Employee benefits are an integral part of many organisation’s attraction and retention strategies, and incentive programs are a common plank in many employee benefit initiatives. Melinda Finch uncovers the pros and cons of both cash and non-cash incentives and examines how they can engender employee commitment, engagement and loyalty
Employee benefits are an integral part of many organisation’s attraction and retention strategies, and incentive programs are a common plank in many employee benefit initiatives. Melinda Finch uncovers the pros and cons of both cash and non-cash incentives and examines how they can engender employee commitment, engagement and loyalty
Busy and often demanding jobs are a necessary fact of life for most people and we are working longer and harder than ever. Fortunately employment benefits such as superannuation and leave entitlements, which have helped take some of the sting out, are now commonplace. Non-wage benefits received by employees are on the increase, according to an Australian Bureau of Statistics Employee Earnings, Benefits and Trade Union Membership Survey in August 2004. Goods or services (18 per cent), transport (13 per cent), telephone (9 per cent) and shares (6 per cent) are among the employment benefits commonly received by employees. But there are plenty of other non-cash benefits and incentives being offered by Australian employers.
So are these incentives best given in an informal or structured way and how effective are they as an attraction and retention strategy?
Ad hoc versus strategic attraction and retention tool?
With 820 staff in seven offices, Gadens Lawyers doesn’t have a formal program for incentives or bonuses preferring to tailor ‘rewards’ for their employees. In the Sydney office, for example, employee benefits are not seen as a strategy, rather as an integral part of the firm’s approach to sharing reward. “We set our employees’ salaries at levels which we consider to be full and fair compensation for the performance of their roles,”says Michael Bradley, Managing Partner of the Sydney office. “We believe that rewards should exist for performance above and beyond the ordinary expectations.”Gadens prides itself on recognising both individual and team effort. “We give individual rewards to staff on an ad hoc discretionary basis throughout the year,” he says. “We give rewards to the whole staff from time to time, for example for a number of years we have given all staff an end of financial year gift, to celebrate the firm’s financial success. Last year we gave everyone a voucher to spend $400 on a pair of shoes.” A pair of shoes may seem an imaginative, albeit slightly frivolous, gift but it was an idea that was supported by management and well received by the staff.
However, taking a strategic approach to employee benefits can be a winning tactic in the recruitment battle for good people. In the aggressive banking and finance industry, Citibank makes a point of wooing candidates with a welcome pack that includes information on non-financial benefits available to them. They receive an On-Line entertainment benefits card and brochure that provides them with discounts on a number of restaurants, hotels and activities. The card can be used both by the candidate and their family members.
Show me the money?
In our mercenary world it may come as a surprise to some that employees don’t always prefer or appreciate cash rewards. These can sometimes not work as well as expected. “Cash bonuses once paid tend to be treated like an entitlement, leading to disappointment if they’re not repeated,” Bradley says. “The value of a non-cash reward can last for a long time … This is particularly so if the reward is either something that the employee was going to have to pay for otherwise, or something they would never otherwise buy or do,” he says.
“The provision of a non-cash reward is typically valued much more highly than the cash equivalent. This is for a number of reasons – the employee feels far more valued if the employer has taken the trouble to think of something they’ll actually value, rather than just writing a cheque. The fact that staff can’t just use the reward to pay a credit card bill and forget about it is also a benefit,” Bradley says.
Warren Antonik, Industrial Relations, Remuneration and Benefits Leader at GE Money Australia and New Zealand agrees. “The downside of cash is that in many cases its quickly forgotten. It also gets absorbed by the many expenses of day to day living”, he says. “Cash is also not great at acknowledging outcomes generated from a team … Confidentiality of cash payments also generally precludes open discussion where as a weekend away provided by the company can be a great talking point.”
Citibank believes not everyone is motivated by cash and uses methods other than fixed remuneration to retain staff. “In developing our non-cash benefits we have considered the different needs of our employees,” says Lara Kirschner, Compensation & Benefits Manager. “Our benefits policy is based on ensuring that there is something that meets everyone’s requirements. Our benefits are not just targeted towards the employee but towards their family as well.”
It is these shared benefits that can also have a positive impact on staff. Personal and corporate gift supplier Red Balloon Days, for example, finds that recipients often pass their gifts onto their spouses, especially if they are health or beauty treatments. So HR professionals formulating or implementing an employee benefits program should also consider this natural desire of their people to share their workplace benefits and rewards with their loved ones. Some of the most appreciated benefits include many of those things which are essential to a smooth running, happy family life such as health insurance, computer equipment, telephone services and motor vehicles.
At GE Money all employees have access to The Spirit program. “Leaders can allocate Spirit points to employees in recognition of exemplary customer service or performance ‘above and beyond’. The points accumulate and can be redeemed at any time for goods and services on line, says Antonik.
Management staff are also offered a recognition program called ‘GE High Flyer’, which acknowledges good leadership results. “Fifty people are chosen [based on performance] across the GE group in Australia and New Zealand by a panel of senior management,” Antonik says. “As a group they travel with their partners to an exotic location for five days. In the past winners have been treated to great resorts in Fiji and New Caledonia ... It’s a great way of acknowledging the employee and recognising the employee’s partner,” he says.
Lifestyle benefits
Other popular non-cash incentives or rewards include those designed to improve well being and fitness. Citibank has engaged three organisations to provide lifestyle services at no cost to their employees. “The Employee Assistance Program (EAP) provides counselling to employees and their families on a range of work-related or personal matters,” says Kirschner. “Work Life Links consultants provide information and support on a number of issues to assist employees juggle work and personal responsibilities. They can provide information on the availability of adult education and health programs, relocation information, pet care, availability and cost of dependent care, information relating to pregnancy and childcare and more. We have just recently acquired the service of Resmed to offer employees sleep apnea screenings,”she says.
The Sydney office of Gadens offers a mixture of lifestyle benefits. “We provide various other benefits, such as free yoga and pilates lessons, massages, external study support, fresh fruit in the office,” says Bradley. “The mix changes from time to time as we come up with new ideas for things which the staff will value and might improve their work lives. We also pay cash bonuses from time to time.” Gaden’s also recognises the demands made on their staff’s time. “The year before [2004] we gave everyone their birthday off as additional paid leave, plus $100 cash to spend on something irresponsible,” says Bradley.
Money, money, money
Naturally cash is still a considerable motivator for many people, particularly those in high pressure, revenue driven roles such as sales. It is easily exchangeable for any goods or services and easily administered and controlled via payroll. “Cash is great for rewarding achievement against specific pre-determined targets,” says Antonik. GE Money has a range of cash-based sales incentives to reinforce achievement of sales targets at all levels. “While the amount of cash is a factor in the success of these programs; it’s the specificity of the metrics that seems to have the most impact,” he says. “Top sales people want to see how they are tracking relative to their targets as well as see how they are tracking against their past levels of achievement. Because of this transparency sales people can calculate precisely how their ‘hip-pocket’ will be impacted.”
Thank you
Of course cash and non-cash benefits are just formal ways of saying thank you yet research suggests many organisations and managers fail to do this even informally. Red Balloon Days’ most recent Australian Pleasure Survey found that 30 per cent of the respondents said a lack of appreciation had even been enough for them to resign from a job. Furthermore, 66 per cent of those surveyed said it had “stopped them making further efforts for a person”. Chances are many of them were their bosses!
Cash and non-cash employee benefits can be more than just a tangible way of valuing staff and their performance. If thought out and applied properly they can also be a powerful part of the glue that binds your organisation, and its people, together.
Potential pitfalls
Warren Antonik, industrial relations, remuneration and benefits leader at GE Money Australia and New Zealand, identifies the potential pitfalls of non-cash incentives.
• Fringe benefits tax makes the cost of providing benefits relatively high. For every dollar of benefit provided to employees it costs a company almost two dollars. It can also be a headache to calculate and administer especially if there are multiple awards
• Reportable fringe benefits on employee’s payment summaries at the end of the tax year can create a nasty surprise. These impact access to government benefits as well as child support payments.
• The cost of administration can be prohibitive – purchase of award items, storage and delivery of awards.
• Selecting the non-cash incentives that appeal to everyone can be difficult.
Possible solutions
• Engaging an expert program provider that can provide full administration support
• Provide participants with some choice of awards
• Provide clear communications to ensure there are no surprises in terms reportable fringe benefits
