Long Service Awards: Time to Rethink the 20-Year Rule

Most UK employees will never qualify for a tax-free long service award. With the average job tenure now just five years, the traditional 20-year milestone has become a relic. Published 11 May 2026, this piece sets out how HR leaders can redesign recognition programmes that actually work.

Why the Gold Watch No Longer Fits

For decades, the long service award sat comfortably in the HR toolkit. Present an employee with something meaningful at the 20-year mark, stay within HMRC's tax-free threshold, and the job was done. It felt fair, structured, even generous.

The problem is that the workforce has fundamentally changed.

According to the Office for National Statistics, the median job tenure for UK employees is now approximately five years. Workers aged 25 to 34 average closer to three years in any one role. That means, under HMRC's current rules, the vast majority of your workforce will leave before they ever qualify for a tax-exempt long service award. The recognition mechanism designed to retain people is failing the people most likely to leave.

This is the central tension facing reward and benefits leaders in 2026. Not whether to run a long service programme, but how to redesign one that is actually fit for purpose.

What HMRC Actually Says (and Why It Matters Less Than You Think)

HMRC's guidance is clear: non-cash long service awards are exempt from income tax and National Insurance contributions, up to £50 per year of service, provided the employee has completed at least 20 years of continuous service and no similar award has been made in the previous 10 years.

That is a meaningful tax saving for those who qualify. A 25-year award, for example, could deliver a £1,250 non-cash gift entirely free of tax. For employees who have stayed the distance, it is a well-structured benefit.

But only 26% of UK companies currently offer a single, unified long service award, while 31% already use five or more recognition tiers, according to XpertHR data from 2025. The multi-tier approach is growing precisely because employers are realising that waiting until year 20 to acknowledge loyalty is not a retention strategy. It is an exit handshake.

Cash awards are a different matter entirely. Cash, or anything that can be converted directly to cash, is always treated as employment income and taxed accordingly. If you are running a cash long service award scheme, you are not getting the HMRC benefit, regardless of how long the employee has served.

The practical implication for HR teams is this: the HMRC exemption should inform how you structure awards at the 20-year mark, but it should not define your entire long service philosophy. These are separate decisions.

The Equality Act Risk Most Employers Are Not Talking About

Here is an area where many HR teams are genuinely exposed.

Under the Equality Act 2010, service-related benefits for up to five years are lawful without the need for further justification. Beyond five years, employers must be able to demonstrate that the benefit fulfils a legitimate business need, typically linked to rewarding loyalty, retaining experience, or incentivising tenure.

In practice, many long service award policies have never been reviewed through this lens. A programme that only recognises employees at 10, 20, and 25 years creates a de facto advantage for older workers who are statistically more likely to reach those milestones. Without documented justification, that structure carries age discrimination risk.

The fix is not complicated, but it does require conscious design. Employers need to ensure their policy can withstand scrutiny: what is the legitimate business rationale for each milestone? Is the programme genuinely accessible across age groups and employment types? Are part-time employees treated proportionately?

For most organisations, the answer is to introduce earlier recognition milestones, which also happens to deliver far better retention outcomes at the points where employees are most likely to leave.

The Case for Earlier Milestones

The evidence here is compelling. Employees who do not feel recognised are twice as likely to say they intend to quit, according to research collated by Thirst in 2026. Well-recognised employees are 45% less likely to have left after two years. Recognition programmes, when well designed, can reduce turnover by up to 29%.

At the same time, the average cost of replacing one UK employee is £30,614, based on joint research by Oxford Economics and Unum. Even modest recognition investment at the one, three, and five-year marks can generate significant retention ROI.

The business case practically writes itself. But the design still requires thought.

A practical framework for redesigning a long service programme might look like this:

Step 1: Audit your current milestones against your actual tenure data. If your average employee tenure is five years, a programme that only starts at 10 years is recognising fewer than half your leavers at any point. Pull your retention data by year of service. Understand where your flight-risk window sits. Design recognition to land before that window opens.

Step 2: Check your Equality Act position on any milestone above five years. Document the business rationale. If you cannot articulate why a 10-year award exists beyond tradition, it is worth revisiting. This is also a good moment to audit whether part-time and job-share employees are included on a pro-rata basis.

Step 3: Introduce tiered, personalised options. The uniform long service award, a branded trophy or a standard gift catalogue, no longer resonates with most employees. Research from Blackhawk Network published in May 2025 found that 63% of employees want access to a more personalised range of workplace benefits. Employee Vouchers, experience days, additional holiday, charitable donations made in the employee's name, and digital gift cards are all formats that give employees genuine choice. Choice is the differentiator between a token gesture and a meaningful moment.

Step 4: Build in public recognition. For distributed and hybrid workforces, the physical award in the post is no longer sufficient on its own. Recognition needs to be visible. Announcing Work Anniversaries across internal platforms, sharing the employee's story in team communications, or allowing colleagues to contribute messages of appreciation turns a transactional award into a genuinely memorable moment.

What Good Looks Like in 2026

The most effective long service programmes in 2026 share several characteristics.

They start early. Recognition at one year signals that tenure is valued from the outset, not just after a decade. Even a small, thoughtful acknowledgement at year one builds the psychological foundation for longer-term loyalty. Milestone Rewards at the one, three, and five-year marks are increasingly standard among employers who take retention seriously.

They give choice. The personalisation of recognition has moved from nice-to-have to expected. Employees are more likely to feel genuinely valued when they can select a reward that reflects their own preferences, rather than receiving a pre-determined item that may not suit them at all.

They are visible, not administrative. The worst version of a long service award is a letter and a gift card sent to a home address with no wider acknowledgement. The best version involves the employee's manager, their team, and ideally a broader internal audience. Recognition that is witnessed is recognition that resonates.

They sit within a broader Appreciation Culture. Long service awards work best as one layer in a wider recognition framework, not as a standalone, isolated policy. Organisations that only recognise employees at service milestones are missing far more frequent opportunities to build engagement throughout the year.

The NHS Example

The public sector offers some instructive evidence. NHS Employers has been vocal about long service recognition as a retention lever, and University Hospitals of Leicester NHS Trust celebrates approximately 3,000 staff members annually through long service award milestones. In a workforce facing chronic retention pressures, structured recognition at multiple tenure points forms part of the broader people strategy, not an afterthought.

For private sector employers managing their own retention challenges, the NHS model is a useful reference point: long service recognition works best when it is systematic, well-communicated, and genuinely personalised rather than ceremonial.

The Data Makes the Case

The CIPD's Reward Survey for 2026, drawn from over 1,000 HR and reward decision-makers surveyed in late 2025, found that 44% of UK employers cite retention as the primary objective of their employee benefits package. Yet only 33% of those who had reviewed their benefits felt the package fully achieved its stated goals.

Long service awards sit squarely in the gap between intention and impact. They are widely used: 63% of UK employers still run years-of-service programmes. But the programmes themselves have often not been redesigned since a time when employees routinely spent 15 to 20 years with one organisation.

Retention is the priority. Recognition is the lever. The architecture of the programme determines whether that lever actually works.

Each Person provides recognition and reward tools designed for modern UK workforces, including milestone and long service recognition that gives employees genuine choice and managers the visibility to make recognition moments count. You can explore how a structured recognition programme supports retention at eachperson.com.

A Final Note on Getting the Structure Right

There is no single correct answer to how many tiers a long service programme should have, or at precisely which milestones recognition should occur. That depends on your sector, your typical tenure data, and your workforce demographics.

What is clear is that a programme designed for a world where employees stayed for 20 years needs updating for a world where five years is the median. The HMRC exemption at 20 years is still worth taking when it is relevant. But it cannot be the anchor point for an entire recognition strategy.

Audit the programme. Check the compliance position. Add earlier milestones. Give people choice. Make recognition visible. Those five actions will deliver more retention impact than any gold watch ever did.