Creating an employee advocacy program is an extremely effective way of communicating with your employees and creating enthusiasm around your brand.  When you are creating an employee program, you will want to make sure you review your program with your HR department to make sure you are staying on the right side of tax and ftc compliance.  

Taxable Income

Should you choose to give away prizes in your employee program, make sure that you discuss the prizes and amounts with your HR department.  Generally, gift cards and cash are considered income and will need to be taxed as such.  Section 102(a) of the tax code provides a gift exclusion but 102(c) states the exclusion does not apply to “any amount transferred by or for an employer to, or for the benefit of, an employee.” That means, when an employer gives an employee a gift, it is taxable under Section 102(c) unless another exception applies.

The primary exception to the rule that holiday gifts, prizes, and parties should be included in income can be found in code Section 132(a)(4), which excludes certain de minimis fringe benefits from taxable income.  We are unable to give you tax or legal advice but overall it is not difficult to create a program where we do not specifically give away prizes or where you can communicate your prizes/winners to your HR department to make sure they are reflected appropriately in your employee's benefits.  

FTC Compliance

The FTC requires that employees disclose their relationship with their employer before endorsing a specific product or company.  Employees can do that in a number of ways.  We strongly suggest you review the FTC guides for employee disclosures so that your posts and messaging can be clear: