INSIGHTS
- Corporations spend around $90 billion on non-monetary incentives in the US.
- Over half of the US firms use incentive programs.
- Employee engagement is a $74 billion of the total addressable market in the US.
OVERVIEW
Introduction
Since we did not find the global market size of employee benefits and rewards industry, we found only country-specific (US) data on two categories within the benefit and rewards industry, namely the non-monetary incentive and the employee engagement market.
We find that US firms spend an estimated $90 billion a year on non-monetary incentives. Employee engagement is a $74 billion of the total addressable market (TAM).
We find that US firms spend an estimated $90 billion a year on non-monetary incentives. Employee engagement is a $74 billion of the total addressable market (TAM).
METHODOLOGY
To find the size of employee benefits and rewards market globally, we looked into various sources (reports, surveys, studies, the media) albeit found no pre-compiled statistics. In our attempt to triangulate a response, we found that the rewards and benefits industry includes five main categories: monetary incentives, non-monetary opportunities, employee recognition, and employee assistance. So, we tried to find the market sizes for each of these categories instead. Even so, the data was available mostly on either employee recognition or non-monetary incentives (for the US market). Therefore, data was not found for each of these categories to calculate the whole rewards and industry market. Moreover, since operated and monitored easily, we find that employee recognition and non-monetary incentives dominate the perception about rewards and benefits industry, making it more difficult to answer directly the client's question. Therefore, we then looked in the available information on the market size of non-monetary incentives and employee engagement categories, but also some of their market subcategories.
GENERAL
According to Blackhawn Network (May 2017), a company specializing in corporate incentive solutions, over half of the US firms use incentive programs. Blackhawn reports US companies spend over $77 billion each year.
NON-MONETARY INCENTIVE MARKET
The 2016 Incentive Marketplace Estimate Research Study, finds that American companies spend an estimated $90 billion a year on non-monetary incentives. About $23 billion of this is spent on employee reward and an equal amount on sales reward.
The Incentivemag offers a break-up of this study. The magazine finds US employees to spend $14.4 billion on incentive travel, while $75.6 billion on award points, merchandise, gift cards for channel partners, all-employee programs, sales staff, and customers. This provides the market size for only non-monetary incentives in the US. Its relative share to the total US employee benefits industry could not be found.
EMPLOYEE ENGAGEMENT MARKET
Employee engagement was a $74 billion of the total addressable market (TAM). It includes the recognition, wellness, talent management, and measurement. On wellness subcategory, the market intelligence firm IBISWorld found the TAM at $7.8 billion.
For measurement, Starrconspiracy (2016) reports talking to CEOs in the area and estimating a consensus of $750 million market size in 2016. Investment bankers at William Blair, a global investment banking and wealth management firm, reported in 2016 the talent management was a $13.2 billion TAM.
For the market size of employee recognition, there is an estimated market range. The International Data Corporation (IDC) estimated in 2013 that the 2016 market size would be $32 billion in 2016, with an 8 percent compound annual growth rate (CAGR). John Bersin, founder at Bersin by Deloitte a leading researcher in human resources, fixed the market at $46 billion. The Starrconspiracy writes that a humble 4 percent CAGR puts the 2016 market at $54 billion if Bersin is correct. Bersin's study (2012) found a $46 billion market for employee recognition (pins, thank-you awards, etc.) with a 1-2% in corporate payroll spending for this.
INCENTIVE EFFECTIVENESS
Patricia A. Norberg and Danial R. Horne in their paper "Employee Incentive Programs: Recipient Behaviors in Points, Cash, and Gift Card Programs" published in Psychology & Marketing finds that employees indicate “higher levels of reward satisfaction when they were in points or cash programs as compared to gift card programs” (p. 385). Researchers also find a significant relationship between reward satisfaction and word-of-mouth (e.g. sharing about the benefit with a colleague). The latter can increase employee satisfaction. This study could also inform investment in the employee rewards and benefits market.
CONCLUSION
We were not able to find the global market size for employee rewards and benefits. However, we provide country-specific market size (US) on the non-monetary incentive and the employee engagement market. This may still aid the client in breaking the global market between the UK and US. We find that in the US corporations spend around $90 billion on non-monetary incentives. We then further break down this category. We find US firms spend $14.4 billion on incentive travel. They spend $75.6 billion on award points, merchandise, gift cards etc. Employee engagement is worth $74 billion of the TAM. Its subcategory “wellness,” for example, is at 7.8 billion, while “employee recognition” is worth $54 billion of the TAM. Finally, we also find a study which points out the effectiveness of some of the categories. Norberg and Horne find rewards in points or cash more effective than gift card programs.