Staff engagement linked to growing reward perception gap

Employee engagement levels have slipped back to lower than pre-recession levels due to a growing ‘reward perception gap’.

Mercer’s Employee Rewards, Benefits and Savings survey, which compiled responses from 79 UK organisations and 1,000 employees, found a striking disconnect between employers and employees on the perception and value of their organisation’s reward and benefit programme.

The report highlighted the number of employees stating they felt engaged and motivated, or had a strong sense of commitment in their current role, has fallen by 17 percentage points since Mercer’s What’s Working engagement survey in 2006.

Mercer attributes the ‘reward gap’ to three factors: the tendency for employees to feel their reward levels are lower than the market average while employers perceive them to be much more competitive; the tendency of employers to underrate the importance of base pay, job security and work-life balance to employees; and a general lack of understanding by employees regarding their reward packages and the communications they receive

According to the research, the majority of employees feel their reward levels are average to below average compared to what they might receive at rival organisations. This contrasted with employers who feel 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, employers generally believe that satisfaction levels amongst employees are higher than they actually are. For example, 66% of employers feel the majority of employees are satisfied with their benefits, compared to only 49% of employees. Half (49%) of employers say their employees are satisfied with their bonus plans compared to only 43% of employees.

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%), and the bonus and organisational culture (both 43%). By contrast, employees rate the most important factors as job security (59%), job satisfaction (47%) and pay (44%).

The ‘reward gap’ can be addressed, in part, with better communications. While monthly payslips remain the most common medium for communication, just 41% of employees receive an annual total reward statement.

Only 53% of employees feel answers to benefits-related questions are easy to obtain, while 36% of employers feel the same. In addition, †51% of employees state the information, once sourced, is easy to understand while 56% of employers feel information about benefits is easy to understand.

The report also highlighted 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. 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, employers believe they are delivering more online than employees are aware of.†

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 would 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.

“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 are not 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.”

“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.

“Companies should be analysing their human capital data, connecting it to business strategy and, in the process, improving measurable levels of employee engagement.”

Read more articles on engaging employees through reward