Employee Gifts: Cash, Choice or a Keepsake? What Research Says

The budget line says “$75 per person, year-end.” The group chat of managers says three different things: “Just give them money.” “Nobody wants another branded hoodie.” “What about something personal?” All three are partly right, which is why this decision stalls every December.

Here is the short answer on employee gifts, cash or personalized: people say they want cash, the research on how gifts land is more complicated, and a gift of any kind should never be mistaken for pay. The rest of this article shows the evidence for each option and a way to choose that respects what your team actually prefers.

Key Takeaways

• Asked directly, most employees pick cash. In a 1,500-person vendor survey, the top three favorites were cash or check, money added to a paycheck, and prepaid cards.
• In a field experiment (Kube, Maréchal and Puppe, 2012), a non-cash gift raised worker effort far more than cash of the same value, even though workers said they preferred the cash.
• How a question is framed changes the answer: people choose cash when comparing side by side, yet rate a non-cash reward higher when judging it alone (Shaffer and Arkes, 2009).
• In the US, cash and gift cards are always taxable wages; tangible length-of-service awards can qualify for an exclusion under specific IRS rules.
• None of these options replaces fair pay. A keepsake works as an optional recognition gesture, not as compensation.

Why “just give them money” and “make it personal” are both half right

Managers who argue for cash have the data on their side, at least the data from asking. Tremendous, a rewards company, surveyed 1,500 employees across 10 industries and reported that 65% “just want money as a gift,” that only 2% named company swag as their favorite gift, and that 31% had received a gift that made them feel unappreciated. A vendor that sells cash-like rewards ran that survey, so treat the exact figures with care. The direction still matches what people say in every break room: give me something I can use.

Managers who argue for something personal have a different complaint. Cash, to them, looks like a smaller bonus. It disappears into the grocery bill, and nobody remembers it in March. They are not wrong either. A gift is supposed to say “we noticed you,” and a deposit on a pay stub doesn’t say much.

The real problem is that a single word, “gift,” is carrying three different jobs: compensation (money people earned), reward (a thank-you for a specific result) and recognition (proof that someone saw their work). Mixing them up is how companies end up handing a $20 mug to people who were hoping for a raise. Gallup’s research on authentic recognition, based on a 2023 web study of 10,026 working US adults, found that employees see recognition as authentic when it feels honest, heartfelt and tied to real priorities. A gift that tries to replace pay fails that test before the wrapping comes off.

What the research actually says about cash versus gifts

Workers prefer cash, then respond more to the gift

The most-cited study here is a field experiment by Sebastian Kube, Michel André Maréchal and Clemens Puppe, published in the American Economic Review in 2012. They hired people for a data-entry job and surprised some with a bonus. The nonmonetary gift had a much larger effect on performance than a monetary gift of the same value. When workers were later given a choice, most preferred the cash, yet the effort response matched what the researchers saw after the non-cash gift. The authors connect this directly to the idea that “it’s the thought that counts.” One more detail matters: cash also worked better when the employer visibly put time and effort into presenting it.

The limits are real. This was a short, one-off job, not a long employment relationship, and the gift was a surprise. It shows that the form of a gift changes how people respond. It does not prove that a keepsake raises long-term retention.

Side-by-side choices push people toward cash

Victoria Shaffer and Hal Arkes, writing in the Journal of Economic Psychology in 2009, ran six experiments on cash versus non-cash incentives. When people compared the two options side by side, they chose cash. When they rated each option alone, they rated the non-cash incentive higher. The reversal appeared for hedonic rewards (things people enjoy) but not for utilitarian ones (practical items). Employees in an incentive program also expected people who received non-cash awards to enjoy them more and to talk about them more.

For a manager, this is the most useful finding in the whole literature. If you send a survey that says “cash or gift?”, you will get cash, partly because of the format of the question. That answer is valid. It just isn’t the whole picture.

Badly chosen gifts lose value, and close givers lose less

Economist Joel Waldfogel’s 1993 paper “The Deadweight Loss of Christmas” asked students to value the gifts they had received. On average, recipients valued gifts at about 84% of what givers paid. A summary from the American Economic Association notes the limits: a small sample of Yale undergraduates, and later studies with broader samples found yields above 100%. Waldfogel’s data also showed that gifts from people who knew the recipient well held their value better. At work, that suggests the risk is not “gifts” in general but generic gifts chosen by someone who doesn’t know the person. (We’ve written about why the thought behind a gift often goes unnoticed for the same reason.)

Tangible rewards can undercut motivation; specific praise does not

A 1999 meta-analysis by Edward Deci, Richard Koestner and Richard Ryan in Psychological Bulletin found that expected tangible rewards tended to reduce intrinsic motivation in lab tasks, while verbal rewards, meaning positive feedback, increased it. Translated carefully to a workplace: the words around a gift may matter more than the object, and a gift that feels like a controlling incentive (“hit target, get prize”) works differently from one that says “we saw what you did.”

Cash, choice or keepsake: a side-by-side comparison

The table below compares the three main options on what the evidence and the tax rules say. “Choice” means a selection to pick from or a gift card the recipient spends.

Option	What it does well	Where it falls short	Evidence and rules
Cash or paycheck bonus	Most preferred when asked; fully flexible; no waste	Easily absorbed into bills; can read as a small bonus; always taxable wages	Tremendous survey (vendor); IRS Publication 15-B treats cash as wages
Gift card or choice catalog	Recipient picks; low risk of a miss	Gift cards are taxable like cash; generic unless paired with a note	IRS 15-B: gift cards are never de minimis
Practical item	Useful, if it fits the role or life	Often branded, generic or duplicated	Waldfogel 1993: generic gifts lose value
Keepsake or personalized gift	Can carry specific recognition; remembered	Personal taste varies; needs consent for photos or stories; not compensation	Kube et al. 2012; Shaffer and Arkes 2009
Words only (specific written thanks)	Free; raises motivation in lab studies	Feels thin if it replaces earned rewards	Deci et al. 1999 meta-analysis

Read across the rows and a pattern appears: each option fails in a predictable way. Cash fails at memory, gift cards fail at meaning, practical items fail at fit, keepsakes fail at choice, and words fail if they’re asked to do money’s job. The goal isn’t to pick the winner. It’s to combine them so each covers another’s weakness.

What to actually do

Separate pay from recognition before you choose anything

If people feel underpaid, no gift will fix it, and a sentimental one may irritate them. Settle compensation questions through compensation. Then decide what the recognition budget is for. Gallup found that employees who strongly agree their recognition is authentic are four times as likely to strongly agree they are paid fairly, which suggests fairness and recognition travel together rather than substitute for each other.

Ask, but ask in two ways

Because side-by-side questions push people toward cash, ask twice. First: “If the company gives a year-end thank-you, which would you prefer: money, a gift card, or a personal keepsake?” Second, for each option on its own: “How would you feel receiving this?” with a 1–5 scale. The first gives you a vote. The second shows you how each option feels when it actually arrives. Our employee recognition preference survey has ready-to-use wording.

Check the tax rules before promising “tax-free”

IRS Publication 15-B states that cash and cash equivalents, including gift cards, are never excludable as de minimis benefits, no matter how small. Separate rules allow an exclusion for tangible employee achievement awards given for length of service or safety, as part of a meaningful presentation, within dollar limits ($400, or $1,600 for qualified plan awards). Under the tax code, a length-of-service award doesn’t qualify in the first five years of employment. Talk to whoever runs payroll before you announce anything.

Offer an opt-out from the personal part

A keepsake often involves photos, stories or a public moment. Make those optional. Some people would rather take a gift card quietly than appear in a video. A choice between “keepsake” and “card” respects that without asking anyone to explain.

What not to do

Don’t put the company logo on the main surface of a recognition gift and call it appreciation. Don’t use a keepsake to make up for a bonus that was cut. And don’t assume your own taste is the team’s taste: the Waldfogel data suggest generic gifts from distant givers lose the most value.

How to make it personal

If you have 10 minutes

Write one sentence per person that names a specific thing they did this year and what it changed. “You rebuilt the onboarding checklist, and our last three hires were working on day two.” That sentence goes with whatever gift you choose.

If you have a weekend

Run the two-question survey above. Group the answers into three lists: people who want cash, people who want choice, people open to a keepsake. Plan each group separately rather than forcing one answer on everyone.

If you want it to last years

For the people who opt in to a keepsake, attach it to a real moment: a project that shipped, a milestone, a team photo they chose themselves. A keepsake that names a specific achievement can still mean something years later. A logo on a tumbler usually can’t, which is the gap between real personalization and a name on a mug.

The question to ask yourself: “Would this person choose this gift if it had no company name on it, and would they still choose it over the cash?”

Frequently asked questions

Is it better to give employees cash or a gift?

Employees usually say cash when asked, and that preference deserves respect. Field research suggests a well-presented non-cash gift can feel more meaningful and prompt a stronger response than equal cash (Kube et al., 2012). A practical answer is to let people choose, and to pair whichever option they pick with a specific written thank-you.

Are gift cards for employees taxable?

In the US, yes. IRS Publication 15-B says cash and cash equivalents such as gift cards are never excludable as de minimis benefits, regardless of amount, so they are treated as wages. Tangible length-of-service or safety awards can qualify for an exclusion under separate rules. Confirm details with your payroll provider or tax adviser.

Do employees actually like personalized gifts?

Some do, some don’t. Personal gifts land best when they recognize something specific and the person agreed to the personal elements, like photos. Gifts that are personal only because the company logo is on them tend to be the least favored; in one vendor survey only 2% named swag as their favorite gift.

Can a gift replace a raise or bonus?

No. Treat compensation and recognition as separate. Gallup’s research links authentic recognition with people feeling fairly paid, but a gift offered instead of earned pay is likely to read as a substitute and backfire.

What is a reasonable amount to spend on employee gifts?

There’s no research-backed number. Budget to your situation, keep amounts consistent across people at the same level, and remember that the specific message attached to a gift costs nothing and matters more in motivation research than the object itself.

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About the author

Ricky Flores is the founder of Watch N Wow and an electrical engineer with 15+ years of experience building consumer technology at Apple, Samsung, and Texas Instruments. In Dallas, Texas, he builds the Mini Memory TV by hand: a small retro TV that plays a video, a message and an original song made from your photos and your story. Read more at watchnwow.com.

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Sources

1. Kube, S., Maréchal, M. A., & Puppe, C. (2012). “The Currency of Reciprocity: Gift Exchange in the Workplace.” American Economic Review, 102(4), 1644–1662. https://www.aeaweb.org/articles?id=10.1257/aer.102.4.1644
2. Shaffer, V. A., & Arkes, H. R. (2009). “Preference reversals in evaluations of cash versus non-cash incentives.” Journal of Economic Psychology, 30(6), 859–872. https://ideas.repec.org/a/eee/joepsy/v30y2009i6p859-872.html
3. Waldfogel, J. (1993). “The Deadweight Loss of Christmas.” American Economic Review, 83(5), 1328–1336. Summary: American Economic Association, “Did holiday gift giving just create a loss?” https://www.aeaweb.org/research/did-holiday-gift-giving-just-create-loss
4. Deci, E. L., Koestner, R., & Ryan, R. M. (1999). “A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation.” Psychological Bulletin, 125(6), 627–668. https://doi.org/10.1037/0033-2909.125.6.627
5. Maese, E., & Lloyd, C. (2023). “Is Your Employee Recognition Really Authentic?” Gallup. https://www.gallup.com/workplace/508208/employee-recognition-really-authentic.aspx
6. Internal Revenue Service. Publication 15-B, Employer’s Tax Guide to Fringe Benefits. https://www.irs.gov/publications/p15b
7. 26 U.S. Code § 274(j), Employee achievement awards. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/26/274
8. Tremendous. “Employee gift ideas to avoid” (survey of 1,500 employees; vendor research). https://www.tremendous.com/blog/employee-gift-ideas-to-avoid/