory and tax codes that impact the business use of non-cash rewards? How knowledgeable are you regarding the regulatory and tax requirements that businesses must comply with for their non-cash reward programs?
Confidence in Addressing Regulations Statistically significant difference between segments
Percent indicating ‘very confident’
92% 70%
86%
85%
59%
85%
57%
46%
Identified ALL relevant regulations
Understand IN DETAIL implications for Understand potential consequences of Adequate measures in place to ensure our programs failing to comply we remain compliant Absolute
Abstract
Program Compliance Mechanisms Explicit Policy Statistically significant difference between segments
An explicit, documented policy to guide design, approval, and execution of non-cash reward programs
79%
48%
25% 17% 9% 3% Not required for our company
12%
6% Identified as a need but not yet developed Absolute
Partially developed and/ or implemented Abstract
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Stakeholders Identified Statistically significant difference between segments
Clearly identified stakeholders for review and approval of non-cash reward programs
73%
41%
18%
14% 4%
3%
Not required for our company
41%
5% Identified as a need but not yet developed Absolute
Partially developed and/ or implemented Abstract
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Formal Review of Design Changes Statistically significant difference between segments
Formal review of any material changes in program design by compliance, legal, or audit team
75%
44% 38% 18%
13% 2%
4%
Not required for our company
5% Identified as a need but not yet developed Absolute
Partially developed and/ or implemented Abstract
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Program Compliance Mechanisms Regular Reviews Statistically significant difference between segments
Regular reviews (annual or otherwise) by compliance, legal, or audit team
78%
58%
29% 17%
11% 3%
1%
Not required for our company
1% Identified as a need but not yet developed Absolute
Partially developed and/ or implemented Abstract
To what extent does your organization have the following oversight mechanisms in place for your non-cash reward programs?
Fully developed and implemented
Specific Regulatory Awareness Statistically significant difference between segments
96%
94%
65%
DOL Fiduciary Ruling
61%
274j for Service and Safety Programs
98%
93%
93%
64%
OSHA Safety Absolute
61%
FLSA Overtime Abstract
95%
62%
Fair Market Value for W2s and 1099s
58%
Sweepstakes/Lottery
Specific Regulatory Knowledge Statistically significant difference between segments
67%
65%
62%
58%
23%
21%
18%
59%
59%
17%
12%
DOL Fiduciary Ruling
274j for Service and Safety Programs
OSHA Safety Absolute
FLSA Overtime Abstract
Fair Market Value for W2s and 1099s
13%
Sweepstakes/Lottery
Regulations Applying to Company’s Programs Regulation Definitely Applies 91%
91%
88%
85%
82%
81%
42% 28%
42%
33%
31%
Average # Regulations Applying
28%
5.0
DOL Fiduciary Ruling 274j for Service and Safety Programs
OSHA Safety Absolute
FLSA Overtime Abstract
Fair Market Value for Sweepstakes/Lottery W2s and 1099s
3.0 2.0 0.7
Definitely Applies
May Apply Absolute
Abstract
Challenging to Stay Compliant: DOL Fiduciary Rule
Challenging to Stay Compliant? 49% 41% 23%
26%
23% 15%
21% 2%
Extremely challenging
Moderately challenging Absolute
Challenging to Stay Compliant?
Slightly challenging Not challenging at all Abstract
49% 41%
26% 21% 23%
23% 15%
Extremely challenging Moderately challenging Slightly challenging Absolute
Abstract
2% Not challenging at all
Challenging to Stay Compliant: DOL Fiduciary Rule
DOL/Fiduciary Rule
OSHA
274j
35%
49%
35%
36%
35%
37%
37%
41% 26%
23%
Moderately challenging Absolute
Slightly challenging
32%
Not challenging at all
Extremely challenging
Abstract
Moderately challenging Absolute
Slightly challenging
Absolute
Extremely challenging
23%
Slightly challenging
Not challenging at all
Abstract
33%
38% 31%
26% 24%
20%
16%
Not challenging at all
Moderately challenging
23%
14%
Abstract
10%
Sweepstakes/Lottery
33%
32%
Slightly challenging
14%
Absolute
41%
35%
17%
Moderately challenging
Not challenging at all
Fair Market Value
26%
Extremely challenging
16%
Abstract
22% 18%
11%
27%
2%
FLSA 35%
18%
18%
23% 15%
Extremely challenging
21%
24%
20%
27%
Extremely challenging
Moderately challenging Absolute
Slightly challenging Abstract
10%
Not challenging at all
17%
17%
Extremely challenging
Moderately challenging Absolute
Slightly challenging Abstract
13%
Not challenging at all
Regulatory Accommodations Program Design Statistically significant difference between segments 45%
We have reworked the underlying business purpose of the program(s)
49%
We have changed what rewards participants are eligible to win (e.g., merchandise instead of gift cards)
42%
37%
We have changed the entire design of a program (e.g., from rewards for sales to recognition/rewards for customer service)
49% 37%
35%
We have eliminated at least one program based on regulatory/compliance issues
29%
We have changed rules regarding what audiences are eligible to participate (e.g., only certain types of employees or sales people can not participate)
No changes
28% 19%
14% 8%
Absolute Abstract
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Communications Statistically significant difference between segments 58%
We have changed the name and description of our program(s) 44%
43%
We have changed the language we use to describe the rules of the program
47%
34%
Communications are reviewed by a team responsible for maintaining compliance
38%
17%
No changes 11%
Absolute Abstract
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Products Statistically significant difference between segments 63%
We have changed the products included in sales or distributor/channel incentive programs
60%
31%
We have changed the products that we sell 30%
29%
No changes 24%
Absolute Abstract
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Rewards Statistically significant difference between segments Shifted spend from cash incentives (commissions, bonuses) to non-cash rewards (merchandise, incentive travel, gift cards, etc.)
42% 40%
Changed design of group incentive travel event (e.g., time in meetings, number of days, types of activities offered, destination)
51% 39%
34% 36%
Shifted spend from gift cards to other non-cash rewards
Shifted spend from cash incentives and/or non-cash rewards to other intangible rewards (e.g., professional development opportunities, education, etc.)
31% 27%
Shifted spend from cash incentives and/or non-cash rewards to recognition activities (awards banquet, etc.)
Shifted spend from non-cash rewards (merchandise, incentive travel, gift cards, etc.) to cash incentives (commissions, bonuses)
No changes
26% 21%
17% 11%
19% 13%
Absolute Abstract
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Reporting & Analysis Statistically significant difference between segments 50%
Increased scrutiny on program statistics (participation, earning, etc.)
53%
62%
Increased scrutiny on accounting, W2 and 1099 calculations, etc 50%
25%
Increased scrutiny on program results (outcomes, ROI, etc.) 18%
23%
No changes 18%
Absolute Abstract
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
Regulatory Accommodations Resources Statistically significant difference between segments 54%
Increased dollars invested into program to pay for changes to rules/rewards
43%
27%
Decreased spend per participant
30%
41%
Increased staff support for program
Increase support from external provider(s)
No changes
38%
15% 17%
23% 17%
Absolute Abstract
Which of the options below best describes how your non-cash reward programs have been designed or changed to comply with regulatory and tax requirements: Select all that apply.
