Saturday, 29 March 2014

Staff discounts can prove costly

Companies have been warned that staff discounts may be a perk of the job but they can quickly get out of hand.

Tina Chander, from our employment law team at Martin-Kaye Solicitors in Telford, said many companies offered discounts on their products and services to their employees, and some also extended the offer to family and friends.

“Some of the biggest names in retailing in the UK are renowned for their amazing staff discounts – with companies like Waitrose, Sainsbury’s and John Lewis offering up to 20 or even 25%. But for smaller companies, what begins as a staff incentive can quickly snowball, and rather than having clear benefits for your business, it can become a nightmare.”

Tina said it wasn’t only companies that widened their offer to their employees’ extended families and friends who were at risk – those who only allowed employees to benefit from reduced rates were also vulnerable.

“You may find your staff agree to buy products or services for other people, and maybe decide to split the difference between them. In this way, your staff are receiving the cash you could have earned from a direct sale. If this is just a one-off, then you may not be too worried about the situation, but if begins to happen regularly, your profits could be hit hard.

“And equally if you open up the scheme to friends and family, your staff may agree to help anyone take advantage of the reduced prices, even people they haven’t met before, as long as there’s a financial benefit in it for them.”

Tina said companies were under no obligation to offer a staff discount to anyone, but if they decided to go ahead, they should have strict rules in place.

“It’s wise to agree that employees must work for you for a certain time before they qualify for a discount, and make it clear they should not personally profit from the scheme or if they do, they’ll risk being disciplined. Put a limit on how many times they can use the staff discount, and reserve the right to change the terms of the scheme or withdraw it at any time.”

Tina said the policy should be regularly reviewed and records of all discounts should be kept to help companies spot any potential over-use. “Everyone likes a bargain and everyone loves a perk, but it’s important to protect your business from people prepared to over-step the mark.”