U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

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A Closer Look at Nonmonetary Awards:
Rewarding With Certificates and Bonds
The fourth in a series of articles addressing nonmonetary awards

Agencies are looking for innovative ways of rewarding their employees. The previous article in this series provided criteria for determining appropriate nonmonetary award items. This article will focus on two forms of nonmonetary awards that some agencies are either currently using or are thinking of using: gift certificates and U.S. Savings Bonds.

• Criteria
• Gift Certificates
• Savings Bonds
• Tax Implications
• For More Information

Criteria. Because any discussion of these two forms of awards will involve the criteria for honorary awards and informal recognition awards (which were described thoroughly in the February 1997 issue of this newsletter), a brief review of the nonmonetary award criteria follows:

Items used as honorary awards must:

• be something that the recipient could reasonably be expected to value, but not something that conveys a sense of monetary value;
• have a lasting trophy value;
• clearly symbolize the employer-employee relationship in some fashion; and
• take an appropriate form to be used in the public sector and to be purchased with public funds.

Items used as informal recognition awards must:

• be of nominal value; and
• take an appropriate form to be used in the public sector and to be purchased with public funds.

Gift Certificates. Gift certificates are items that can be redeemed for merchandise or services at a particular place of business, a group of businesses, or a retail location (this includes chain stores, restaurants, and malls). As nonmonetary items, gift certificates fail to meet the criteria for honorary awards because they convey a clear monetary value, they do not have a lasting trophy value, and they cannot be characterized as symbolizing the employer-employee relationship. Consequently, gift certificates may be used only as informal recognition awards and, therefore, they may not exceed nominal value.

Savings Bonds. A U.S. Savings Bond used as an award might be classified mistakenly as a cash award. However, because a savings bond is a Federal contract that must be purchased, the Office of Personnel Management (OPM) considers it to be a nonmonetary item. With respect to the criteria for use as an honorary award, although a U.S. Savings Bond clearly conveys a sense of monetary value, its minimum 6-month holding period gives it some lasting value, it symbolizes the employer-employee relationship for any Federal employee, and it is appropriate to the public sector. Consequently, OPM has concluded that a savings bond may be used as an honorary award or, if of nominal value, as an informal recognition award.

Tax Implications. The Internal Revenue Service (IRS) considers gift certificates and U.S. Savings Bonds to be taxable fringe benefits that must be taxed on their fair market value. The face value of a gift certificate would be considered its fair market value, and tax withholding must be based on that amount.

The fair market value for a savings bond generally is the purchase price of the bond. For example, if a $200 bond is purchased for $100, tax withholding must be based on $100.

For More Information. Further questions on taxable fringe benefits should be directed to the IRS.

Please note that by featuring these two forms of awards, we are not encouraging or recommending their use, but at the same time we do not discourage their use either. We are merely presenting them as two possible forms of nonmonetary awards that agencies may use in their awards programs.

Originally pblished on October 1997.