Why employers should take notice when employees grumble about pay
Why employers should take notice when employees grumble about pay
While it is fairly normal for employees to grumble about their pay, a new study suggests that employers may want to pay attention to these concerns– or risk wasting some of their reward dollars.
Through its latest People at Work survey, Mercer Human Resource Consulting asked a scientifically valid sample of 2,600 US workers to share their attitudes and perceptions regarding their job, organization, work environment, compensation, benefits and the management of their organization. Of the 180-plus questions in the survey, more than a dozen pertained specifically to reward programmes, including pay and benefits. They revealed that:
over half the employees surveyed (51 per cent) say they understand how their pay is determined, and about the same number feel there is some fairness to their current level of pay;
48 per cent say they are paid fairly given their performance and contributions to their organization;
51 per cent feel they are paid fairly compared to other people performing similar jobs in the organization; and
50 per cent believe the pay in their organization is as good as, or better than, the pay offered by other organizations in their geographic area.
Frank Roche, a Mercer senior communication consultant, said these numbers are typical. “When you survey employees about various work issues and conditions, pay usually ranks low in terms of satisfaction,” he explained.“This has been the case for many years and it is quite understandable. After all, who wants to say they are overpaid?”
However, other findings in the study should raise red flags for employers. Only 28 per cent of the employees surveyed say they are personally motivated by their company’s incentive plan, and only 29 per cent say that when they do a good job, their performance is rewarded.
“Employees do not see a strong connection between pay and performance,and their performance is not particularly influenced by the company’s incentive plan,” said Steven E. Gross, leader of Mercer’s US compensation consulting practice. “This means that employers are not getting the best return on their reward-programme investments.”
Among employees who say their performance is rewarded when they do a good job, 90 per cent are satisfied with their job, 88 per cent are satisfied with their organization and only 12 per cent are seriously considering leaving their organization. In contrast, among employees who say their performance is not rewarded when they do a good job, 52 per cent are satisfied with their job, 47 per cent are satisfied with their organization, and 36 per cent are seriously considering leaving their organization.
The same pattern holds regarding incentive plans. Among employees who say they are personally motivated by their organization’s incentive compensation plan, 89 per cent are satisfied with their job, 87 per cent are satisfied with their organization and 11 per cent are seriously considering leaving. However, among employees who say they are not personally motivated by their organization’s incentive plan, 52 per cent are satisfied with their job, 49 per cent are satisfied with their organization and 36 per cent are seriously considering leaving.
With limited reward dollars available, employers are trying to achieve the right balance between pay and benefit programmes. “As companies decide how to allocate their reward budgets, they need to understand which reward-programme elements are most valued by their employees or even different groups within their employee population,” said Steven Gross. “They also need to understand how employees view potential trade-offs between pay and benefits.”
The study shows the potential for conflict in this area;
58 per cent of the employees surveyed say that increasing direct pay is more important to them than improving benefits;
48 per cent of employees say they would be willing to use some of their own money to pay for improved or new benefits that are important to them;
49 per cent of employees would be willing to increase their payroll deduction for medical benefits to avoid a cutback in coverage, such as increased deductions.
“These findings show the difficulty and risk of taking a one-size-fits-all approach to reward-programme design,” said Steven Gross.“What appeals to employees can vary significantly by such factors as age,gender, and income level, so there needs to be some flexibility to accommodate differences in the employee population.”
This makes measurement a very important element of plan design, both in terms of measuring employee opinions and measuring the effectiveness of the reward programme in meeting its stated objectives. “Employers need to understand how their reward programmes are performing and why,” said Frank Roche.
He pointed out the need to consider “delivery” issues as well as design issues with respect to reward programmes. “Given these differences in the employee population, organizations can further leverage their investment in reward programmes by using highly personalized, targeted communication approaches,” he said. “As the research shows, employees who have greater understanding and appreciation of their organization’s total value proposition tend to be most committed to the organization – through both the good times and the bad.”
