With morale in the workplace flagging, is it wise to cut your benefits spend? Growing Business looks at the options for keeping your employees motivated
In a tough trading environment, any extra outlay is scrutinised. This makes non-contractual perks, such as motivation schemes, vulnerable. The average spend per person on benefits – over and above contractual ones – is 5% of each individual’s salary a year, but this is expected to fall dramatically as business owners cut back. But experts say investing in staff now is crucial to help companies survive the recession and keep that momentum going during the recovery.
The right environment
A small firm in Milton Keynes is proof that if companies reward employees, it’s not only good for morale, but can affect talent retention and improve the bottom line. All 165 staff at P&MM are eligible for a monthly nomination scheme where five are selected as best performers and receive £50 each. The best of them then wins a car parking space nearest to the building and a car valet. Even the best team of the month is rewarded with £200 to spend on a party and a bottle of champagne each. This is all run on an annual budget of £20,000, yet it has led employees to vote P&MM – which itself specialises in improving companies’ performance – as one of The Sunday Times’ 100 Best Places to Work. The award, voted for by employees, also shows that staff retention and morale are high.
Richard Davies, head of employee benefits at P&MM, says creating the right working environment is critical to business success. “People are the engine room of the business. They are its biggest cost and it’s important they’re engaged on a daily basis,” he says. “As a supplier, we have to have the principle that a happy motivated employee will be more productive to an organisation.”
It’s a compelling argument. Employers are starting to offer flexible benefits packages on top of contractual ones, such as pensions and health insurance. Some firms give employees a budget, often around £500 each, and allow them to choose the benefits they want, from gym membership to an adult learning course.
The big problem, however, is motivating staff when their colleagues are being made redundant. Sheila Sheldon, director of European operations at Michael C Fina, which specialises in reward and recognition, has worked with companies facing this dilemma. She says honesty about the situation and clear communication is key to ensuring employees buy into the company’s strategy.
“It’s about trying to ensure your employees are engaged,” agrees Davies. “When you are not going to give pay rises and won’t have the motivational effect of this, it’s about looking to creative initiatives to lift the spirits of the organisation in the most cost effective way.”
Investing in people
For some companies, that means introducing training schemes. The Department for Innovation, Universities and Skills (DIUS) is encouraging more employers to train staff despite the economic downturn. It is convinced that a failure to train now will mean we won’t have the skilled workers we need to seize the opportunities that growth presents when the economy starts recovering. “Businesses that continue to invest in their people during the hard times will emerge as winners when the good times return,” it says.
Fortunately, motivating employees does not have to be expensive. It’s possible to cut your cloth to a tough trading environment without aggressively slashing staff benefits. “If you take away salary, employees say feeling valued is the most important thing and often that is about allowing them a voice,” says Sheldon.
This can be done simply. For example, by asking employees for ideas about how to cut costs makes them feel that their opinions are valued. If the best suggestion is rewarded with a bonus or voucher, they will feel motivated too. However, companies are reducing their spend on such incentives in tune with the economy and to meet the needs of staff. For example, luxury items, such as designer handbags, are being replaced by more basic rewards, such as supermarket vouchers and even washing machines.
Davies cautions against focusing too much on recession-oriented rewards, which may be useful, but are unlikely to do much to lift the gloom. P&MM, he says, “delivers benefits that are designed to put a smile on people’s faces”. The company negotiates discounts and vouchers so that people can buy goods and services at preferential rates. These include cinema tickets and cost between £5 and £10 per employee a year. “The value to the employee is high, but the cost to employers is small,” says Davies.