Employee engagement falling back in the UK

A ‘reward perception gap’ between employers and employees is eroding employee engagement levels and threatening company productivity and economic recovery, according to new report issued by Mercer.

An analysis of reward, benefit and savings programmes amongst major UK multinationals found a striking disconnect between employers and employees on the perception and value of their organisation’s reward and benefit programmes.
 
Used effectively, reward programmes are an effective method of attracting, motivating and retaining staff. The report's data has shown that employee engagement levels have slipped back to lower than pre-recession levels however, due to a growing 'reward perception gap'.

The principle findings of the report are that:
• Employers are misjudging the drivers behind staff attraction, retention and motivation, leading to 17 percentage point drop in employee engagement levels compared to 2006;
• Employers are underrating importance of base pay, job security and work life balance to employees, while overrating bonuses and career development.
 
"There is a direct relationship between an engaged and motivated workforce and company productivity," commented Chris Johnson, UK Head of Mercer’s Human Capital business.

"At a time of economic uncertainty, we’d expect high employee engagement, especially with many staff appreciating their companies' efforts to limit redundancies during the recent recession. The reverse seems to be true - primarily due to a mismatch in perceptions."
 
The report highlights that the number of employees stating they felt engaged and motivated, or had a strong sense of commitment in their current role, has fallen by 17 percentage points since Mercer’s What’s Working engagement survey in 2006.

Mercer attributes the 'reward gap' to three factors:
1. The tendency for employees to feel their reward levels are lower than the market average while employers perceive them to be much more competitive;
2. The tendency of employers to underrate the importance of base pay, job security and work-life balance to employees;
3. A general lack of understanding by employees regarding their reward packages and the communications they receive.
4. According to the data, the majority of employees feel their reward levels are average to below average compared to what they might receive at rival organisations.

This contrasted with employers who feel that their employees’ reward levels are competitive or above average.

When asked if they are satisfied with the specific elements of their organisation’s reward packages, again, employers generally believe that satisfaction levels amongst employees are higher than they actually are.

For example, 66% of employers feel that the majority of employees are ‘satisfied’ with their benefits, compared to only 49% of employees. Forty-nine percent of employers say that their employees are satisfied with their bonus plans compared to only 43% of employees.
 
Divergent views and perceptions are also evident in the importance that the two groups place on 14 different reward factors instrumental in attracting, motivating and retaining staff.

In terms of attracting staff, employers rate the most important factors as base pay (54%), career development (47%) and the bonus and organisational culture (both 43%). By contrast, employees rate the most important factors as job security (59%), job satisfaction (47%) and pay (44%).
 
However, Mercer believes this divergence has most impact when it comes to defining what drives motivation.

On the one hand, employers feel that the most important factors driving employee motivation were job satisfaction (47%), career development (43%), culture (41%) and job security and training & development (both 29%). On the other, employees cite job security (51%), job satisfaction (44%), pay (44%) and work/life balance (31%) as the drivers.
 
"Employers tend to overrate the importance of culture, career development and training and development," commented Johnson.

"Crucially, they underrate the importance of job security and pay to employees. Engagement is going to suffer if employees feel their needs aren’t being met. Companies may be concentrating their resources in the wrong area so are finding attraction, retention or motivation problematic. Some organisations may be over-spending on some while under-spending on others," he said.
 
The 'reward gap' can be addressed, in part, by better communications. While the monthly pay slip remains the most common medium for communication, only 41% of employees receive an annual total reward statement, leaving the majority of workers without access to this effective method of staff communication.

To compound the situation, only 53% of employees feel that answers to benefit-related questions are easy to obtain. Thirty six percent of employers feel the same. Only 51% of employees state that the information, once sourced, is easy to understand while 56% of employers feel that information about benefits is easy to understand.
 
Mercer’s Employee Rewards, Benefits and Savings Survey was compiled from responses from 79 UK companies and 1,000 employees. The survey looked at company reward programmes and employer and employee perceptions of what drives staff attraction, retention and motivation.