Companies put benefit and retention programs in place for a variety of reasons, ranging from goodwill and benevolence through to rewards for strong performance. There are a number of other factors in the employment market that are affecting companies in such decisions. With 5.7% unemployment and a growing economy, organisations are realising that they need to offer rewards and incentives to help attract and retain the best employee/members.
The cost of losing an employee/member in their first year of employment is estimated by Swinburne University and the respected Human Resources Magazine at three times their annual salary, plus the hire cost of approximately 25% to 30% – a loss of up to $165,000 for an employee/member on a salary of $50,000. Just multiply that by the number of staff lost over a 12 month period, and many companies will be shocked by the financial impact on the their business.
Many employers make the mistake of basing the cost of staff turnover on hiring and salary costs alone, however the bottom line impact on a business is far more reaching. In addition to the direct and indirect costs involved in hiring activity (advertising, equipping and administration, as well as the time taken for screening, interviews and orientation/training), the fiscal impact of separation (legal costs, severance payments), lost productivity, interrupted client relationships, negative impact on team morale, and disruptions to core business activity must be factored in.
An AC Nielsen and Inside Story study, commissioned by MLC, showed that employers place a high weighting on the importance of benefits. It revealed that 76 per cent of employers thought that staff benefits could retain people and 52 per cent thought they could attract people to an organisation.
An effective benefits program can also contribute to an improvement in on-going employee/member engagement.
While strong engagement is a combination of a number of factors, recognising employee/members for a job well done can have a significant effect. What employers need to do are advocate incentives and rewards to show that the hard work of employee/members never goes unrecognised or unappreciated. The bonuses don’t have to be large or extravagant, but should be appealing and demonstrate the company truly cares about its staff.
Benefit programs not only act as an incentive but also provide tangibility and clarity around the achievement of key performance goals. The most important thing to remember about rewards programs is that they do not have to be a high-cost investment – they are accessible through EAE to large and small business operators, an important sector of the overall employer/employee/member target market.
Australia’s aging population will see the annual employment growth rate fall by 0.4 per cent per annum. This will cause a shortfall of 195,000 workers over the next five years. In Australia, for every new young person entering the labour market today there are seven workers over the age of 45 available. The importance of supplying employee/member benefits over and above salary increases is as a result going to intensify in the coming years.
The competition for skilled staff and the desire to be seen as an employer of choice is driving many organisations to reconsider the ways they attract and retain staff through the benefits they offer. And while there are many advantages for employers who offer competitive salary packages, more pressure will be placed on HR and remuneration professionals to include comprehensive benefits programs for which they will need to seek external assistance.