With rising health benefit costs and relatively flat wage increases deflating employees' perceptions of their work environment, new survey data from Aon Hewitt demonstrates the importance of this relationship.
Aon Hewitt recently surveyed more than 2,500 U.S. employees at mid-size and large American employers to determine their perspectives and attitudes about their employment experience, including values and culture, work environment, engagement, total rewards and communication.
The survey found 60 per cent of engaged employees say their total rewards – which include everything an employer provides to an employee, including pay, benefits, and the work environment – are above or well above what other employers offer. Only one-quarter of those who are disengaged (24 per cent) say the same.
Similarly among engaged employees, half (51 per cent) view career development/training programs as better than what other employers offer, while only 19 per cent of disengaged employees would rate these programs as better competitively.
"While we consistently see employees ranking pay as the most valuable reward they earn from their employer, it's not the only thing that matters," said Ray Baumruk, partner and employee research leader with Aon Hewitt. "Engaged employees value a more balanced, less oriented toward pay-only, rewards package compared to those who are disengaged."
Poor understanding of total rewards
According to the survey, paid time off (84 per cent) and base pay (83 per cent) were the most understood of all total rewards programs, while bonuses (64 per cent), career development/training (61 per cent) and work/life balance (60 per cent) were among the least understood.
"Employees are telling us that nothing about their total rewards package stands out," Baumruk said. "This lack of differentiation could be damaging to attraction, and many of the least understood programs are also the ones viewed by employees as less competitive."
While overall awareness and understanding was strong, perception of competitiveness could be improved. Employees rated their current employer's paid time off programs (42 per cent) and pension plans (41 per cent) as above the competition. Bonus incentives/commissions (30 per cent), base pay (27 per cent), career development/training programs (22 per cent) and work/life balance (20 per cent) were less likely to be viewed as competitive relative to other companies.
"Companies could see improvements in employee engagement by increasing awareness and understanding of these programs," said Pam Hein, partner in communication consulting with Aon Hewitt. "Often providing total rewards statements and related web tools can help foster greater understanding. Administering engaging quizzes or quick assessments to employees can also draw attention to rewards that may be undervalued or misunderstood."
Demographics influence perceptions
According to Aon Hewitt's data, men are more likely than women to perceive their total rewards to be competitive. More specifically, men are more likely to believe their pay programs are better than others (39 per cent) and their bonus opportunity is better than what other organizations provide (38 per cent). Male participants are also more likely to say the following rewards are well above or above what other organizations offer:
- Savings and company-match programs (40 per cent)
- Work/life balance programs (38 per cent)
- Life and disability insurance (32 per cent)
Perceived competitiveness of Total Rewards is also higher among Millennials than other generations, particularly on career development/training programs (41 per cent).
Better communication improves engagement
According to the study's findings, there is a significant gap between the communication perceptions of engaged and disengaged employees. Among engaged employees, more than three-quarters (77 per cent) feel encouraged to share ideas while only 22 per cent of those who are disengaged would agree.
Similar gaps exist when considering how open and honest senior leaders are viewed, and how managers share and provide information with employees.
Aon Hewitt's study also revealed that most employees feel they receive the right amount of communication on benefits and job-related topics. Employees feel they receive too little communication related to important aspects of engagement such as career development (42 per cent), recognition of efforts and achievement (46 per cent), incentive/bonus pay (40 per cent) and work/life balance or stress management (40 per cent).
"The most engaged employees are the ones who are encouraged to share ideas and who witness open, honest communication from senior leadership," Hein said. "Offering communication training for managers and leaders, regularly sharing key messages, and instituting performance and reward related metrics, related to communication from managers and leaders, will be essential to achieve improvement in this area."