Strong Link Exists Between Employee Engagement And Employee Perceptions Of Total Rewards

With rising health benefit costs and relatively flat wage increases deflating employees’ perceptions of their work environment, new survey data from Aon Hewitt shows a strong relationship between employees’ perceptions of their total rewards package and their overall engagement levels. The survey of more than 2,500 U.S. employees found that 60 percent of engaged employees say their total rewards overall (everything an employer provides to an employee, including pay, benefits, and the work environment) are above or well above what other employers offer, while only 24 percent of those who are disengaged say so. Similarly among engaged employees, 51 percent view career development/training programs as better than what other employers offer, while only 19 percent 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, employee research leader, Aon Hewitt. “Engaged employees value a more balanced, less oriented toward pay-only, rewards package compared to those who are disengaged.”

Understanding and perceived competitiveness of total rewards. According to the survey, paid time off (84 percent) and base pay (83 percent) were the most understood of all total rewards programs, while bonus (64 percent), career development/training (61 percent) and work/life balance (60 percent) were among the least understood.

“Employees are telling us that nothing about their Total Rewards package stands out,” said Baumruk. “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 percent) and pension plans (41 percent) as above the competition. Bonus incentives/commissions (30 percent), base pay (27 percent), career development/training programs (22 percent) and work/life balance (20 percent) 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, Communication Consulting, 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.”

Total rewards by gender. According to the 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 percent) and their bonus opportunity is better than what other organizations provide (38 percent). Male participants also are more likely to say the following rewards are well above or above what other organizations offer: savings and company-match programs (40 percent); work/life balance programs (38 percent); and life and disability insurance (32 percent).

Total rewards by generation. Perceived competitiveness of total rewards also is higher among Millennials than other generations, particularly on career development/training programs (41 percent).

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 percent) feel encouraged to share ideas while only 22 percent 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.

The study 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 percent), recognition of efforts and achievement (46 percent), incentive/bonus pay (40 percent) and work/life balance or stress management (40 percent).

“The most engaged employees are the ones who are encouraged to share ideas and who witness open, honest communication from senior leadership,” said Hein. “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.”

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