Here's the Deal

Employee discount programs have become big business. While discounts for phone service, personal computers and theme parks may not be new, the range and reach of discount programs has greatly increased in the past decade with the advent of web-based platforms, more and larger discount players, and a wider variety of offerings.

Programs for both an employer's and third parties' products and services are receiving increased attention from HR managers in a difficult financial environment where employers are hard-pressed to reward employees through more conventional means, such as bonuses and salary increases.

"It's a weak economy, and vendors and service providers want to maximize their exposure, so they'll offer discounts to achieve that goal," says Jennifer Loftus, GPHR, SPHR-CA, a partner at New York City-based HR consulting firm Astron Solutions LLC. "In a tight economy, people are watching what they are spending. If they can save 5 percent or 20 percent, it helps them."

A fall 2011 Society for Human Resource Management survey of HR managers found that 58 percent of their employers had employee discount programs. Of those with programs, 51 percent said their organizations' programs had grown in the previous two years, as measured by the value, types and number of discounts offered. The respondents represented 486 organizations of all sizes.

Larger employers often receive a plethora of offers. "We have numerous outside vendors who give us great programs," says Danny Garces, PHR, HR manager at Southern Wine & Spirits of America Inc., a Miami-based alcoholic beverages distributor. The company's 12,000 employees are offered discountedSprint or AT&T cell phones and discounted tickets, such as for amusement parks.

At smaller companies, offers may be more limited. "We'd like to offer more discounts," says Terri Clarke, HR manager for Optima Healthcare Solutions, a Palm City, Fla.-based software development company with 70 employees. The company already offers discounts for AAA memberships, banking services at Wells Fargo and the nearby Daytona 500. "Since we just grew to more than 50 employees this year, I expect that more companies will offer us better discounts," Clarke adds.

Some employers and many aggregators of discounts charge a royalty or finder's fee to vendors for the opportunity to market to employees. Some discount aggregators charge employers to join their discount programs.

58% Percentage of companies that offer employee discount programs.

A Growth Industry

Ten years ago, New York City-based Next Jump negotiated and manageddiscount programs for 50 large clients with 1.5 million employees; now it provides discount programs to more than 90,000 employers with more than 100 million employees, including 70 percent of the Fortune 1,000 companies, says co-founder Greg Kunkel. He says 85 percent of the employees of participating employers register for the discount programs, and 30 percent of participating employees make discounted purchases each month. 

Virtually every large corporate employer with 1,000 or more employees now offers employee discounts through aggregators that package deals, through vendors directly, or through the company on its own products or services, Kunkel says.

These programs are trickling down to employers who in the past might have been bypassed because of a relatively small number of employees. Kunkel says four years ago, Next Jump expanded into serving small to medium-sized businesses with its Corporateperks.com program. Certain discounts are available to employees for free, and employers can pay fees to receive larger discount offers for their employees, he says.

Kunkel identified six common categories of discounts for employees:

• Home items, ranging from diapers to lower Internet bills to construction and repair goods offered at home improvement stores.
• Electronics, including computers, televisions and cell phones.
• Apparel.
• Travel items, including hotels, car rentals and flights.
• Local goods and services, including for restaurants and gym memberships.
• Seasonal and occasion-based items, such as goods and services related to many holidays.

Another national discount provider, Acton, Mass.-based Working Advantage, began 16 years ago as a supplier of members-only entertainment benefits to corporate HR professionals. Working Advantage now offers a range of goods and services at discounted prices to 10,000 corporations and their 10 million employees. "We purchase in very large volume and transact at below-market prices," says Mike Giles, Working Advantage's vice president of business development.

The company offers discounts of up to 50 percent for movie tickets and up to ​30 percent for ski tickets, in addition to significant savings on theme parks, Broadway shows and professional sporting events, Giles says. Many HR managers combine Working Advantage's free discount program with other programs that provide discounts on items other than entertainment.

Reaching Employees

The sophistication and reach of direct marketing to employees is increasing, with many vendors taking the burden off HR administrators by establishing independent websites with pages that mimic the look of the employer's website and allow employees to directly access discounted goods and services with pass codes.

It's important to understand the demographics of the target company's employees to effectively extend discounts to them, says Rob Hill, national account manager for Miami Gardens, Fla.-based Corporate Communications Group.

Sometimes employers offer discounts, but their employees don't know they are available. One of Hill's clients has many employees who typically do not use computers at work, so the Internet isn't an effective way to communicate with them. To reach them, Hill has gone to their worksites to display available products and services. He has also done "payroll stuffers, newsletters and a multitude of other things. It depends on what the client lets us do. Some say we can only have a link on the intranet on the employee website; others let us do e-mail campaigns," he says.

Whether and how to allow access to employees can be a sensitive topic for HR managers. Some employers prohibit or greatly restrict vendor access to their employees.

Company Perks

There is no better place to start offering discounts than with a company's own goods and services, HR experts say. "Our employees get all coffee and fountain beverages at no charge while working," says Steve Seymour, SPHR, director of personnel for Erie, Pa.-based Country Fair Inc., a chain of convenience stores and gas stations with 1,400 employees at 75 locations in Pennsylvania, Ohio and New York. An added bonus: Employees get to know Country Fair's products. "When your employees can get excited about a product, it's easier to sell," Seymour says.

Weststar Mortgage Inc., a Woodbridge, Va.-based mortgage company with 300 employees, offers discounts to employees on its mortgage services, which can add up to thousands of dollars of savings, says Weststar HR Director Tasha Faison-Hill.

Since 1989, Goshen, Ind.-based retirement community Greencroft Communities has allowed employees at its largest campus, Greencroft Goshen, to receive a discount on retirement accommodations, says Vice President of Human Resources Kathy C. Brewton, SPHR. "We want to recognize these employees' commitment to the organization and encourage them to consider our community as a retirement option," she explains.

Some government employers extend discounts to their employees. A year ago, in addition to discounted theme park and concert hall tickets and a discounted gym program, the City of Manassas, Va., began offering its 450 employees discounts through a Commonwealth of Virginia surplus merchandiseprogram and the Government Employees Marketplace, a program offered by the National Association of Counties. Employees can get discounts of 20 percent to 50 percent off items such as computers, cameras, flowers, and other goods and services, says Brenda Cogdell, SPHR, the city's human resources and risk manager.

Many discounters are tied to particular industries. Weststar Mortgage joined a conglomerate of mortgage banking lenders in a discount program called Lenders One Mortgage Cooperative, based in St. Louis, Faison-Hill says. Weststar pays a membership fee to be part of the program, which allows employees to receive 10 percent to 15 percent off a range of vendors' goods.

Another specialty discounter, ProMotive.com, a Salt Lake City-based online marketplace, puts together deals on outdoor apparel and accessories for employers in those industries, yielding discounts of 30 percent to 70 percent off retail prices on products ranging from yoga gear to skis. Employers can join ProMotive.com at no charge. Employees gain access to the deals through the ProMotive.com website by typing in a code.

Boulder, Colo.-based Leisure Trends Group, a market research company,offers ProMotive.com's discounts to its 45 employees, most of whom are outdoor enthusiasts, says Karen Mawhinney, Leisure Trends' human resource and office manager.

Mawhinney says offering discounts on outdoor goods boosts morale. "It's integral, considering the type of person working here and their interests. If you work here, you know you will have access to really great deals on the things you value and are likely to spend money on."

Some employers and vendors have formed regional consortiums to exchange discounts. The Employee Services Management Association of Central Florida represents 104 members, including vendors and companies. Its discounts reach approximately 250,000 employees in central Florida. Participating businesses exchange discounts with one another through a website, www.esmacfl.org. The association allows smaller companies to enjoy greater purchasing power for a flat annual charge of $125 per member, says Ralph R. Recht, president of the association and an engineer at Orlando, Fla.-based Daniels Manufacturing Corp.

With so many discount opportunities available, employers can afford to be selective, HR experts say. When evaluating opportunities, Loftus advises asking:

• How much time does it take employees to use the service?
• How much time does it take to manage?
• From a financial perspective, is it worth it?

"A lot of the discounts have been fair, but not major. Sometimes, the salesperson on the other end doesn't provide follow-through, isn't there for questions or the hands-on personal feel is missing," Loftus says.

She advises HR managers to be aggressive in seeking to understand the arrangements and to push for greater discounts from vendors or aggregators. "Don't be afraid to negotiate," she says.

Web Extras

• SHRM poll: Employee Discount Programs
• SHRM article: Tax Preparation as an Employee Benefit (Benefits Discipline)
• SHRM article: Discounts Not to Be Discounted (HR Magazine)