Pay and Benefits

As we prepare to immerse ourselves in 2010, many businesses will be looking to put the challenges of the previous year behind them. For those that successfully weathered the storm, this year brings a feeling of resilience, new hope and possibly a new Government too. 

 

 

If the impact on UK businesses was challenging, then spare a thought for employees. For many, the recession was unprecedented both in its speed and ferocity. Unemployment peaked at almost three million and many households were reduced to relying on part-time work, single salaries or Government benefits for survival.

 

A joint research project undertaken by Ceridian and Vebnet looked at the impact of the recession on employees and explored the effects this has had on their engagement. The results suggested that employees have re-evaluated what is important in line with the challenges they have faced and are looking to their employers to provide additional support.

 

Failure to acknowledge and react to this could cost employers dearly. Almost one in five employees reported feeling negative towards their employer due to the lack of support provided during the recession and more than a quarter intended to look for a new job as a result.    

 

So what does this mean for employers? Undeniably, the performance of their people has been the deciding factor in many businesses’ survival. It is also widely recognised that an engaged and motivated workforce is crucial to ongoing success. However, the need to control cost is still high on the agenda and many organisations have entered 2010 cautiously. For reward and benefit professionals, this means an arduous task of managing employee expectations for recovery and working creatively with diminished budgets.  

 

 

While the New Year signalled new beginnings for many, the recent redundancies and restructures are all too fresh in people’s minds. Employee perspectives have changed fundamentally, both in terms of their priorities and in their expectations of their employer. 

 

Of the 1,000 employees we surveyed, half listed day-to-day survival as their main concern compared to only six per cent who identified pensions. The recession has certainly brought an increased awareness of personal financial circumstances and has all too often highlighted the lack of responsibility taken for future financial planning. 

 

From the projects we’ve delivered, we have seen a shift in the types of benefits preferred by employees. Those bringing short-term respite from financial strain, such as subsidised travel and discounted retail vouchers, have increased in popularity. Perhaps more worryingly for employers, our research suggests that pension contributions are being deferred in favour of these short-term fixes. That is not to say that company pensions are not valued by employees, they certainly are, but this indicates how much pressure employees are under and also perhaps how little they understand around the impact of deferring longer-term investments. 

 

Employers are recognising the important role a flexible benefits scheme has to play in maximising the reward budget, while also allowing staff to choose what is relevant to them. However, there is still an element of responsibility here, and the communication must be two-way. On the one hand, taking into account employee preference through surveys and focus groups will help drive utilisation through inclusion of relevant benefits but, on the other, employers should be educating employees to ensure they are gaining the most from their choices.   

 

 

Increasingly, employees are looking to their employers to do more to support them. With almost a quarter of employers in our survey introducing new benefits as a result of the recession, it would appear employers are responding to this need – but still more can be done. Employee assistance programmes and counselling helplines are valuable ways of providing emotional support to employees and most now include resources and interactive tools for wider lifestyle concerns. 

 

Our research also suggests that many are looking for practical help in understanding and managing their financial situation. Specifically, one in four of those surveyed wanted help in making their monthly salary go further and “financial support” was identified as the most useful additional benefit that could be provided. 

 

Employers could benefit from making a regulated financial adviser available to employees or by setting up financial planning sessions to enable them to proactively manage their individual circumstances. Providing details of where to go for additional information can also help employees tackle concerns early on. The advantages of this are numerous. Not only does this help to position your business as an employer of choice and one concerned with wellbeing, but it will also help to reduce instances of absence brought on by the stress of financial problems and help build employee resilience.   

 

Educating employees on their benefits selection is an essential part of the enrolment process and shouldn’t be overlooked. If employees are prioritising benefits which deliver immediate relief to financial pressures over pension contributions for example, then employees need to be aware of the longer-term impact. Similarly, if salary sacrifice arrangements are offered, employers should ensure these are fully explained so employees understand how the savings are achieved.  

 

With four out of five people also reporting that they would stay with their current employer if they were given more support through their benefits package, it makes sense to reiterate exactly what is available, using various methods of communication. Employees may not be aware of the breadth of benefits and support on offer or what they are eligible to receive. 

 

The reaction from employees in our survey was certainly favourable, with one in three saying newly introduced benefits have helped their health and wellbeing and 22 per cent feeling they had helped them financially. Using employee case studies within internal communications is another way to demonstrate the range of support and the benefits in real-life examples. 

 

 

Heralded as a contributing factor to the recession, cash bonuses have reached new levels of notoriety. Yet, many organisations still incorporated these into their reward structure in 2010, and rightly so. Despite their controversy, most notably in the financial services sector, these can be effective as part of a recognised reward framework, helping to celebrate high achievers and encourage desired behaviour.  

 

In the past, there has been an expectation that an employee’s hard work will be rewarded with a bonus payment. A key point here, and one that the recession has helped to highlight, is the link, or lack of, between company performance and the reward strategy. It has also challenged the perception that employee effort should be rewarded financially. For those that can afford to, cash bonuses are still a good way of incentivising and rewarding exceptional individual effort, provided this is linked to company performance, but they are by no means the only way. 

 

Many forward-thinking organisations seized the opportunity early on to review their rewards strategy, think more creatively and launch a variety of voluntary benefits and non-cash rewards. These organisations have successfully used non-cash rewards to increase the overall net value of the reward package by enabling employees to benefit from the company’s bulk purchase power. This has worked especially well during the recession, not only providing greater choice but also helping to soften the blow of reduced or removed cash rewards and, in some cases, cutbacks in other benefits. 

 

An additional advantage to this is the tax and National Insurance savings that can be made through salary sacrifice arrangements. These can be used to deliver savings straight to the employee, allowing them to purchase benefits at a lower cost or be reinvested into the scheme itself to achieve cost-neutrality. Essentially, this means employers can deliver an enhanced benefits package without increasing overall costs to the business.  

 

This creativity has continued with some of our clients exploring unbundling benefit provision and linking a percentage of this spend back to performance as well. Although in most cases companies will wish to ensure that employees always have enough funding to secure essential benefits, restructuring the benefits spend in this way shifts the company’s spend from “entitlement” to “performance”. 

 

 

Despite the hardship of recent months, the recession has fostered real creativity, innovation and problem solving. Now is an opportunity to celebrate these achievements and remind employees that work can still be a positive place to be.

 

Businesses should be encouraging their workforce to think of the future. As well as talking about the organisation’s long-term plans, objectives and strategy, employees should be reminded of the company’s visions and values and the important role they play in achieving these. 

 

Although the training budget is often one of the first to be cut, many employees will have developed new skills through job sharing or role changes undertaken as part of restructures. Helping employees to recognise the capabilities they have developed will enable them to realise that even in the absence of formal training courses, they are still progressing and there are still opportunities for them within your business. 

 

Ongoing development should be encouraged, with core strengths and competencies cultivated through internal training, coaching and mentoring. These key skills can be reinforced through a comprehensive reward framework, which outlines the types of behaviours and efforts that will be celebrated and rewarded in your business. 

 

However, with many employees eager to discuss pay rises and promotion, employers need to be realistic about the opportunities available. Wherever possible, these conversations need to be linked back to the performance of the company and the individual. 

 

It’s important that employees recognise that many companies have evolved towards flatter, less hierarchical organisational structures as a means of reducing costs during the recession. Consequently, there are fewer opportunities for promotion. Looking to the future, it is those employees who have taken opportunities to broaden their skill sets, cross-train and move laterally within their organisations who will stand the best chance for upward progression as and when opportunities do arise. Employers who encourage such mobility will be offering their employees real opportunities for self-development and are helping to ensure they are well positioned to achieve their career aspirations in the longer term.

 

Some of the most successful techniques to increase engagement are also the simplest. Colleague of the month schemes or a simple “thank you” from the CEO can make the difference to engagement levels. These initiatives shouldn’t be overlooked just because they don’t involve a cash incentive. They form an important part of building a positive culture, which can help cultivate engaged and motivated workers and is a good foundation for any business success.

 

Jennifer Stacey is Chief People Officer at Ceridan; and Richard Morgan is Director of Consultancy Services at Vebnet.