Lifestyle Spending Accounts (LSAs) are the most sought-after employee benefit meeting employees exactly where they are, wherever they are, globally.
LSAs are the only global benefit that can offer inclusive equalization of reimbursements regardless of geographical location. These ultimately flexible and purpose-built plans help smart companies positively impact business goals and outcomes.
In Session 4 of the Espresa Discovery Series on LSAs, we will cover:
– Gamifying the reimbursement process
– Utilizing LSAs as a differentiator when it comes to recruiting new talent
– Creativity of companies in implementing and providing the ‘best’ benefits for their employees
– Comparing earned allowance to employee recognition programs
Discover immediate and actionable ways you can create the most wanted new employee program. Watch the virtual forum video and/or read the transcript below.
Discovery Series Session 4: Creative Lifestyle Spending Accounts (LSAs) Programs, Session Four: Transcript
(Modified to remove superfluous language for readability)
Well, welcome to part four of our LSA Education Series. We’re going to recap what LSAs are from a high level. Then, we will look at earned allowance examples. This is an exciting new type of LSA that is becoming much more prevalent in the total reward space. Then, we’ll look at that earned allowance compared to traditional LSAs compared to employee recognition programs, and lastly, we will look at the inclusive marketplace for LSA points.
What is a Lifestyle Spending Account? LSA are oftentimes referred to as reimbursements, allowances, stipends, wellness, or wellbeing wallet, or something as broad as a perks program.
An LSA is a lifestyle spending account, but LSAs are unregulated unlike HSAs or FSAs, which are the terminology is dictated by U.S. government practices. LSAs are unregulated, so you can refer to them by a number of names, and common ones that we see across our client base reimbursement, perks programs, wellness wallets. So, you certainly can have the vernacular that fits your company culture. For the purpose of this, I will refer to them as LSAs as that’s what they’re commonly referred to by both consultants and brokers.
The key here is regardless of what you call your program, is that it’s a predetermined amount for your employees based on the plan design, and this is really the traditional look at LSA programs, predetermined, forward-looking, it’s going to be on a cadence that you choose either annually, monthly, or quarterly. Each plan is flexible and purpose built by each company.
Some of the very common things we see in these companies’ plans are, first of all, wellbeing is very, very common. Wellbeing focused on fitness is very traditional. Things like stipends or reimbursements for gym memberships have been common for many years. In the past couple of years, we’ve seen it pivot to more virtual fitness options such as reimbursements for Pelotons or amazing online platforms like Les Mills, and then some companies are taking a much more holistic approach to wellbeing, not only looking at physical fitness but the other types of wellbeing like financial wellbeing, dependent care, mental health. That’s becoming common in wellbeing plans.
Creativity of companies in implementing and providing the ‘best’ benefits for their employees
Then, in the current work environment, we’re seeing a lot of stipends set up for work from home, so people have the resources and materials they need to do their best work in that home setting. Then, other areas that are incredibly common, professional development, stipends around tuition and learning and development or things like adoption and surrogacy as well. When we think of all these different plans, typically, what you see is one particular plan with one distinct budget and then subcategories or pillars that go into that plan.
So, in this scenario, let’s imagine that this is Plan A. Plan A has $1,000, and within Plan A, there are four particular subcategories that a person can choose to spend that thousand dollars on, and that employee is empowered to spend that thousand dollars on those four subcategories in any which way they choose, making LSAs one of the most inclusive offerings that total rewards offers their employees because a person where it’s very important them to invest in personal wellness, they maybe put most or all of that thousand dollars towards that, whereas someone else who’s focused on financial wellbeing or maybe someone who’s in their first work from home position, they may want to utilize that stipend towards work from home.
Now, some companies choose to have multiple plans, so they may have a Plan A as we just covered that has four subcategories, but they also may have a Plan B that’s particular to a certain aspect such as tuition for professional development and lifelong learning. The key here is that when you have a Plan A and a Plan B, they cannot be co-mingled. Subcategories or pillars can be broken down or commingled under one plan, but if you have multiple plans, they cannot be commingled. So, the $500 for tuition would not be able to be used for work from home materials or childcare or pet care.
Now, to recap, this is a standard LSA plan where you have a predetermined amount, predetermined subcategories. Each plan has a predetermined amount, and this is provided upfront. This could be, again, annually, quarterly, or monthly. Now, one of the areas we’re seeing companies pivot to is this concept of earned allowance under the LSA program, and this is different than the traditional standard LSA. The max plan amount here is typically predetermined, but it’s earned by behaviors that are lived out by your employees.
Utilizing LSAs as a differentiator when it comes to recruiting new talent
So, here’s our first example. This company is looking to encourage global wellbeing by providing an earned LSA allowance. The goal here is to drive more participation and encourage healthy lifestyles for their employees. Now, these employees are earning points on a quarterly basis for challenges. This particular company is fitness challenges focused on things like steps, healthy habits, sleep, drinking enough water, et cetera. They’re getting points for the participation, and then the outcomes of these events. Additionally, this company is running one-off events where you can earn additional points.
Gamifying the reimbursement process
What happens then is at the end of this quarter, there are points allocated to the employees that have chosen to take part in this well-being challenge, and they can utilize those points that they received for, we’ll call it a wellness wallet where they can spend those on additional resources for wellbeing, things like mind, life, financial. Really, that holistic wellbeing is what this company is focused on. Being that this is a global company, they’re utilizing what’s called a purchase power parity index to ensure that it is equitable and inclusive on a global scale. So, just for transparency, if you were going to give, let’s say a thousand dollars is the maximum that someone could earn in the United States through this earned allowance, that would be about $300 in India. Conversely, in some other countries, you may have even a higher standard of living where that person may have the ability to get the equivalent of $1,200 of U.S. dollars. Again, that’s going to ensure that they have the same purchasing power for the wellbeing around body, mind, life, and financial fitness or the subcategories that you can utilize this for.
So, moving on from example one to another case study here that we have, this company, Company 2, is focused on promoting amazing culture initiatives. So, employees are able to earn points for doing various things that promote great company culture, and those can be a variety of things, whether that’s being involved in internal initiatives, whether that’s being focused on DE&I efforts and encouraging participation in employee resource groups by becoming an ambassador, whether that is charitable drives. Right now, it’s the holidays. Many companies are doing toy drives for kids in need, or if you live in a colder climate … I myself do. I live in Wisconsin. Right now, it’s a coat drive season, so kids that are in need of new coats, they can stay warm through the winter.
Employees that take part in these different programs, they’re able to earn points and accumulate those points to utilize. Some companies do these cultural programs throughout the course of the year. Maybe you earn points in certain quarters. You redeem points in other quarters. It’s completely up to you how you do this because, again, this is not a regulated program. It’s a program that’s meant to encourage certain behaviors through this earned allowance.
Example three, gamifying this process. For many years, we’ve talked about how do we encourage adoption, engagement, employee experience. Well, one of the ways that we’re seeing companies do that is gamifying employee onboarding, and then the ongoing progression within that person’s career. Now, more than ever, if you’re onboarding folks in some cases that are remote, how do you encourage them to stay engaged, go through all the courses, stay on task? A great way to do that is by offering an earned LSA allowance for both onboardings and if they continue to do professional development courses, logging into an LMS system to be a lifelong learner, then encouraging them with points through that process so that they can redeem those through appropriate pieces of merchandise through the LSA. You can offer a wide array of things for people to redeem for, or really have an infinite marketplace. We’ll discuss what that means in a brief moment here.
Here’s example four, is integrating employee recognition programs with these LSA and earned allowance programs. So, employee recognition programs have been commonplace for many decades at this point, probably more commonplace than LSAs over the past decade, but now, we’re seeing progressive companies really blend these ideas of how does recognition fit with LSAs and how might that fit with an earned allowance. So, you have all the typical recognition modules, things like peers recognizing peers, managers recognizing employees, cross-functional and doing that in a social manner where you have that social field, where you can comment, like, congratulate, et cetera through that platform, additionally bringing in some of those legacy recognition moments such as years of service awards, but then giving the employees the ability to redeem those recognition points through the LSA program.
What that does is it enables them to have an infinite marketplace. You think of some of these legacy years of service programs, very restrictive on the rewards that you can get, catalog set of items. You may or may not want any of them. Going to the aspect of allowing folks to take those points and go through the LSA, you have an infinite marketplace, and you’re always getting the best value through that marketplace because you’re purchasing things at the price of Amazon as opposed to a rewards vendor’s catalog.
LSAs are the most sought-after employee benefit meeting employees exactly where they are, wherever they are, globally.
So, to break them down in a nice, easy to break down table here, we’ll start with recognition. You’re earning points via recognition moment, whether that’s a real-time spot award or a five-year service anniversary award. The redemption experience for that person who strictly has recognition is limited to what’s in the marketplace. So, you may have a hundred gift cards. You may have a few hundred items, but that’s all that’s available in a typical marketplace. You can submit a receipt for any purchase that you want. You do have the points upfront, but if you don’t want to use those points, they may sit in your budget forever, and they may go to nothing. There may be a high amount of breakage there. Again, the marketplace is very pre-configured and fixed. It’s not a wide array of choices. There’s no access to discounters.
So, if any of the folks on here are from a large company, you may have a perks program or a perks partner where people can go in and purchase things, in some cases, at very significant discounts, some items, 50% or more off. Recognition programs, their rewards network, and redemption experience tends to have very, very high markup as opposed to a discounter where you’re actually saving money. We here at Espresa, for our reimbursement and earned allowance clients, partner with Abenity. If you have another vendor where we’re not … just willing to work with Abenity, we work with anyone, but for those who don’t have that discounted partner, we do have one in place for you.
With the reimbursement, looking at the second column, that LSA program, traditionally, is a fixed allowance based on a predefined annual program. The experience is employee goes out, purchases something. They reimburse through payroll. All they have to do for that process to happen is submit a receipt that is within the purview of the plan and the rules that are put forward in that. If it’s a well-being plan, does it fit within that? If it’s a work from home stipend, does it fit within the work from home parameters? If so, they go out, they buy something, submit a receipt, and they’re able to be reimbursed for that.
Additionally, if they want access to the discounts, they can work through that. So, maybe they want to get the call map for wellbeing. Abenity has that at 57% off. They can easily get that, meaning that your predefined budget is going farther, and your employee’s getting more from that. Then, there’s the earned allowance where people are competing challenges or tasks or doing, taking part in their events or being ambassadors. Typically, we’re seeing this assessed on a quarterly basis, but again, you’re not limited with these types of programs. They are unregulated, so if some of these earned allowance programs, you want to be annual, certainly a good vendor can support that. The redemption experience is the same as LSA. They purchase it. It goes through payroll. All they need to do is submit a receipt.
Employee rewards as an infinite marketplace
Really, it’s an infinite marketplace. If you want to allow employees to utilize these points for anything under the sun, you certainly can do that. If you want to allow for branded items either through some of our partners, or maybe you have a company store, that’s fine. They certainly can do that then, and again, the access to the discounted store as well. So, that earned allowance is going farther, is even a greater benefit for your employees.
When you look at that earned allowance mode, really, it’s a great way to offer products and services on a global scale in an infinite marketplace. Typically, some of these U.S.-centric vendors, they’re going to have a rewards network or an online marketplace. It’s not going to have the level of gift cards and merchandise on a global scale that an infinite marketplace does. What we see from our client base is that having employees purchase in a typical manner that they would, credit card, phone, watch, checkbook, cash, whatever they choose, and submitting a claim, it’s not a friction point because it’s approved quickly. It goes through the next payroll cycle. They are reimbursed right away.
For the client and the employee, all compliance and taxation is automated regardless of where they are in the world, so you don’t have to worry about the administrative burden that sometimes takes place in these programs if they’re homegrown. Because it’s so easy to do, we typically see 85 plus percent participation rate within these programs. Some of our clients are seeing above 90%, which is absolutely incredible adoption for these programs, particularly as they keep ongoing.
Again, just to recap on the infinite marketplace, it can be anything. We’re complete rewards agnostic where people can choose what they want to have. If you want to have some parameters, we can support that, but if you want to open it up, that’s great. We make no markup on our merchandise. So, if people want to work through Amazon, they can do that. If they want to work through other vendors, that’s fine too, but great, great experience for both the employer and the employees.
So, with that, I see we have quite a few questions, which is fantastic.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Thanks, Brandon. We’ve had a pretty active Q and A. So, we’re going to start with Amy. Amy wants to know, how do you recommend employers take advantage of child care tax breaks if childcare expenses are built into an LSA?
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Yeah. Very good question, Amy. So, the way that we do that is through the subcategories or pillars. Every one of those can be coded for appropriate taxation, meaning it can be pre-tax or post-tax or taxable, or non-taxable. There are certain categories such as childcare or commuter benefits that do have tax advantage status, and we would code that. So, when the employee is reimbursed through payroll, they would not be taxed on that. Alternatively, if you’re offering something like fitness where people can reimburse gyms or online courses like Les Mills, they would be taxed on that because those are taxable events.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Okay, great. Mike asked, “Can you clarify how to connect a recognition program to an LSA? Does this cover all types of recognition, such as peer-to peer-spot, et cetera?”
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Yeah, absolutely. So, what we’re typically seeing is that when there’s a monetary recognition moment, that employee is given points. That’s the typical terminology in the industry. At Espresa, a point in our recognition platform typically equals one U.S. dollar. That’s the conversion that we utilize it. So, when we have clients that decide that employees not only can redeem through our rewards marketplace but otherwise transfer those into LSA reimbursement dollars, they simply decide to go through the infinite marketplace, purchase something they want, submit for adjudication. That’s industry term for review of receipt, and have it approved. So, it’s a very simple, seamless process, and again, your employees can get anything they want as opposed to a few limited items within a rewards catalog.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Okay, great. The next question’s from Boston from Xander. Can you talk more about gamification and what that means? Do you have some material you can share?
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Yeah. Great questions, Xander. So, gamification initially became quite popular with the wellbeing and fitness where people would do things sometimes as simple as a step challenge and incentivize folks with monetary rewards. What we’ve seen is that while step challenges are still very common parts of these fitness challenges is that with purpose-built technology, it can be so much more. We can track not only steps through smart devices, but we can track cyclists cycling through Strava. We can have self-reporting for things such as eating healthy, getting enough sleep, mental wellbeing, drinking enough water, really anything that you want, or we can gamify that.
Then, even taking it a step further, we have clients that not only look at the gamification from a wellbeing standpoint, but they might gamify something like a charity drive. They might gamify something like enrollment in employee resource groups to help boost DE&I efforts. They might gamify something like Earth Month to encourage good behaviors for the environment. Each one of those can be gamified with some type of monetary incentive. Sometimes, that’s called points. Sometimes, it’s just dollars being put into an earned rewards LSA, but yeah. It’s an exciting area where we’re seeing a great deal of interest from both consultants and clients.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Okay, great. Nadine asks, “Can benefits be used for multi-person experiences like if an employee applies their LSA toward an experience, can they bring their partner or friend along as part of the benefit?”
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Yeah, Nadine, that’s a very good question. So, that’s a program design question actually in that some organizations make the decision that those LSA points can only be utilized for the employee. Others decide that they can also be utilized for others as well. For instance, I’ll use the example of a gym membership. Some organizations only allow for the gym membership to be reimbursed for the employee. Other companies decide, here’s the stipend. You can utilize that towards just yourself or towards a family membership. So, really that’s design question. Regardless of what you choose, if you’re an Espresa client, your adjudicator will be trained on the parameters of your particular rules. So, if you’re allowing for family, great, they will allow that. If you’re not, they would then decline that and work with your employee to find the right way to utilize the plan.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Okay, great. I think [Imogen’s] question kind of builds on that. She says, “For recognition, how do you handle the budget?”
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Yeah, again, that’s a program design question. So, there are different ways to budget for Recognition. We could spend a lot of time discussing those, but typically, companies have two ways they budget for recognition. They either do it by percentage of payroll. So, if you go to like SHRM, WorldatWork, et cetera, they may have some industry benchmarks. If not, we can share those with you, or they do it by per employee where you invest an approximate amount per employee that you plan to spend. That’s how we see people budgeting for recognition.
The one nice thing about offering the infinite marketplace or if you have a recognition partner who doesn’t have any backend markup is you have full transparency into the budget. If you’re giving someone a hundred dollars a quarter on average for recognition, on average, your employees are going to be able to purchase a hundred dollars worth of rewards because they’re just purchasing them, submitting receipts, and it’s coming out of their points. So, really great experience, and it ensures that your employees can get whatever they want.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Okay, great. Then, [Henrico] asks, “How can we promote creative programs globally while also being locally relevant? We have multiple campuses, and I’m afraid of causing more work for my team.”
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Very, very good question. So, one of the things that if you’re a global company will want to ensure is that you partner with a truly global provider, ones that have in-language support for every country that you’re in not only on the software platform but through the adjudication platform as well, so that if you have folks in Japan that are going to a gym in Japan, receiving a receipt, that that receipt doesn’t have to be in English because that’s an unrealistic ask for your Japanese employees if your partner vendor doesn’t have the ability to do Japanese receipts. So, a good global provider should be able to support all languages, all currencies, customer service in all time zones. That’s a key when you look for a partner.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // All right, it looks like this is maybe the last question. So, if anyone else has anything coming up, reminder to just pop it in the chat. So, Inez asks, “Do LSAs make a good replacement for onsite or concierge services. Do you have examples?”
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Yeah. Yeah, certainly. So, if you want to do onsite or concierge type services, LSAs certainly can support that. If you’re looking to replace those with new options for folks that are working from home, LSAs are a fantastic vehicle for that because your employees have a forward-looking budget, they can support preferred vendors, they can give access to things that your employees may not be familiar with like a Les Mills or a Peloton or some of these other resources where if you don’t have people coming 100% of folks to the office every day and maybe there’s a gym there or something, that’s no longer available. We’re giving great alternatives to those folks.
If you do have onsite services or if you do have different things that are going on, certainly we can promote those through the LSA as well. So, it’s really a nice balance to offer your employees in the current environment that we’re in and the environment that it looks like we’re going to be going forward, at least for the time being. So, very good question and something that LSAs can really help facilitate.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // All right. Thank you, Brandon. Thanks for leading us through all the information. It looks like we’ve answered all of the questions for today.
Brandon Markham, Vice President, Workplace Culture Solutions, Espresa // Very good. Well, once again, thank you to everyone who’s joined this or any of our LSA micro series. If you have more questions on LSAs or how recognition plays into LSAs, we’re happy to connect and continue the dialogue at a further date.