How reward and recognition can help businesses attract and retain employees
An introduction to total reward, perks and benefits
Back in 2017, Gallup released a blog titled ‘The World's Broken Workplace’. It was a result of a global survey the company conducted, revealing that only 15% of the world's one billion full-time workers are engaged at work. This indicates that a huge majority of employees aren’t focused or productive at work. The survey covered 160 countries, some with better results than others. The US had an engagement rate of around 30%, whereas a staggering 94% of Japanese workers were not engaged at work.
Jim Clifton, Chairman & Chief Executive Officer at Gallup, concluded that workplaces around the world were failing to build a working environment that allows people to enjoy and thrive at work. In fact, he felt like it meant human development was failing too. When people come to work with great enthusiasm, they shouldn’t be met with bad management practices, poor workplace culture and needless processes that "[grind] the life out of them."
The picture Gallup painted wasn’t a pretty one. It urged for a widespread transformation of workplace cultures.
But some would say this was already happening, albeit not on a large enough scale to impact employees everywhere. The idea of improving the culture of workplaces, keeping existing employees satisfied and attracting the best new talent has been around for some time.
Timelines tracing the history of work suggest that by the 80s, people started talking about a couple of things:
- Work-life balance
- Corporate culture
- Wellness programmes
By the 90s, we really started to see employees placing their own needs and interests above those of their employers. They were doubting the value of long-term company loyalty and expecting more from companies. Businesses which didn’t consider quality-of-life factors for employees, or prioritised "competitiveness-enhancing, productivity-improving schemes" started to see people leave for friendlier workplaces.
The way we understand employee productivity and engagement has totally transformed. People don’t need to be stuffed into a cubicle, forced to wear a suit and watched over in order to prove they’re working. Employees can truly thrive when given the opportunity to work in a way that suits them. After all, people are the most valuable asset to any company.
The coronavirus pandemic proved that, even under the most challenging circumstances, people can successfully work from home. It has created an otherwise unlikely shift away from old-fashioned ideas that productivity can be judged by the number of people at desks in an office.
Of course, we’re yet to fully understand how people will work after the pandemic. Some may continue to work from home, some may return to offices. There are a lot of unknowns. But one thing is certain: a lot of people would like to continue working from home some of the time (57% of workers, according to YouGov). Working from home is no longer seen as a privilege for the few.
But where people work is just one piece of the puzzle. Traditionally, a salary was the only way of rewarding employees and it was not common to offer other incentives outside of this.
Nowadays, people are looking for much more than just a salary from their employers. To remain competitive as a company, to attract and retain the best staff, and to truly recognise and value employees as people, businesses need reward policies and practices.
But how do employers decide what to offer? What truly offers the most to employees? And what keeps staff the happiest? If you’re asking yourself what you should be offering to attract and retain employees, you’re already on the right track. This question is more relevant than ever right now, especially with all the uncertainty in the world. Many of us have been working at home as a result of the coronavirus pandemic—although stay at home restrictions have lifted, some workplaces continue to offer some kind of flexible working arrangement. But as we learnt while working from home, professional and personal lives can be blurred, causing worries around increased stress and burnout.
In their efforts to manage employee happiness, amongst other challenges, business owners and managers are restructuring total reward to meet the demands of the new working world.
The key elements of total reward
There are many of these surveys out there that place similar benefits as a priority, but the order does vary. This highlights the need to ask your own employees to discover what matters most to them. For example, the Aviva survey found that Londoners’ choices are different to elsewhere in the UK, rating both free meals and subsided travel as more interesting to them.
If a statutory benefit is a ‘need-to-have’, then a perk would be a ‘nice-to-have’. They are extras that aren't typically monetary-based, don’t tend to be listed in contracts and are rarely a legal requirement.
Perks should offer something which appeals to employees, makes their working life easier or more enjoyable, supports their life outside of work or simply lifts up team morale. Perks vary hugely, from ‘pawternity’ leave to life-changing work-from-anywhere opportunities. Some of the most common perks in the UK include:
- Free or subsidised travel
- Free or subsidised gym memberships
- Free food or meals
- Company cars
- Company events
- Medical or dental care
- Childcare vouchers
- Wellness programmes
- Mental health support
The best perks offer tangible benefits to how an employee lives—not just their working life, but their life outside of work. It’s all about recognising employees as humans, not just staff. Offering a balance of perks that cover health, wellbeing, happiness, socialisation, finance and future planning can make a huge difference to working adults.
Perks are given to all employees. While rewards are accessible to all employees, they tend to be given as a thank-you—a way to recognise and encourage certain values or behaviours. They can be linked to performance. If an employee does a really good job, meets or beats their targets, shows integrity, refers a client or new employee, they may get a reward. It’s up to the employer to decide what’s worth recognising and is largely based on the behaviours they want to encourage in the workplace as well as company values. Companies also have to define the format of the reward. It could be a sabbatical due to length of service, a gift for completing a successful project ahead of time, or a bonus for meeting performance-based targets.
How to approach and implement a successful total reward strategy
Creating a strategy with employees in mind
To create a recognition-rich culture, you have to determine salary structure and which benefits-in-kind and perks will have the highest return on investment in terms of enhancing the employee experience and company culture.
First things first, a total reward strategy shouldn't be seen as a fix for workplace issues. It’s fundamental to helping businesses attract and keep employees engaged, but it can’t be seen as something that can make up for problems in the workplace. If businesses try to do this, it’ll just be plastering over the cracks. That said, total reward is all-encompassing by design—you can work on identifying (and solving) problems while seeking to deliver additional benefit.
A good place to start is by looking at common reasons employees are unhappy and why they ultimately end up leaving their jobs. Research reveals that half of Brits (52%) want to quit their jobs. The top ten reasons were:
- Want higher pay
- I’d like a new challenge
- I’m bored
- There is no career progression
- It’s too stressful
- I just hate it
- I have to work too many hours
- I’m not learning any new skills
- I don’t feel support by my boss
- I want to change industry
But employees don’t tend to make impulsive decisions. 79% of people admit they take up to two years to work up to leaving on average. That is valuable time you have to make changes to improve employee happiness, and to align your company’s offering with the values that matter to you.
Some of those values will be shared across companies and employees. For one, to have access to the tools and resources to do a good job. A worrying number of employees are regularly facing stressful situations which detract from their ability to work productively – 38% in fact, according to research. Many factors were cited as contributing to employees feeling stressed, including unrealistic expectations and unmanageable workloads.
COVID-19 has also created higher stress levels within workplaces as people tried to juggle working from home with the worries of a global pandemic. It has really highlighted the need for businesses to focus on wellbeing. If you have a highly stressed workforce, simply offering up free snacks isn’t going to solve the problem. Taking a total reward approach—looking at all the elements which contribute to an employee’s wellbeing—can help you create a supportive environment.
You’re focusing on addressing what your employees need, rather than offering up perks of no value. And the best place to start is simply asking your employees. You need to figure out what they consider rewarding and what might be dismissed as an empty gesture. It’s pointless wasting time and money rolling out a total reward strategy without asking the people it’s meant to recognise.
Company loyalty could increase if benefit options were customised to meet individual needs. When you create a total reward package with employees in mind and ensure they’re clear what benefits are on offer to them, usage rates are likely to be much higher. You can do this by:
- Surveying your team
- Sharing how you used that input in creating or changing your reward plans
- Keeping all employees informed about the benefits on offer
- Reviewing your offerings regularly
Choice is an incredibly important factor in rewarding employees. Giving employees the opportunity to contribute their own ideas treats them as individuals and allows your investment in reward to have maximum impact. When planning your benefits, it’s important to be flexible to ensure that employees are getting the most value. For example, say you want to recognise employee longevity. You could simply give them a bonus. Or you could make it personal, giving them a choice to have an experience that’s important to them.
When it comes to benefits and tax, there’s an important distinction to make between:
Benefits which are a ‘top-up’ of statutory benefits
(e.g. extra parental leave or holiday days). These are not taxed any differently or additionally to regular income because they don’t increase the gross pay.
Perks or benefits-in-kind that have a monetary value
International pay and compensation
If your team is spread across countries, it can make paying them a little more difficult. Not only is there additional scope for unfairness, there’s extra legal complexity. As Omnipresent explains, finding that top-tier remote talent is only the first step. Once hired, you’ll also need to onboard them and process payroll. For payroll, they explain:
- If your remote workers are in the same country or region as your company, pay them as standard.
- If your remote employee are based in another country or in another state in some cases, you have two options:
- Set up a local entity in that location to pay staff compliantly there. You’ll need to do the same for every different location you hire staff from.
- Rely on an Employer of Record (EOR) service to employee staff in different locations on your behalf. They will be responsible for paying your workers and following all local regulations and customs.
The main thing to be aware of when paying and rewarding staff in different locations is whether they are a contractor or an employee. Contractors are a flexible alternative to permanent employment for many businesses. They can provide their skills and services for a set amount of time. Contractors can be self-employed, sole traders, or run their own limited company. They work for themselves or an umbrella company or agency that employs contractors.
It’s easy to think that contracting will solve remote payroll issues, but misclassifying an employee as a contractor can be regarded as non-compliance and the business could be penalised.
When considering pay and benefits across borders, you must also consider employer and employee contributions to things like pensions or healthcare. Different countries will have different tax rules; you have to follow the laws of the country or region where the employee is. Both payroll taxes and mandatory contributions must follow the local regulations of the employee, not the employer.
The impact for employers
While there may be legalisation to consider, rewarding your employees is worth the effort. After all, the people who work for your company are your strongest asset. Staff turnover, sick days, absences and so on are critical to the business and should be recorded and analysed regularly. They can reveal trends in employee happiness, engagement and other important insights.
Rewards and recognition in particular are tools often used to keep employees engaged and motivated, as well as to attract new talent:
Improvements to talent retention
Deloitte says recognition is among the top three most effective non-financial factors for retention. In companies with recognition programmes, employee engagement, productivity and performance are 14% higher than in organisations without recognition.