Generations X and Y are different, so tailor your benefits accordingly
The bottom line has long been the business focus, across public and private organisations. However, as budgets continue to tighten, it is clear that organisations must invest both time and money in their greatest asset – talent.
An effective compensation and benefits strategy is an opportunity for an organisation to differentiate itself from its competitors, which might otherwise prise talented individuals away. Organisations need to be clued up on the evolving needs of the working population to ensure they offer the most competitive package.
As many organisations struggled to stay afloat in the depths of the recession, their employees showed great loyalty, putting in long hours, often on reduced pay. With full market recovery still some way off, significant pay rises may not be viable in some sectors; nonetheless, many employers feel their employees should be rewarded for their hard work. Through a compensation and benefits package that caters for their needs, employers are able to demonstrate that they value their workforce.
However, to create the most attractive compensation and benefits package, there is a new generational question to take into account: employers must now address the fundamental landscape change in workforce requirements and demands. Generation X, born in the 1960s and 1970s, has ceded place to a new cadre of workers, the so-called Generation Y. Firms need to adopt a flexible approach to compensation and benefits to satisfy the different priorities of these generations.
'Planning for the future' has been the dictum governing Generation X's approach to their careers and so, traditionally, generous pension provision has been the key to attracting such workers. For Generation Y, priorities are quite different. According to research conducted by Hyphen last year, just 4% of 16-24-year-olds were attracted to their employer because of their pension contribution, compared to 17% of 45-54-year-olds. Indeed, younger workers are increasingly questioning the traditions of the workplace and, for them, pension plans, previously synonymous with security, are now considered unstable. Widespread media attention focusing on the 'pensions time bomb' and the demise of the final salary pension scheme has compounded this issue and led many employers across public and private organisations to question their approach to compensation and benefits.
We are seeing Generation Y workers seeking flexible benefits that can be tailored to their individual needs. The most popular employers offer a menu of benefits, rather than pre-defined plans. In particular, we have seen high demand for flexibility on holidays. Offering prospective employees time off on top of annual leave, in the form of a supplementary day off on their birthday or additional time between Christmas and New Year, is now critical to attracting top talent to an organisation. Hyphen's 2010 survey found a quarter (25%) of 16-24-year-olds chose their employer based on number of holidays.
Also symptomatic of the Generation Y work culture is a breaking out of the traditional 'job for life' mould of Generation X. Workers are looking for variation in their career path and we are seeing Generation Y candidates drawn to employers that demonstrate a commitment to their personal development. Employers that offer secondments, particularly abroad and/or sabbaticals are seen as attractive.
Allowing employees to move around like this does of course impact on the organisation and employers would be advised to engage in meticulous workplace planning to ensure extended absences do not negatively impact on the efficiency of their team.
The positives of exercising such flexibility far outweigh any inconvenience. At a time when organisations continue to expect a lot of time and commitment from their employees, flexibility can help employers to develop a reputation for care and altruism. We are seeing savvier team leaders of Generation Y applying for monthly budgets for team-building, as they look out for the collective welfare of the workforce as much as their own personal development. In this way, far from being an additional part of the employer-employee relationship, compensation and benefits packages can play an effective part in restructuring internal culture, fostering a stronger sense of teamwork and organisational drive. This is certainly something Generation Y values; our research found one in ten (11%) 16-24-year-olds were attracted to employers that hold social events, a sentiment echoed by less than 1% of all older age groups.
Success is thus repositioned as shared success. Viewed in this way, the greater the investment in people, the greater the benefits for the entire business model. By breaking out of rigid compensation and benefits packages focusing on pensions, employers can cater for Generation Y's desire to take control of their work/life balance and foster a sense of organisational altruism, which ultimately helps them to attract and retain the best talent.
Zain Wadee (pictured) is managing director at recruitment services provider Hyphen