In 2022, it’s hard to imagine a forward-thinking, modern day workplace that doesn’t at least acknowledge the importance of the mental and physical well-being of it’s employees. Wellness incentives are a proven way to increase engagement and get employees excited about their company’s wellness program.
Incentives are the perfect fuel for motivation and commitment when it comes to completing any task or goal, which is why employers have been incentivizing their fitness and wellness programs for decades.
In this article, we’ll be discussing:
- What is a wellness incentive?
- How/when wellness incentives started & how they are used now
- Do wellness incentives work?
- Are wellness incentives legal?
- Are wellness incentives taxable income?
- Wellness incentives best practices?
- How to incorporate wellness incentives into a wellness program?
1. What is a wellness incentive
An incentive is something that motivates or encourages someone to do something. Wellness incentives, specifically, are incentives intended to motivate someone to make healthier choices and engage in healthy activities that promote physical or mental wellness.
There are many reasons an employer chooses to implement a wellness program for their employees.
Incorporating wellness incentives into your program is a great way to increase excitement, morale, and most importantly, engagement from your team. The tricky part can be choosing the right incentives for your program and your employees.
Incentives can fall into the following categories:
- Cost incentives
- Example: Cash rewards, gift cards, reimbursements
- Low or no-cost incentives
- Example: Paid time off, extended breaks
- Progress-based incentives
- Best for increasing and maintaining participation. Employees can earn multiple incentives throughout the program. Increasing the size/value of the incentives as the program continues is an additional way to motivate your team to participate.
- Participation-based incentives
- This type of Incentive can be given to anyone who participates in the program. Because of its non-competitive nature, this type of incentive is best for increasing comradery and cohesiveness among employees.
- Performance-based incentives
- This type of incentive can be given as employees reach certain goals or milestones in your program. If you have a team of highly-competitive people, this type of incentive is an effective way to ensure high participation rates.
- Results-based incentives
- This type of incentive is typically given at the end of a program to employees who reach an overall goal.
The most common type of incentive offered by employers is, of course, monetary, which can include:
- Cash rewards given directly to employees as bonuses
- Reimbursements for classes, memberships, subscriptions, equipment purchased by employees, etc.
- Money deposited into an Health Spending Account (HSA) – which we’ll talk more about later in this article.
In addition to monetary, there are many different types of incentives that employers can offer employees. Other types of incentives can include:
- Material gifts (i.e. apparel, appliances, tech, equipment, etc.)
- Gift cards
- Company events
- Free meals/lunches
- Free subscriptions or memberships
There are also low or no-cost incentives like:
- Paid Time Off (PTO)
- Extended or additional breaks
The best way to figure out which incentives will work best for your team is to simply ask them. Pulse surveys are an effective and efficient way to gather this information from each participant. They serve as an important tool in gauging the overall satisfaction of employees, helping identify their needs, etc. Ultimately, pulse surveys help you, the employer, design a culture and supportive environment that enables employees to do their best work.
Learn more about how to use and get the most out of pulse surveys here.
2. How wellness incentives started and how they’re used now:
The concept of employee wellness has been around for centuries, but only recently has it been popularized and implemented in the modern workplace. An employee wellness program includes any activity designed to support better health at work to improve health employee performance, productivity and satisfaction.
Work is where most of us spend about two-thirds of the time we’re awake throughout the day, 5 days a week. If we’re not feeling our best, both physically and mentally, our performance at work and the balance between work and our personal lives can struggle.
How and When Did They Start?
A Welsh social reformer named Robert Marcus Owen proposed the 10-hour work day. Seven years later, he proposed an even more controversial idea: an 8-hour work day. He even coined the phrase, “eight hours of work, eight hours of recreation, eight hours of rest”.
Workplace wellness programs started to appear in academic literature, mainly focusing on the positive effects and benefits of physical fitness improving employee’s health and performance in the workplace. The Journal of Occupational Health also began publishing articles that discussed how corporate wellness programs could directly contribute to reducing absenteeism and healthcare costs, and even potentially attract top talent in 1982.
The vast majority of workplace wellness programs during this time mainly focused on physical aspects of health. It wasn’t until the late 80’s that companies started to normalize and adopt methods that catered to the psychological side of health and well-being.
An initiative by the federal government called Healthy People 2000 was launched. It proposed that 75% of employers with 50 employees or more should offer health services as a benefit. This initiative was an attempt to increase the health of the American population by the end of the century.
Programs during this time mainly focused on three areas:
- Physical Health Education: classes, health fairs, educational pamphlets, posters and other printed materials promoting physical health, nutrition, etc.
- Lifestyle and Behavioral Change Education: Programs implemented for a certain amount of time to give workers educational information, resources and support to implement healthier lifestyles and habits.
- Creating a company culture that supported the education and implementation of healthier lifestyle and behavioral choices workers.
A revised version of the Healthy People 2000 initiative was introduced — Healthy People 2010. It aimed for 75% of workplaces/worksites with 50+ employees to have a “comprehensive health promotion plan” that would consist of five elements:
- Health education
- Supportive social and physical work environment
- Integration of the program into the administrative structure
- Related programs
- Screening programs
3. Do wellness incentives work?
As with any task, program, process, etc. in the workplace, wellness incentives work if they are strategically designed and properly implemented.
Implementing an effective wellness program requires consistency, organization and a clear & concise process. For a wellness program to work, you first need to decide and understand why you’re facilitating it in the first place.
What are your goals with your company’s wellness program? Is it to save money on healthcare costs? Increase productivity? Improve comradery and collaboration?
What do you want your people to get out of your wellness program?
Do you want employees to make healthier choices regarding their diet, exercise and sleep? Do you want to encourage employees to stop unhealthy habits like smoking or unhealthy snacking? Do you want employees to improve their mental health through activities like meditation and yoga?
Creating a clear and decisive outline of your wellness program’s purpose and goals is the first step to ensuring its success. A great way to make sure you’re choosing the right goals and purpose of the program is to find out directly from your employees what their personal wellness goals and needs are. The best method to gather this information is through pulse surveys.
Pulse surveys can be used throughout your wellness program to help determine what kind of activities your employees would be interested in, what kind of incentives would best motivate them to participate and even track their satisfaction with the program throughout.
4. Are wellness incentives legal?
There are many rules and regulations around the privacy of an individual’s health information. Thanks to government organizations like the Equal Employment Opportunity Commission (EEOC) and federal statutes such as Health Insurance Portability and Accountability Act of 1996 (HIPAA), employees have very specific rights and protections over their private health information.
The downside for employers is that some may argue that the nature of wellness programs require employees to publicize their personal health information, which is strictly prohibited by HIPAA and yes, illegal.
So are employee wellness programs legal? In short, yes.
Implementing a completely voluntary wellness program where employees can choose to participate if they’d like typically doesn’t muster up any legal issues. Legal issues may arise when the program is designed to reward only the employees who choose to participate. Essentially, the bigger reward employees get for participation, the greater the possibility for legal issues to arise.
5. Are wellness incentives taxable income?
Before implementing a wellness program, it’s important to know the facts about all of the intricacies, legalities and costs associated with the type of program you want to run.
According to this article from Society For Human Resources Management, wellness incentives are taxable by the IRS and emphasizes “how important it is for employers to ensure that they are compliant with all tax withholding and reporting requirements under the tax code”.
Generally speaking, any incentive or reimbursement (i.e. cash reward, gym membership or equipment reimbursed, etc.) given by an employer to an employee is taxable to the employee as wage. Employee’s should include these earnings on their W-2 as they are subject to federal tax withholdings, Social Security taxes and Medicare taxes.
But good news for employees, there is a way around incentives and rewards being taxed.
Employers can deposit cash rewards and reimbursements directly to a non-taxable Health Spending Account (HSA).
What is an HSA and How Does It Work?
An HSA, which stands for “Health Savings Account” or “Health Spending Account”, is an account that individuals can use to pay for eligible healthcare expenses. Employees can choose a dollar amount of their wages they’d like deposited directly into their HSA (up to a certain amount per year).
HSA’s can help employees with high deductible health insurance plans pay for healthcare and medical expenses. In addition to the non-taxable aspect, an enticing benefit of HSAs is that the money in your HSA can earn interest as long as you keep a balance of over $1,000. For some, there is also an option to invest the money you accrue in an HSA.
HSAs are a great option to simultaneously lower company healthcare costs and help make it easier for employees to pay for their personal healthcare.
6. What are some wellness incentive best practices?
We briefly mentioned some best practices when creating and implementing a wellness program, but what about when it comes to incentives? When choosing incentives for your wellness program there are a few things to consider:
- What type of activities will your program involve?
- If your program is ongoing with many milestones, you may want to offer many small prizes, incentives or rewards periodically throughout. If your program has more of a one-and-done structure, you’ll probably want to offer larger, lump sum rewards.
- What do your employees want? What’s most important to them and will best motivate them to participate?
- It’s a waste of your valuable time and money to choose the incentives you’ll be offering without first asking your people what they want. As we mentioned earlier, the most effective way to tackle this is with pulse surveys. Learn more about pulse surveys and how to implement them here.
- Consider your budget and the associated costs that are needed to make your wellness program successful.
- Offering everyone a new car as a reward for running a marathon would be amazing, but there’s nothing more embarrassing than making promises that exceed your capabilities. You’ll want to decide on a budget and choose the incentives you’ll be offering accordingly.
- If your budget is on the lower side, that doesn’t mean the value of your incentives has to be lower too. To some, an extra PTO day or even extra break time is more valuable than a tangible or monetary reward.
7. How to incorporate incentives into a wellness program?
Our expert advice is to always include incentives in your wellness program, but incentives don’t have to be material items. Some examples of non-monetary incentives include:
- Paid time off
- Additional or extended breaks and personal time
- If your team is fully in the office or hybrid, consider offering work from home time
- Shout participants out in an internal communal space
- Give the gift of choice
- For example: Maybe your organization does team lunches? Winners and participants of your program can be rewarded with choosing where you eat next.
Some ideas and inspiration for incorporating incentives and rewards into your wellness program:
Maybe you have a team of people who spend a majority of their day sitting and you’ve been noticing that the general energy and morale around the office is getting increasingly low. A great activity to implement would be a step challenge. Step challenges are typically facilitated as a short term, one time program, so offering a performance-based incentive (smaller rewards that increase in value as larger milestones are reached) would work best for this type of program.
If the employees at your organization already live generally active and healthy lifestyles, a great program to implement could be joining or creating a league or running a marathon as a team. This type of program is an excellent way to increase comradery and a participation-based incentive would work best.
Whether you’re organizing and implementing your organization’s first ever wellness program or you’ve been doing this for a while, but your program needs a little revamp and refresh, it can never hurt to think outside the box when it comes to incentivizing your people to live healthier lives.
Learn more about the different types of wellness programs and incentive options we offer by booking a call with one of our benefits experts today!