In a recent survey by Deloitte Consulting and the International Society of Certified Employee Benefit Specialists, a nonprofit educational association, 75 percent of corporate respondents identified the ability to attract, motivate and retain talent as a top five priority for their annual agendas, up from 69 percent in 2006 and 56 percent in 2005. This growth was even more pronounced among companies with revenues exceeding $1 billion; 77 percent of respondents in this category identified the issue as a top five priority, slightly higher than the control of health care costs (73 percent).
One way that employers may attract, motivate and retain talent is by providing desirable or attractive benefits. However, benefits are costly and the costs are rising. In order to balance the competing objectives of providing benefits that will be attractive to employees and controlling costs, employers need to consider a number of issues.
First of all, companies should consider employees concerns about equity. Equity is when executives receive substantially better benefit packages than a company’s “rank and file” employees. Employee dissatisfaction may result and significant disparities between executive and employee benefits can sometimes become an issue in labor union negotiations. As an example some company executives can receive what is called a golden handshake or golden parachute. A golden parachute or handshake is a clause put in an executive’s contract to grant them large benefits if their employment is terminated. This type of package can be viewed as a benefit to the executive receiving the contract, but a disadvantage to those employees at a lower level. The view from the employer’s side is that they secure work for high-paid executives, but the downside is that the contract does not specify the executive to perform well.
Next, employers considering benefits to attract, retain and motivate employees need to take into consideration economic issues. According to National Underwriter Life & Health magazine, in a 2006 study, 90% of the benefit managers surveyed rated “controlling costs of both health and welfare benefits” as the most important factor they consider in making benefit decisions. As benefit costs appear to be increasing exponentially, employers are trying to control those costs. In addition to paying some share of employee’s benefit costs, companies must pay costs of administrating the plan. Administrative costs are those costs to the employer via fees from equity companies who are the initial benefit provider. According to the survey listed above, reducing human resources administrative costs was significantly lower in importance this year compared to a similar study constructed in 2002. This is perhaps a sign that concerns of increasing costs in medical plans are taking precedence over reducing administrative costs. While controlling costs may improve a company’s bottom line, going too far in this direction by reducing benefits or by shifting more of the costs to employees may reduce job satisfaction or motivation on part of employer’s workers.
Employers designing benefits plans may also run into certain political issues. For example, Wal-Mart recently experienced a surge of negative public opinion and political outcry when memos came to light that revealed that the company had contemplated cutting benefit costs by dismissing elderly workers and those with health problems and limiting employees eligibility by restricting many to part time schedules. Another political issue is if married employees with families receive benefits for their spouse or daycare benefits for their children. Offering coverage for controversial or experimental medical treatments, or denying such coverage could have political repercussions as could the denial of benefits to unmarried life partners. Lastly, the Starbucks article could bring up a point on politics. This article speaks how employees are eligible to participate in the company’s 401(K) plan if they are full time or part time and receives over 240 hours of work. It would seem that the misappropriation could be seen that a full time worker is getting similar benefits as compared to the part time worker.
Competitiveness may be a key factor when employers are deciding what benefits to contribute to employees. The attractiveness of your benefits package can make a difference, with regards to attracting new hires, between pulling in star candidates and having to settle for average performers, especially when the labor market is tight. (Potter and Youngman) The disadvantage of using employee benefits to attract new applicants is it may take additional effort to make them feel that your benefits are better than the next interviewing company’s. The key to competitiveness is differentiation. Even when particular benefit elements are seen as desirable or almost universally offered, employers could still differentiate their programs.
“More experienced” applicants may be the ones most likely to place the most weight on a company’s benefits package in considering whether to accept a job offer. According to Employee Benefit News, much is being written about the value of retaining and recruiting older workers. The advantages of having mature employees-baby boomers and members of the Silent Generation preceding them-are well known, they tend to be stable and loyal. Most are highly skilled. Workers with long tenures possess workplace experience and institutional knowledge that is difficult, if not impossible to replace. If there is a downside to employing a veteran workforce, it’s higher health care bills. There’s no getting around the fact that older human assets break down more often and require more costly maintenance.
Lastly, employers looking to make benefit decisions based on employee attractiveness, retention and motivation need to look at overall employee satisfaction. Again, according to the National Underwriter Life & Health magazine, in a 2006 study found that attracting and retaining employees and increasing employee job satisfaction continue to be the two most important goals of benefit plans among over 500 employers with 10 to 2000+ employees. They said, “Helping employees plan for their financial future is also key.”
A factor to consider along with job satisfaction is motivation. To further explain the connection between job satisfaction and motivation and employee benefits, it is useful to take a look at Hertzberg’s theory. Hertzberg’s theory describes motivation as being based on two factors: motivators that are associated with job satisfaction, and hygiene and maintenance factors, which are called job dis-satisfiers. Motivators consist of achievement, recognition, work itself, responsibility and advancement. They are central and related directly to the nature of the work and rewards attainable from work performance. Hygiene includes company policy and administration, supervision, salary, interpersonal relations with superiors, subordinates and peers and working conditions. These are extrinsic and associated with the work environment. The important thing to remember is that these two factors are different. For instance, providing for hygiene needs can prevent dissatisfaction for the employee and disadvantages to the employer, but does not contribute to satisfaction and therefore cannot increase motivation. The best way to increase motivation is from the central factors, so it is advantageous for employers to identify and utilize effective motivators.
In conclusion, in considering how to use benefits as a means to attract, retain and motivate employees companies need to take into account issues related to equity, cost, politics, competition, recruiting and even job satisfaction and motivation. Overall it is interesting to see employers who worry more about the benefits that are provided than the employees do. Although benefits are a consideration of potential employees, the top consideration when deciding to join or remain with an employer is “the quality of coworker and/or customer relationships,” followed by the opportunity for work/life balance and “working for an organization whose purpose/mission they agree with.”
Lindsey Pascoe, Controller