EMPLOYEE ENGAGEMENT
Recovery threatened by lack of employee engagement and reward perception gap A “reward perception gap” between employers and employees is eroding engagement levels and threatening company productivity and economic recovery, according to new report by Mercer. An analysis of reward, benefit and savings programmes amongst major UK multinationals found a “striking disconnect between employers and employees on the perception and value of their organisation’s reward and benefit programmes”.
According to the Mercer data, employee engagement levels have slipped back to lower than before the recession due to the growing “reward perception gap”. Chris Johnson, UK Head of Mercer’s Human Capital business, said: “There is a direct relationship between an engaged and motivated workforce and company productivity. At a time of economic uncertainty, we’d expect high employee engagement, especially with many staff appreciating their companies’ efforts to limit redundancies during the recent recession. The reverse seems to be true - primarily due to a mismatch in perceptions.”
%ADVERT%
Why is there a reward gap?
Mercer attributes the “reward gap” to three factors:
1. The tendency for employees to feel their reward levels are lower than the market average, while employers perceive them to be much more competitive.
2. The tendency of employers to underrate the importance of base pay, job security and work-life balance to employees.
3. A general lack of understanding by employees regarding their reward packages and the communications they receive.
Key survey findings
The number of employees responding to the survey who state that they felt engaged and motivated, or had a strong sense of commitment in their current role, has fallen by 17 percentage points since 2006.
The majority of employee respondents feel their reward levels are average to below average compared with what they might receive at rival organisations.
This contrasted with employers who feel that their employees’ reward levels are competitive or above average.
When asked if they are satisfied with the specific elements of their organisation’s reward packages, again, employers generally believe that satisfaction levels amongst employees are higher than they actually are. For example, 66% of employers feel that the majority of employees are “satisfied” with their benefits, compared with only 49% of employees. As many as 49% of employers say that their employees are satisfied with their bonus plans. The comparable figure among employees is only 43%.
Impact of rewards and benefits on attraction, retention and motivation
Divergent views and perceptions are also evident in the importance that the two groups place on 14 different reward factors instrumental in attracting, motivating and retaining staff.
In terms of attracting staff, employers rate the most important factors as:
base pay (54%)
career development (47%)
bonus (43%)
organisational culture (43%).
By contrast, employees rate the most important factors as:
job security (59%)
job satisfaction (47%)
pay (44%).
However, Mercer believes this divergence has most impact when it comes to defining what drives motivation.
On the one hand, employers feel that the most important factors driving employee motivation are
job satisfaction (47%)
career development (43%)
culture (41%)
job security (29%)
training and development (29%).
On the other, employees cite:
job security (51%)
job satisfaction (44%)
pay (44%)
work-life balance (31%).
Johnson said: “Employers tend to overrate the importance of culture, career development and training and development. Crucially, they underrate the importance of job security and pay to employees. Engagement is going to suffer if employees feel their needs aren’t being met. Companies may be concentrating their resources in the wrong area so are finding attraction, retention or motivation problematic. Some organisations may be over-spending on some while under-spending on others.”
How can you close the reward gap?
Mercer reckons the reward gap can be addressed, in part, by better communications. But there remains much room for improvement:
While the monthly pay slip remains the most common medium for communication, only 41% of employees receive an annual total reward statement, leaving the majority of workers without access to this effective method of staff communication.
To compound the situation, only 53% of employees feel that answers to benefit-related questions are easy to obtain. As many as 36% of employers feel the same.
Only 51% of employees state that the information, once sourced, is easy to understand, while 56% of employers feel that information about benefits is easy to understand.
Johnson said: “Perceptions about the competitiveness of benefits and their value depend on communication, which improves understanding. In turn, understanding improves levels of satisfaction and motivation.”
Greater use of HR technology
The report does highlight a general trend towards greater use of HR technology, with almost half of employers planning to use it to increase employee understanding of reward packages. As Mercer points out, this aligns with an apparent unmet demand from employees for more online information, with nearly three-quarters of employees expressing an interest in it. However, in line with the general “benefits disconnect” theme emerging from the report, employers believe they are delivering more online than employees are aware of.
A final word
“Engagement surveys, performance data and financial specifics are mines of information that provide insight into employee engagement. It is these insights that should inform employers’ priorities to attract, retain and motivate their people. The real issue is whether organisations are making the best use of the data, isolating it and grouping it to reveal the key narratives, and arriving at the true story of what is going on within the company.
“Data bring discipline and rigour to the ‘soft’ people issues such as engagement, motivation and satisfaction. Companies should be analysing their human capital data, connecting it to business strategy and, in the process, improving measurable levels of employee engagement.” - Chris Johnson, UK Head of Mercer’s Human Capital business.
Want to know more?
Title: Employee Rewards, Benefits and Savings Survey, Mercer, November 2010.
Survey details: The survey was compiled from responses from 79 UK companies and 1,000 employees. The survey looked at company reward programmes and employer and employee perceptions of what drives staff attraction, retention and motivation.
Availability: For more details visit http://uk.mercer.com/rewardsurvey.
Mercer is a “leading global provider of consulting, outsourcing and investment services”. It works with clients to “solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits”. Mercer’s 20,000 employees are based in more than 40 countries. To find out more visit http://uk.mercer.com.