· 5 min read · Features

HR Reward Survey 2011: Business is failing to communicate the value of employee benefits

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The results this year’s HR Reward Survey are marked by ennui and inertia. Business is not communicating the benefits message to employees. It needs to get its act together.

When 1,000 former Sun Microsystems employees who had yet to join Oracle's group personal pension plan - following Oracle's takeover of Sun in 2009 - were this year targeted with 38 presentations across nine locations, the results of the exercise were staggering: 87% joined the new pension, 36% paid more than the minimum 6% contribution, while 44% gave up part of their flex fund to invest into their pension.

But according to the results of this year's HR Reward Survey 2011, sponsored by Vebnet and Standard Life, the standard of communication and financial education shown here seems more likely to be a one-off rather than the norm. The survey, now in its third year, which was answered this time by more than 500 HR professionals, finds depressing levels of improvement - if not regression - in the very things people say are their most pressing concerns.

The most striking level of ennui was around communication. For a third year now, lack of understanding and appreciation of the benefits package is said to be the most pressing concern of respondents (by 56% ¬- up from 53% last year). Just when real incomes are at their lowest since the 1970s, a staggering 53% say they don't offer, and nor do they intend offering, financial education - up from 39% last year.

Experts are not impressed: "Benefits heads will have to ask some very tough questions of themselves on these findings," says Richard Morgan, director at consultancy Vebnet. "What we are seeing here are trends against the economic grain: it's a 'hope-we-get-it-right' attitude to communication, rather than a proactive one."

The concern is that while benefits heads moan about the benefits package not being understood, they are doing little to remedy this. There has been a five-percentage points fall (to 31%) in those who agree/strongly agree they conduct frequent employee research on employees' views and concerns about reward and benefits and an increase (from 53% to 73%) in those who say staff know where to find the information they need.

Rachel Stone, director people management of accountancy firm Smith & Williamson, says: "Benefits heads seem to think that communication stops at providing information. Either that, or they are relying on technology, such as email communications and intranets, in a passive way. This is tucked-away communication. Staff need trigger points. Employees will say 'you have not communicated to me' if you don't actually talk to them face-to-face."

Wayne Harrington, product manager, reward & loyalty, at employee benefits company, Edenred, agrees. He says: "It's shocking the communications issue has not been grabbed," and goes further: "Staff get used to things so quickly. Benefits professionals need to inject 'shock-value' ¬- stuff that gets people talking, and gets them to go to the intranet. But my fear is that this requires marketing skills that HR professionals still don't feel confident or equipped with."

Experts agree much of the inertia has been down to the severe challenges of the past few years. Stone says benefits chiefs have been "operationally overloaded". Although there are some positives - growth (48% of respondents) comes ahead of downsizing (41%) as the main people issue for 2011 - it simply means under-performing benefits heads will have to up their game even more, not least in areas that seem to have made a return to prominence: performance-related pay (PRP) and bonus expectations.

"I am not at all surprised these have come to the surface again," says Mark Bishop, reward consultant at consultancy plusHR. When asked to rate their top three concerns, this year 'managing bonus expectations' comes out most consistently as respondents' top reward concern, while in concerns overall, PRP rises from fifth last year to second, behind base salary competitiveness as the top number 1 concern. "The economy is picking up," Bishop says. "But reward professionals should be looking at what type of employee they want to attract and tailor their benefits around this. I am not sure they are doing this, though."

There is timely evidence that suggests they should. In July, the CIPD found pay and benefits (rather than, say, job satisfaction) is now the number one reason people seek new jobs. While this year's Reward Survey reveals staff aren't so much asking for more benefits (less than one in five are), what it does suggest is that they want something that is fair, with mechanisms that reward hard work: "Very low payrises, combined with the recession-created notion that 'we're in it together', is starting to wane," says Chris Charman, director reward, talent and communication, at Towers Watson.

He adds: "This 'in it together' attitude has to change. It always hurts high performers worst - because they suffer financially and think they can get better rewards elsewhere. Businesses are crying out for the reward function to provide mechanisms for allowing PRP to happen more, because it's not a cost, like salary - which will probably remain capped - but it comes out of additional business growth."

Whether benefits professionals will be so transformational, though, is a moot point. Shocking numbers are failing on the basics, such as getting their house in order for auto-enrolment: a third say they haven't started/feel ill-informed about it. Last year, an encouraging 43% of respondents said they offered staff total reward statements. This year, however, it slumps to 17%.

Should we be so harsh? "We can't underestimate the impact the global recession has had on business and employees," says David Long, head of HR operations, at technology and engineering company, e2v. "In the past two years many businesses have had a very different approach - that of survival. The fact that 56% now recognise that they have a job to do in raising understanding around benefits is, in my mind, a positive thing. It shows professionals are now gaining confidence to be able to look to the future, planning for a healthy business going forward."

Angela Wright, former government remuneration advisor, now senior lecturer in HR management at Westminster Business School, admits benefits heads are in a tight spot. "Things such as pensions are decreasing in value, so I think there is a reluctance to say 'we're offering more choice, but the value of your benefits is going down'," she says.

There is still potential, she says, in increasing the psychological value of benefits, which might explain the third main finding: why wellbeing is suddenly so big. "It is the one thing I think companies can do to set them apart," says Morgan. Added as a new question this year, two-thirds of respondents now say they have introduced wellbeing initiatives, either as part of a defined strategy, or as an add-on to it. "A positive approach to employee wellbeing should always be on the agenda, but if it hasn't, it is never too late to introduce it," says Long. "Not only is it a responsible approach, it is also at the heart of a healthy and productive workforce."

But whatever the reasons, Carol Arrowsmith, head of Deloitte's UK executive compensation consulting practice, says benefits professionals must up the ante and decide whether they should sit tight or plan for a brighter future. "It is always safer to cut cuts, than proactively add costs, such as introduce financial education - which still costs money," she says. "The mistake often made is that two-thirds of benefits time and money is spent on designing schemes, and only a third is left on communicating them. It should be the other way round. This way, they'll save money, and improve their communications - which can only be a good thing."