If there’s something we all agree with to a great extent is the fact that money makes the world go round. Tremendous efforts have been put in over the years to determine which factors about work are most valued by employees.
Cash and other benefits have always been pivotal in attracting and retaining employees. And most professionals still cite income as the most important consideration when looking for an opportunity. Other things valued by employees are career progression opportunities, work culture followed by work-life balance.
The case for flexi benefits
Freedom of choice is increasingly valued by all employees in today’s world where information about other firms’ practices is so easily available. And that is the beauty of a flexible benefits program, where employees get to have their choice in selecting benefits.
Two other solid arguments in favor of flexible benefits are keeping up with competitors and improving recruitment. While cash and other benefits help in attracting and retaining good people, millennials increasingly want to work with companies whose provide flexibility. Building and promoting an attractive corporate culture and establishing a reputation for fostering a supportive working environment are extremely important.
Worth the cost?
Many firms simply offer a standard employment plan for all employees, with no choice involved. Not surprisingly, there is a mismatch between how much employers spend on benefits and the value attached to them by employees.
Flexi benefits are beneficial for the employer because they add value for the employee more than they increase costs. They don’t necessarily increase the taxable income of the employee, but they do make the employer more attractive.
In terms of cost – it is more than offset by reductions in other areas, such as lower recruitment cost, a more highly qualified workforce, higher employee morale, increased productivity, a more versatile workforce, and so on.
When it comes to employees soft benefits are attractive because they recognize contribution in non-financial ways and also because they change the perception of the culture of the organization and at times also improve the quality of life.
Some of the popular perks offered by major corporations to attract top talent are – flexible working hours, paid sabbaticals, paid time off for volunteer work, onsite gymnasiums, onsite medical care facilities, 100% health coverage, work from home, crèches, tuition reimbursements etc.
Bonuses or pay rises?
Bosses today increasingly have to consider the return on investment (ROI) of rewards, they often have to choose between providing bonuses or one-time pay increases.
We all know cash or non-cash benefits are important, but it is about leveraging the best of each to boost employee engagement scores while maximizing the benefits of cash offerings. The need to tread this delicate balance is what is making employers move towards one-off bonuses at the expense of annual pay hikes. Offering a bonus plan instead of increasing salary can avoid the increment of fixed costs which is important to maintain the competitiveness in the market. Moreover, crowdsourcing of employee expectations is also signaling a shift away from longer-term salary increases.
One of the possible drawbacks of using monetary benefits to retain people is that increased salary levels are easily matched by a lot of firms but flexible benefits aren’t given by many firms yet. Hence, a better option is to provide a mix of both cash and non-cash offerings in the benefits basket.
Communication is the key
A critical factor in employee engagement is to achieve is a sense of fairness, transparency and equity. It is paramount to ensure that employees feel the hike or bonus they receive is fair based on their performance. Managers must be able to communicate clearly what their employees are getting and why and relate it back to their performance and competencies. They also need to substantiate their decision with data, using metrics such as personal performance, external and internal parity and let the team member know about this.
HR and senior leaders need to work closely to develop a culture and work environment that clearly defines and delivers the value proposition that employees will find compelling enough to be worth their time and effort to work there.