How sustainable is employee motivation in a zero or low pay rise environment?

A number of employers have hit the headlines in the past couple of months for committing to pay staff the living wage or, at the other end of the spectrum, gravely failing to pay the national minimum wage. Both place the spotlight on the role salary has to play in motivating staff and its impact on businesses.

Motivation

If you read nothing else, read this…

  • A lack of pay increases can hinder motivation.
  • Employers that take steps to engage their workforces are more likely to be rewarded with loyalty.
  • Gift or e-gift vouchers can be effective motivation tools.

Research by Canada Life Group, published in December 2013, found that pay increases, or lack thereof, can hinder motivation, because around a third (32%) of employees claim that a higher salary would boost their motivation.

Yves Duhaldeborde, director in Towers Watson’s employee surveys practice, says: “Regardless of average pay levels, motivating employees is essential because high engagement leads to better performance. Compared with their less motivated peers, engaged employees are more likely to work safely, to support team members, suggest process improvement ideas and, most importantly, look after internal and external clients.”  

Organisations have different approaches to pay and pay increases. Some industries are recognised as typically being low-pay environments such as retail and hospitality. So what can employers do to engage and motivate staff, and ensure that the business runs as smoothly and productively as possible? 

“When it comes to motivating employees to give their best effort, pay is only one of the elements [employers] need to get right,” says Duhaldeborde. “In low-pay environments, employers should adopt a total reward mindset and craft an employee value proposition that goes beyond base pay.

“Elements or programmes to consider include: training and development, flexible working and performance recognition to empower employees; quality line management and open transparent communication to make working life more fulfilling; and benefits such as wellness programmes, discount vouchers and healthcare, which are valued by employees and provide good value for employers.”

Motivation strategies on a shoestring

Increasing employee motivation levels does not have to be expensive if employers are creative with their strategies. Bill Alexander, chief executive officer of experience provider Red Letter Days, says: “The most important thing is saying thank you – it is free and very impactful. Other benefits that work well include giving staff extra holiday or coffee, lunches, shopping vouchers or cinema tickets – basically anything employees might like to do outside of work.

“If employees’ pay is too low, it is going to be difficult for employers to engage them.”

The Employee outlook: Autumn 2014 survey published in October 2014 by the Chartered Institute of Personnel and Development (CIPD), revealed that 62% of employees who reported being engaged at work had not received a pay rise in 2014, and 63% were satisfied with their job despite not receiving a pay rise. This shows there is scope for employers to motivate staff without increasing salaries.

Gift and experience vouchers can be effective in boosting motivation levels while recognising the importance of helping employees’ salary to stretch further for things such as groceries, experience days and gifts.

Clare Rutherford, business insight and marketing manager at House of Fraser for Business, says: “In a no or low pay rise environment, treats and luxuries become even more noteworthy.

“While employers recognise the importance of pay increases, they have to balance this against key factors such as affordability, profitability and growth. This, combined with the emergence of alternatives to cash awards, such as gift cards, has impacted employers’ ability to make pay increases a regular feature of the reward strategy.”

Motivation leads to staff retention

Motivation strategies that include low-cost benefits, such as gift and experience vouchers, can also aid staff retention.

Joanne Taylor, head of business development at Jordan Media, says: “With vouchers, staff can choose something aspirational or they can make their salary go further by spending the vouchers on something like a food shop, but there is a tilt towards more luxurious items.

“These kind of cost-effective benefits make employees feel valued, acting as a great retention tool. Vouchers also inform workforces that despite the fact they may not be receiving increased pay, their employer still wants to make them feel appreciated.”

Personal touch can go a long way

Offering a benefit in order to motivate staff is more than just about the monetary value. “By distributing it in person and in the presence of peers, an employer is making a public statement about the importance of recognition and the contribution that the individual has made to the business,” says Rutherford. 

Ensuring staff feel valued even if they receive no or a low pay rise can result in dividends for employees. Investing in staff motivation will encourage them to put more effort in and get more out of their role, which can aid engagement and retention. Identifying cost-effective ways to engage employees, and consequently make motivation sustainable even in a low or no pay rise enviroment, therefore, is worth investing in.

Can staff be motivated through anything other than pay?

Linda Holbeche

When all around there is talk of Britain’s economic recovery and relatively low levels of unemployment, it is easy to forget that, after Spain, Britain has the highest proportion of low-skilled jobs in the Organisation for Economic Co-operation and Development according to Industrial Strategy and the Future of UK Skills Policy, produced for the Chartered Institute of Personnel and Development by the Centre on Skills, Knowledge and Organisational Performance, which was published in February 2014. Plus, improvements in productivity and pay are still not in sight.

With so many jobs offering low pay, little interest or security and few progression opportunities, it would be no surprise if employee motivation and morale were bumping along the bottom. How can low-paid employees trust employers that award themselves large bonuses when their own pay is held down, or if there are no other rewards on offer, such as training, that will allow employees to progress to more senior and better-paid roles?

Given the widely acknowledged link between employee morale and performance, employers that value employees and want to retain them, as well as improve productivity, must find other ways of motivating employees without the promise of increased pay.  

This is about keeping faith with employees by communicating effectively and being straight with people. Managers must manage their teams’ expectations and discuss with them the benefits of a wider reward package, such as pensions or investment in learning and development, assuming of course that employers do invest in upskilling their business and its people. It’s also about designing richer roles in which employees have a chance to grow.

When business results improve, good employers share the rewards with employees, such as JCB and the John Lewis Partnership, which continued to pay employee bonuses even during the toughest part of the recession.

Linda Holbeche is director of the Holbeche Partnership

 

Case study: Marks & Spencer takes a mixed approach to staff motivation

Marks and Spencer

Retailer Marks & Spencer (M&S) uses a range of methods to motivate its employees without spending too much of its benefits budget.

With 75,000 employees across more than 800 UK stores, M&S uses traditional cost-cutting methods and technology to engage staff. For example, its internal social media network Yammer helps bring workers together, as well as congratulate them for hard work.

Throughout February 2015, 15,000 M&S staff were in conversation across the Yammer network, which was 15.7% more than in the previous month, despite there being no specific drive to increase this in February. This resulted in 63,000 message posts, 112,000 likes and 18,000 pictures posted on Yammer in February.

Sarah Findlater, head of employee relations and employee engagement at M&S, says: “Teams often use Yammer to congratulate colleagues on great in-store displays and it links to the M&S Living the Values app, which workers can use to post messages to congratulate colleagues on their work, which can then be posted to live feed on Yammer.”

The retailer includes an employee of the month award on its internal communications page, which recognises employees that illustrate M&S’s values of being innovative and inspirational. The award also acknowledges outstanding achievements by M&S workers who show passion and commitment to their co-workers, and go the extra mile for customers. Each month, workers submit their nominations to their line manager and one employee is selected from the nominations. There is no specific prize for winners, as it is chosen each month by the department that the winner belongs to.

M&S also offers staff performance incentives. For example, when model Rosie Huntington-Whiteley launched her first fragrance in February 2015, employees were informed that whichever store sold the most bottles would get a visit from the head of beauty or regional manager, along with Huntington-Whiteley. This generated anticipation and engagement from teams, and staff shared best-practice tips and ideas of how to drive sales on social media.

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Findlater says: “Celebrating the efforts of our employees is very important to us and recognition is one of the most important factors in inspiring our teams to keep up the good work.

“By introducing innovative recognition methods to our workplace we can now acknowledge any of our colleagues who are displaying great work and share this with the rest of the M&S team.”