Employee discount programs are a popular way for companies to provide additional benefits and perks to their employees. These programs allow employees to receive discounts on products, services, and experiences offered by the company they work for or by partner companies. Employee discounts are a great way to boost employee satisfaction, retention, and engagement. In this article, we will explore what employee discount programs are, who is eligible, what types of discounts are typically offered, the benefits of these programs, and more.
What are Employee Discount Programs?
Employee discount programs, also sometimes called employee purchase programs, offer special discounted pricing on products and services to employees of a particular company. The discounts are offered as an employment benefit, with companies partnering with other merchants and service providers to extend discounts to their workforce. The discounts provide a perk to working at the company and help improve employee satisfaction. Companies can partner with almost any type of business to offer discounts, including retailers, restaurants, theaters, theme parks, cell phone providers, gyms, and more. The company may negotiate special rates given the size of their workforce, which are passed onto employees.
Who is Eligible for Employee Discounts?
Eligibility for employee discount programs varies by company. Most programs are only open to current employees of the company. Some extend eligibility to retirees, spouses, domestic partners, and children as well. Eligibility may also depend on the length of time an employee has worked for the company, with newer hires potentially facing a probationary period before gaining access to discounts. Companies can determine their own eligibility policies to best fit their workforce and budgets. The more inclusive the eligibility requirements, the more popular a discount program is likely to be with employees.
Types of Employee Discounts
There are many different types of discounts companies can offer employees. Some of the most common categories include:
- Retail discounts: Discounts at clothing, electronics, home goods, and other retail stores. Retailers often offer 10-25% discounts.
- Restaurant discounts: Reduced pricing at fast food, casual, and fine dining restaurants in the area. Discounts typically range from 10-30% off.
- Cell phone service discounts: Savings on cell phone plans and devices from major carriers like Verizon, AT&T and T-Mobile.
- Health and wellness discounts: Gym memberships, massages, chiropractic care, LASIK eye surgery, and other wellness services at discounted rates.
- Entertainment discounts: Savings on movie tickets, theme parks, concerts and shows, sporting events, museums, and other entertainment options.
- Travel discounts: Discounted rates on hotels, rental cars, airfare, cruises, and package vacations.
- Insurance discounts: Lower premiums on auto, home, health, life, and pet insurance policies.
- Childcare discounts: Savings on daycare centers, after-school programs, tutoring services, camps, and enrichment programs.
- Home and auto discounts: Deals on auto parts and services, home improvement supplies, home/auto insurance, and more.
- Company product discounts: Special employee pricing on products made or sold by the employer.
These are just some of the most popular categories of discounts companies can leverage for their employee programs. The best programs offer deals across multiple categories relevant to employees’ everyday needs.
Benefits of Employee Discount Programs
There are many advantages and benefits to offering an employee discount program. These include:
- Improved recruitment: Discounts make the company’s overall compensation and benefits package more attractive, helping recruit top talent.
- Increased employee satisfaction: Employees appreciate and get excited about the perks and savings from discounts.
- Higher engagement: Employees feel valued and invested in the company for providing the discounts.
- Better retention: Interesting discounts encourage employees to stay with the company longer term.
- Reduced expenses: Employees get to keep more of their take-home pay when using discounts.
- Convenience: Onsite discounts and payroll deductions make participating very convenient.
- Tax benefits: Certain discount programs are structured to provide employees with tax advantages.
- Boosted company image: Companies are perceived as more employee-friendly and generous when they offer discounts.
Discounts act as a valuable fringe benefit that boosts morale at little to no cost to the employer. The savings opportunities make employees feel rewarded and appreciated. Companies with generous discount programs tend to have stronger employee retention and satisfaction.
Common Employee Discount Program Providers
Rather than trying to set up and manage discounts with merchants directly, most companies partner with professional employee discount program providers. These companies have existing relationships and contracts with businesses across many categories. Working with an established discount provider simplifies launching a robust program with minimal effort. Some of the most popular national employee discount program providers include:
- Access Development
- Corporate Offers
- Corporate Shopping
- Working Advantage
These companies allow businesses to easily provide discounts from leading brands and local businesses. The providers negotiate and maintain the relationships with discount partners, handle all the administrative tasks, and provide an online portal where employees can browse and access available deals. Companies simply pay an annual subscription fee to the provider to offer the discounts to their workforce.
Top Companies with Employee Discount Programs
Many leading companies from various industries offer stellar employee discount programs. Some companies with renowned programs include:
- Southwest Airlines: Employees get free flight benefits and travel discounts.
- Verizon: Employees receive up to 25% off cell phone plans plus device discounts.
- UPS: UPS offers discounts on cell plans, restaurants, travel, and more.
- Home Depot: Employees get 10% off in-store purchases year-round.
- Disney: Disney employees get free admission to parks plus discounts on resorts, cruises, and merchandise.
- Walmart: Walmart associates get 10% discounts on regularly priced merchandise and special “Associate Shopping Days”.
- Nike: Nike employees enjoy 25% off gear, 50% off at company outlet stores, and other perks.
- PwC: Discounts on cell plans, entertainment, travel, insurance, restaurants, and retail.
These companies use their employee discount programs to boost recruitment, retention, and satisfaction. The discounts act as added incentives to working there beyond just compensation and benefits.
Consumer Brands with Employee Discounts
Many popular consumer brands that sell products directly to customers also offer employee discount programs. Getting discounts on these brands’ products is an enticing perk for many. Some consumer brands known for their employee discounts include:
- Apple: 25% off Apple products and repairs.
- Samsung: Up to 30% off Samsung devices and accessories.
- Adidas: 50% off Adidas apparel, shoes, and gear.
- Levi’s: Employees get 75% off Levi’s jeans and apparel.
- Under Armour: 50% discounts on all Under Armour workout clothes and shoes.
- Coach: Coach employees enjoy discounts up to 50% on handbags, wallets, and accessories.
- Columbia: Columbia offers 60% off outerwear, sportswear, and shoes.
- Timberland: Timberland workers get 50% off boots, apparel, and other items.
Having access to steep discounts on popular brands makes employment with these companies more enticing for many. Getting brand name products for much less is an attractive perk.
Major Retailers with Discount Programs
Major retailers like department stores, supermarkets, and big box chains realize the value of offering employee discounts to boost recruitment and retention. Retail employees often have the chance to save on everyday essentials from their own employer. Some top retailers with employee discount programs include:
- Target: 10% discount on Target brand items and occasional extra coupons.
- Kroger: 10-15% off Kroger brand groceries and fuel points discounts.
- Walgreens: 20% employee discount on regularly priced Walgreens brand products.
- Best Buy: Employee pricing on electronics, appliances, and more.
- Lowe’s: 10% discount on Lowe’s brands and select other products.
- Amazon: 10% off regularly priced Amazon merchandise.
- The Home Depot: 10% discount on all in-store purchases.
Retail employee discounts typically apply each pay period on general merchandise or the retailers’ private label brands. Some programs exclude limited-time sales or promotions.
How Employees Can Use and Maximize Discounts
Once an employer offers a discount program, employees should learn about the available deals and how to best utilize them. Here are some tips to maximize savings:
- Carefully review all discounts offered and plan purchases around the deals.
- Add up potential savings from discounts when preparing your monthly budget.
- Check the discount provider’s website frequently for new offers and flash sales.
- Don’t impulse buy items just because you have a discount – only utilize deals on items you truly need.
- Look for discounts before paying full price anywhere – discounts may exist for items you buy regularly.
- See if any discounts exist for items you were already planning to purchase.
- Ask about exclusions – some discounts don’t apply to sale items or popular products.
- Find out if your company offers discount gift cards that provide additional savings.
- See if family or friends qualify for the discounts under your employer’s policies.
- Use discounts in conjunction with coupons, sales, and loyalty programs for maximum savings.
Taking the time to find and evaluate available discounts allows employees to stretch their paychecks further. Discounts provide the most value when used regularly and strategically.
Potential Drawbacks of Employee Discount Programs
While employee discount programs offer many benefits, there are some potential downsides to consider as well:
- Discounts cost the employer money in lost revenue, so budgets need to be factored in when determining program details.
- Productivity could suffer if employees spend work time browsing for deals online.
- Employees at different levels may resent unequal discount policies that favor executives.
- Employers could show favoritism in discounts offered to key strategic partners versus competitors.
- Discounted gift cards could be lost, stolen, or sold for profit by dishonest employees.
- Managing a program and redeeming discounts takes administrative time and effort.
- Employees may feel discounts are lackluster if companies are too selective in partnerships.
- Workers who rarely or never use discounts may view them as an ineffective perk.
While disadvantages are usually minimal, companies should structure programs carefully to maximize value to employees while minimizing administrative hassles and budget concerns.
Are Discounts Taxable?
In most cases, employee discounts up to 20% off the retail price are not considered taxable income by the IRS. Discounts exceeding 20% are likely taxable for employees. Different discount policies also have varying tax implications:
- On personal purchases: Discounts up to 20% off items for an employee’s personal use are generally tax-free.
- On business purchases: Discounts used for legitimate business purposes are not taxable.
- On gift cards: Discounted gift card amounts are usually taxable.
- On family & friends: Discounts exceeding 20% used by family or friends are taxable to the employee.
Various other factors impact how discounts are taxed, so employees should consult a tax professional to understand their individual situation. Taxes can take away some of the savings offered by employee discounts.
Are Discounts Reported on W-2s?
Employee discounts that are deemed taxable income must be included on employees’ Form W-2 Wage and Tax Statement. The discounted amounts exceed the IRS 20% threshold so they are subject to income and payroll taxes. However, discounts up to 20% off as well as any discounts used for legitimate business purposes are not reported on W-2s or subject to taxation. Companies need to track taxable discounts across the year and properly include them on employee W-2s after each tax year ends.
Using Employee Discounts Without Impacting Productivity
A potential downside of employee discounts is reduced productivity if workers spend time browsing discounts instead of working. However, companies can implement policies to prevent misuse of discount programs during work hours:
- Set expectations that discounts are for personal use only, not work time.
- Block access to discount program websites from work networks and devices.
- Ban discussions about discounts during meetings and work hours.
- Encourage employees to view discounts during breaks, off hours, or personal devices.
- Track web usage data to identify misuse of work time.
- Enforce consequences through warnings or disciplinary action if misuse continues.
Well-structured policies combined with employee education prevents distraction or overuse while allowing employees to benefit from program discounts.
Best Practices for Employee Discount Programs
Companies looking to maximize the impact of their employee discount program should follow these best practices:
- Survey employees to identify the most desired discounts to guide program choices.
- Negotiate deals on products or services tied to the company’s own industry.
- Partner with category leaders in each industry to access the best discounts.
- Promote the program thoroughly through HR materials, emails, intranet, and managers.
- Make enrollment and opting into discounts very simple for employees.
- Offer a wide array of discount categories to appeal to diverse interests.
- Update deals regularly and communicate new discounts to maintain excitement.
- Issue discounts electronically through discount codes or employer ID cards to simplify administration.
- Track program usage carefully to identify popular vs. ineffective discounts.
- Ensure discounts follow IRS guidelines and are handled properly for tax purposes.
Optimizing a discount program involves careful planning, promotion, and monitoring. Companies that invest in their programs reap benefits in recruitment, engagement, and retention.
Employee discount programs offer a range of benefits to companies and their workforce. By partnering with vendors across diverse industries, employers can provide discounted pricing on everyday purchases. Employees can save significant money on expenses like dining out, shopping, travel, insurance, and entertainment. Businesses boost recruitment, satisfaction, and retention rates with properly constructed programs. However, companies must weigh tax implications, administrative needs, and productivity impacts when leveraging discounts. Overall, these programs serve as low-cost, high-ROI perks that make employment more rewarding.