Reward management has never been this easy
Let's say that you want to pay a 10€ reward to someone. How would you do that? We asked a few sport associations how they do it now, and found that the cost of paying the reward is 38€ plus the 10€ reward, making the total cost 48€. Let that sink in. The total cost is four times as much as the actual reward. This comes from
- Applying for the reward is usually done via e- or snailmail.
- Once the mail is received, the reward needs to be approved, taking about 10 minutes to review and approve it.
- It takes 10 minutes for the payroll clerk to set up the new person who will receive the reward.
- Then the payroll clerk has to ask the employee for their tax card so that they can accurately calculate how much tax to deduct before paying the reward; this takes another 10 minutes-
- Furthermore, there is a 3€ software cost to set up the employee in the payroll software.
- Finally, the reward needs to be reported to the incomes register, but let's assume that the payroll software takes care of that manually.
- In total, 30 minutes to process the reward. With a 70€/hour fee, that'll cost you 35€. Add the software fee of 3€, and that's 38€.
This would be understandable if it were the 90s, but time should not be wasted like this anymore. Now some of you might be thinking "The cost is overrated, I don't cost 70€/hour". That might be true, but 70€/hour is the standard fee that accountants in Finland charge.
Let's break down the stages of this process and analyse them one by one.
- The reward form & making it accessible
- Reviewing and approving the reward
- Calculating, paying and reporting
Step 1 - Creating the reward form and making it accessible
To pay the reward, you need to get some basic info such as:
- Social security number
- Phone number
- Tax percentage
- Tax Card (attachment)
You might even want them to fill in a cost center so that you know what department should pay for the reward.
To get this info, most organisations use some form. When googling Finnish companies that pay rewards, we found hundreds of organisations that have a page on their website where they tell their members how to download an excel file or pdf, fill it in and send it back to them via email or snail-mail. To be honest, this is quite offensive to the member, and the hassle of filling it in might make them skip it altogether. In other words, they might be discouraged off applying for the reward you want to give them.
Although the organisation gets the correct data by having the members fill in a standardised form, this is far from optimal. There is no automation involved, and the info filled in by the user will be re-entered into the payroll software. Luckily, there are free tools available with which organisations can create forms that'll give the data in a standardised format that's easier to automate than an excel or a pdf file. You can easily create a form with gravity forms, typeform, surveypal, sprout forms or some other form tool. Embedding that form on your website will make it easily accessible.
Step 2 - Reviewing and approving the reward
Once you've received the reward application, you need to make sure that the person is eligible to receive the rewards. Did they do what they said they did? And is it according to your reward guidelines? You might know the answer right away, but what happens if you don't know the person, and need to verify the information with someone else? Then you need to figure out who should review it, and send the reward form to that person. After it's reviewed, you probably also need to have it approved by someone that has the right to pay from your organisations bank account.
Although this review and approval process can seem quite easy, it can get very complicated when you factor in multiple departments, areas, spending limits etc. And you also need to make sure to keep an audit trail of the approval process.
At this point, you might want to consider inserting the reward to your purchase ledger and take care of the approval there. Then again, considering GDPR; should personal data be in there?
Alternatively, you might consider getting a reward software such as Bezala that'll take care of the entire process.
Step 3 - Calculating, paying and reporting
When paying rewards in Finland, Sweden, Norway, Estonia and most European countries: you need to deduct tax from the reward. Countries have their own tax percentages and mandatory deductions, so please make sure to familiarise yourself with your own governments' reward legislation. In Northern Europe, the tax percentage is on the tax card, that's why you need to ask the member for their own tax card. That tax percentage is to be deducted from the reward amount. The deduction shall be paid to the tax authorities as an advance on that person's tax for the year. The advance is paid to ensure that the person won't spend their tax money before paying it. Furthermore, this also needs to be reported to the incomes register of each respective country. In Sweden it needs to be reported on a monthly basis, and in Finland it needs to be reported right away.
The payroll and payment process isn't too complicated when you get the hang of it, but keep in mind that the tax percentages and legislation is updated yearly, so you have to stay on top of it. Alternatively, you can outsource the calculation to award- or payroll software like Bezala. We'll take care of it all so that you won't have to.