If you read nothing else, read this…
- Employers must invest in reward for the millennial generation to exploit their technology-driven talents.
- Employers must find out what young people expect of the labour market.
- Social networking forums can be an effective way of providing financial advice for young employees.
- Initially, employers might want to offer them Isas and debt repayment schemes rather than a pension.
- Young staff want to make decisions about finance almost instantly.
Case study: Pepsico caters for young tastes
Pepsico UK and Ireland has ensured its benefits package is tuned into the requirements of the next generation of workers.
The firm has introduced total reward statements, revamped its flexible benefits package and is now planning to introduce new perks that are relevant to millennials. For example, it is considering introducing a corporate individual savings account (Isa) for employees who might not be able to save into a pension because of other financial pressures, such as saving up for a deposit on a house.
Estibaliz Lekuona, compensation and benefits manager at Pepsico UK and Ireland, says: “In terms of the trends we are seeing out there in the post-recessionary age, clearly there are very different generations joining the workforce.
It is really important we can maximise the value of all the benefits we offer employees and that they can really cater for very different employee needs. What we are trying to do is introduce benefits that can do exactly that.”
Employers need to tune into the expectations of the new generation of employees to take full advantage of the talents they can offer, says Nicola Sullivan
Graduating from university or looking for a first job during an age of austerity following a global recession is a daunting prospect for many young people. However, in a knowledge economy that is increasingly driven by new technologies, employers must ensure a depressed labour market does not make them complacent when attracting and rewarding the next generation of workers.
After all, the millennials, as this group is commonly known, have grown up in the age of social networking and the internet, both of which provide a limitless source of information and myriad communication channels. The younger generation is therefore essential in helping businesses harness the power of new technology and remain competitive in a challenging global economy.
Organisations that want to attract and retain fresh talent need to look at what millennials expect in reward and benefits. PricewaterhouseCoopers’ (PWC) 12th annual global CEO survey, conducted in 2008, suggests employers may not be tuned into the millennial mindset. According to the research, 65% of chief executives are experiencing difficulties in recruiting and integrating younger staff into the workforce, and most see flexible working as a critical benefit to address the problem.
However, of the 4,142 graduates who responded to PWC’s Managing tomorrow’s people: Millennials at work: Perspectives from a new generation survey, just 3% expected to work at home or other locations. In fact, most expected to work regular office hours, with only 18% expecting flexible hours.
Training and development most prized
The study, conducted in September 2008, showed training and development was the most prized benefit, with three times more graduates putting it as their top choice rather than cash and bonuses. Ben Wells, human capital consultant at Buck Consultants, says: “More of a priority are things that make them more employable. That brings financial security, so career development is number one on the list and they will trade career development for a certain amount of cash.”
Many employers fall into the trap of using gross stereotypes when segmenting their workforce for reward purposes, says Dr Benjamin Reid, senior researcher at The Work Foundation. “The way segmentation is done generally is massively unsophisticated and occasionally teeters over into some horrendous stereotypes,” he says.
“There are some trends one can identify that could be associated with having been born at a certain time, but it spills over into things about attitudes and behaviours which are unsustainable.”
Kevin Harrington, director of engagement at Sodexo, says employers need to collect hard evidence about what different groups of employees want. “I think there is too much guesswork going on. The approach has to be around wanting staff to be engaged, which leads to all those great benefits of staff retention, efficiency and productivity.”
Similarly, the use of technology in benefits programmes is sometimes driven by misconceptions about how the millennial generation relates to it. Reports such as Millennials: A portrait of generation next, published by the Pew Research Centre in February 2010, show that young people use technology as a badge of generational identity, so it is perhaps understandable why employers are keen to infuse their benefits packages with the latest gadgetry. But this is not always effective.
“If an employer is going for an all-bells-and-whistles gimmicky pitch for young people, which is radically different, they are likely to be barking up the wrong tree,” says The Work Foundation’s Reid. “These people are quite sophisticated users of that media and will see through any attempts to be cool.”
Although young people define themselves through their use of technology, they use it primarily to communicate. Buck Consultants’ Wells says: “Technology and modelling tools are much more preferable for the older generation, who are engaged in [financial] products in the first place and want to spend time playing around with them. The millennials want to make decisions around finance in a split second. What they want primarily to support any decision is not tools. They do not even need to understand what the implications are. What they respond to best is a tip or a piece of advice from a colleague or a friend or a family member.”
Financial advice through social networking
Social networking mechanisms can be an effective way to provide financial advice to young staff. For example, an online forum can be used for peer-to-peer sharing about the impact of a financial decision.
Although a well-thought-out communication strategy might encourage young staff to save into a pension scheme, some employers are starting to focus on illustrating the benefits of alternative savings vehicles, such as corporate individual savings accounts (Isas) and debt repayment schemes. Such perks, which can be used to fund a deposit for a house or take the sting out of mortgage payments, can be converted into a pension later.
Employers also need to look at how they treat interns. According to the report Why interns need a fair wage, published in July 2010 by the Institute for Public Policy Research (IPPR) and campaign group Internocracy, there is a mistaken belief that employers can take on people on a voluntary basis if both sides agree. By law, if an intern is doing work, they should be paid. But the research found only half of the organisations that use interns pay them at least the adult minimum wage, 18% pay no wage at all, and 28% pay less than the adult minimum wage.
Kayte Lawton, research fellow at IPPR, says: “The anecdotal evidence was that people did feel under more pressure to do [unpaid internships] because of the state of the labour market, because they were unable to find paid work, or felt they needed to do something to differentiate themselves from other graduates. The downside is there are young people who cannot do that, particularly if they are not from the South East and cannot live in London.”
Dominic Potter, report co-author and director of Internocracy, adds: “We now have entire industries that rely on the willingness of young people to work for free. In the long run, this is bad for business because it damages the reputation of these industries and makes it difficult for them to recruit from the broadest pool of talent.”
Where employers may go wrong on millennials
- Use of technology in benefits programmes is not always effective because it is driven by misconceptions about the millennial generation.
- When segmenting workforces for reward purposes, organisations can fall into the trap of using gross stereotypes for the younger generation.
- A business that is keen to protect its reputation should look at how it treats its interns. Many employers wrongly think they are within the law by not paying them.
Read more on reward