Solving the UK productivity puzzle

Last week the Office for National Statistics (ONS) produced its latest estimates of UK productivity. These statistics – the first estimates for the 2014 year – should be a wake-up call for business leaders and politicians alike. 

The bottom line is that when compared to the other members of the G7 major economies the UK is doing rather badly.

The following table caught our eye in particular. Gross Domestic Product (GDP) per hour worked: UK productivity in 2014 was: above that of Japan by 15 percentage points lower than that of Canada by 4 percentage points lower than that of Italy by 10 percentage points lower than France, Germany and the US by 32–33 percentage points, and lower than that of the rest of the G7 by 20 percentage points. So, while the UK is not in last place, we are certainly close to the trap-door of relegation. 

This is a genuine concern for businesses of all sizes, as low productivity could well make UK business less competitive than our major economic neighbours. Opinion varies as to how this issue – often dubbed the productivity puzzle – can be best addressed.

There are many factors at play here – yet one that might be relatively simple and cost effective for employers to tackle is our old friend employee engagement. In simple terms an engaged employee is one who will go the extra mile in his/her job on a regular basis. It has been suggested that the difference to the employer’s bottom line between a very disengaged and highly engaged workforce is an improvement of more than 50% in operating income. And if that is a bit nebulous for you, then a more direct correlation can be found in absence rates. 

Highly engaged employees take less sick-leave than their disengaged colleagues (2.7 and 6.2 days per year respectively). So engagement could be a key component of the productivity puzzle, but where to start? Paying higher salaries is one option (and the UK does pay poorly compared to many of our European neighbours), but a major salary increase for all employees is going to be a big ask for employers. 

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So how about improving other aspects of the remuneration package instead? Which takes us to employee benefits. Organisations of many sizes spend money on a variety of employee benefit offerings. When properly utilised such packages can improve staff retention and recruitment, lower absence, protect key human capital assets and act as a powerful employee engagement tool. 

The problem is that a significant number of UK employers don’t regularly communicate the value of their benefits to employees. By this one omission employers may lose many of the employer positives – particularly the engagement (and by extension productivity) piece. The reality is that employee benefits have an important role in the employee engagement conversation – and could therefore be a key component to improving productivity. So it follows that employers of all sizes should review their benefits communications to achieve the best possible return on their investment. The overall UK productivity puzzle certainly won’t be resolved any time soon, but at least employers can do their bit to make their own organisation – and the country – just that little bit more competitive.