According to our second Reward Survey, employee expectations remain high and many could jump ship if they are not met.
If 2009 was characterised by staff worrying about whether they will keep their jobs, in 2010 - which is showing tentative signs of recovery - the boot could be on the other foot, where this time it is employers that could be worrying about how they manage to keep hold of the talented staff, the ones that survived the recession, but who could now be tempted to go.
But while better pay deals have historically followed economic hardship, it is not the case this time. With pay freezes still being maintained by a third of employers, according to the Incomes Data Service, and the fall-out from the excessive bonus culture still taking up column inches in the national press, (Barclays Capital was slated only last month for awarding an average £95,000 bonus to 23,000 investment bankers), one thing is clear: employers have been forced to examine more cost-effective reward strategies to stop staff jumping ship
This is the headline result in this, HR magazine's second Reward Survey, sponsored by employee benefits provider Vebnet. Designed to uncover the issues that keep HR directors and benefits managers awake at night, this year's survey results reveal performance and planning for the future are the major issues for HR professionals this year (rated as a priority by 55% and 54% of respondents respectively), with engagement (51%), retention (33%) and recruitment (32%) also high on their list. This compares with 2009's results, when only 35% of respondents put engagement as their top priority.
This year, 348 HRDs and benefits heads responded, and nearly half of them (47%) said their main reward issue was base salary competitiveness.
Bonuses were clearly something that have given our respondents a headache. This year just under a quarter (24%) rated managing the expectations of their staff on bonuses as a main issue for 2010. (Unfortunately, this question was not asked in 2009.) Another worry has emerged, though: 26% of respondents said an extra worry for them this year is managing staff expectations, with employees pressing for more perks.
Paul Banfield, lecturer and programme director in organisational and HR management at Newcastle Business School Northumbria University, explains: "This is rather converse - managing expectations seems quite at odds with the macro-economic environment. With more jobs losses and issues of underemployment, employees should still be more concerned with keeping their jobs than pressing for more perks."
He adds: "The public sector is lagging behind the recessionary trends - but staff there need to realise the good times are coming to an end and they will have to get used to cuts and pay freezes before things get better."
Although more than a third (39%) of respondents saw flexibility of reward to meet the needs of business as a major concern for 2010, a smaller proportion (28%) were concerned about the flexibility of their reward packages in meeting the needs of employees. This suggests employers are putting business need first, in front of employee need. In fact, more than half of respondents thought employees actually lacked an understanding or appreciation of what perks were on offer.
Given 59% of employers either agreed or strongly agreed staff know how to access information about their rewards and benefits, (49% provide multiple channels to communicate benefits - up from 36% in 2009), it indicates HR professionals believe they provide all the information necessary, it's just that staff don't make use of it. Indeed, the 36% that said they conducted frequent research to find out employees' views and concerns around benefits provision is a drop from last year's results. Last year, nearly a half (47%) frequently asked for feedback on reward.
Mark Carman, director at employee benefits technology provider Motivano, says: "Last year it seems employers were asking staff what they wanted. This year they are doing the telling. It could be they are communicating the changes they have made after staff surveys - but it could also be they are scared to ask what staff want in case they cannot provide it."
But Mike Cooke, director of organisational development at the London Borough of Camden and lead officer for pay and reward at the Public Sector People Managers' Association, adds: "It's fashionable to talk to staff about the 'fantastic benefits of total reward' but staff want different things. For example, in my council we offer a great final-salary pension, and 50% of lower grade staff don't take it up. They would rather have more holidays. Employers need to listen to staff and segment their communications."
Duncan Brown, director of reward at the Institute of Employment Studies, says: "This survey shows employers want to engage staff and boost performance, but if they are cutting staff surveys to save money, it will make staff cynical and less engaged."
It is apt to talk about pensions now, because the changes in legislation to come in October 2012 seem very close. From this date employers will be obliged to auto-enrol staff into an occupational scheme. In these schemes employers must contribute at least 3% of an employee's salary and staff have to pay 4%. If the employer does not offer a pension scheme within these parameters they will have to provide a National Employment Savings Trust (NEST), formerly known as personal accounts.
In the Reward Survey HR magazine asked how far respondents were prepared for the changes and found 21% were already making plans for the changes in legislation and 44% are considering the options. But a significant minority of 13% still did not feel properly informed about what the legislation would mean to their business. Furthermore, 22% had not given the issue any consideration at all.
The survey found just under a quarter (23%) of respondents are prepared to auto-enrol staff into their current defined-contribution pension, and 7% will offer lower earning staff a NEST scheme. But only 4% will implement NEST schemes for all staff and a massive 61% have not considered how they will change their pensions.
John Lawson, head of pensions policy at Standard Life, thinks this figure is "incredibly high" and "seriously disappointing". He said: "Employers need to make pension decisions now. New legislation will increase their costs base. At the moment, we estimate employers have 45%-50% take up rates on pensions but with auto-enrolment this could increase to 85%. So employer costs on pensions could double or even treble. This may mean companies might want to level down their contributions to save money."
Lawson believes employers might be delaying changing their pensions because of the upcoming General Election, but the Tories support Labour's proposals on pensions and, if they make revisions to the Pensions Bill, it could actually be to bring the timeline forward. "It is necessary to engage staff with pensions now," says Lawson. "This will allow employers to gradually phase in auto-enrolment before 2012."
Staying with the subject of pensions and finance, in 2009 HR magazine's Reward Survey found 43% of respondents did not believe their staff had enough financial information to plan effectively for their retirement. In 2010 more than three quarters of HR professionals (76%) agreed or strongly agreed employers have an opportunity to improve the financial awareness of their staff. But in spite of this, 39% still do not offer any form of financial education to staff, nor do they have any plans to do so. Almost a fifth (18%) admit they do not offer any education programmes now but have plans to implement them over the next 12 months.
Richard Morgan, head of consultancy services at Vebnet, says: "I think employers shy away from financial education as they do not see it as their role. As we come out of tougher times, though, staff are realising they have been naive about their personal finances. It is philanthropic for employers to educate them on their finances. They can use this to engage staff with a pension scheme or help them understand how their rewards and benefits fit into the larger plan."
Overall, the survey shows employers have come through the recession, having learned from the mistakes of the pay and bonus fiascos of 2008 and 2009. But if they want to use employee benefits more effectively to achieve their goals of recruitment, retention and engagement, a greater focus is needed on flexibility, financial education, pension strategy and two-way communication.
Morgan concludes: "Staff that feel treated fairly by their employer will be more likely to stay. We have to look at the reality: the world will not stop working if employers don't put more into reward. But if they seriously want to engage employees and rebuild after recession, they must do better."
HR magazine surveyed 348 business people with an HR remit, using an online poll. The majority of respondents (42%) were HR managers or HR directors (20%). Most of them (80%) were from the private sector, but a wide range of industries were represented including healthcare, manufacturing, finance, media, retail, manufacturing and local government. Just under half of the total respondents (47%) employ staff both in the UK and abroad. The majority of respondents' organisations (61%) had a turnover in 2009 in excess of £10 million and 40% employed more than 1,000 members of staff, with 6% employing more than 50,000.
To receive a printed copy of the full report from our sponsor Vebnet, email firstname.lastname@example.org