How reward strategies impact on employer organisations
†
Impact of benefits strategies |
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| † | To some extent | To a significant extent |
| It helps improve staff motivation/productivity | 62% | 20% |
| It engages staff in the organisation | 62% | 18% |
| It is an effective recruitment tool | 57% | 32% |
| It promotes work-life balance | 56% | 24% |
| It is an effective retention tool | 55% | 32% |
| Employees clearly understand our benefits strategy | 55% | 30% |
| It is flexible enough to meet changing business conditions/needs |
55% | 25% |
| It encourages desired culture and behaviours | 54% | 29% |
| It is clearly linked to business strategy | 53% | 32% |
| It is viewed as a source of competitive advantage | 52% | 26% |
| It promotes a high performance culture | 51% | 18% |
| It helps in attracting and recruiting talent | 49% | 46% |
| It helps control sickness absence | 46% | 8% |
| It enables reward decisions to be made locally | 45% | 15% |
| It is driven by job grade | 44% | 16% |
| It is driven by length of service | 39% | 6% |
| It is presented as a total reward strategy | 31% | 25% |
| † | † |
Sample: all respondents
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†
The issues shaping benefits strategies |
|
| † | To some extent |
| Improving perceived value of the benefits package | 73% |
| Making benefits more cost effective | 65% |
| Communicating benefits | 63% |
| Desire to improve staff engagement levels | 58% |
| Desire for flexibility | 57% |
| Matching benefits to employee needs | 55% |
| Improving effectiveness of the benefits package | 54% |
| Presenting it as a total reward strategy | 49% |
| Aligning benefits with business strategy | 48% |
| Effects of legislation (such as pensions changes or age laws) | 43% |
| Harmonisation of terms and conditions/benefits | 37% |
| Linking benefits to performance | 37% |
| Aligning benefits with HR strategy | 35% |
| Poaching of staff by competitors | 35% |
| Helping staff to understand pensions/retirement planning | 35% |
| Ageing workforce | 28% |
| Encouraging pension scheme take-up | 27% |
| Easing organisational change (eg merger, acquisition, downsizing, expansion) |
23% |
| Breaking down workforce hierarchies | 20% |
| Operating on a global/multinational basis | 16% |
| Managing multiple pension schemes | 13% |
| † | Sample: all respondents |
Commentary on graphs
Perceptions of the impact of benefits strategies have moved on in recent years. There was a time when staff retention and recruitment were indisputably at the top of the list of functions that apply to benefits strategies. And, indeed, they were when Employee Benefits last conducted a survey into UK employers’ benefits strategies three years ago (The Benefits Research 2004 was published in that year’s Benefits Book) and employers were asked to indicate how their benefits strategies could be best described. While these two factors are still significant, the concepts of staff engagement and motivation linked to productivity have now both come to the fore.
This perhaps demonstrates that engagement has become a key function of the benefits strategy. It is closely linked to staff motivation and, in turn, productivity. The emergence of these two concepts may be explained by the fact that the world of compensation and benefits has now become much more sophisticated. Benefits experts argue that perks should not be viewed simply as a necessary cost of recruitment and retention, they should instead also be perceived as a means of boosting productivity and service levels through staff engagement and motivation.
A further example of how benefit strategies have evolved is the increase in emphasis placed upon the promotion of work-life balance which, when we last conducted this research, lagged towards the bottom of the table. Interestingly, 66% of publicly-quoted companies claim that their benefits strategies promote work-life balance to some extent, compared with 50% of public sector organisations, while 38% of public sector organisations adopt the function to a significant extent, compared with only 16% of listed firms. While 53% of organisations link their benefits strategy to business strategy to some extent, this is most apparent among publicly-listed companies. But despite the vast amount of money spent on healthcare benefits by employers, just 46% say it helps with sickness absence.
When it comes to the cost of benefits, little has changed since our survey into the benefits strategies of UK employers back in 2004. Almost two-fifths of employers spend between 11% and 20% of payroll on benefits. Just 8% spend more than 30%, while 18% put a value on the benefits package of between 21% and 30% of payroll. However, just 16% of organisations employing 500 or fewer staff spend more than 21% of payroll on benefits, compared with 33% of employers with a workforce of more than 500. This may indicate that smaller organisations have tighter budgets.
Given the amount of money spent on perks, it is perhaps no surprise that the biggest issue shaping employers’ benefits strategies is the need to improve the perceived value of the benefits package (73%), regardless of their size or type of organisation. Only those employers with between 1,000 and 5,000 staff are more concerned with communicating their benefits strategy.
The need to improve the perceived value of the benefits package also topped the list of issues facing employers when we last undertook a survey into benefits strategies in 2004. The solution partly lies in the communication of the benefits package, which is a concern for 63% of employers. Unless employees are told how much their benefits are worth they will not have any appreciation of their actual or potential value. Making benefits more cost-effective remains the second most important issue to shape benefits strategies, with 65% of employers citing it as a problem. However, public sector organisations rank improving staff engagement levels, improving the effectiveness of benefits and communicating perks higher up their agenda.
Employee engagement, total reward and flexibility also all feature highly on the list of issues taxing the minds of employers. It seems more employers have now got to grips with aligning benefits strategy with business strategy compared with three years ago. Then 63% of employers cited it is an issue, now it is 48%. Meanwhile, the proportion citing the alignment of benefits to HR strategy as an issue has shrunk from 42% to 35%.
The last year or so has been hectic for employers as they have had to get to grips with reams of new legislation that affects benefits, including pensions simplification and ageism laws. So it is no surprise that 43% said legislation has been an issue shaping benefits strategies.