The Engaged Employer - Whitepaper (Moorepay)

The Engaged Employer - Whitepaper (Moorepay)

WHITEPAPER

THE ENGAGED EMPLOYER

Making payroll & HR easy

Contents

FOREWORD

03

METHODOLOGY

05

INTRODUCTION

06

EXECUTIVE SUMMARY

07

THE PEOPLE CHALLENGES FACING EMPLOYERS

11

BENEFITS BAROMETER: THE PERKS PROVIDED BY EMPLOYERS

14

WHAT EMPLOYEES WANT

19

POSTSCRIPT

26

Whitepaper – The Engaged Employer 02

Foreword

By Stephen Bevan, Head of HR Research Development, Institute for EmploymentStudies

All of this adds up to a labour market which, in many respects is defying convention and forcing employers to think differently about the ‘deal’ they offer their employees and the psychological contract they want to nurture, especially with their most prized and talented staff. These challenges face firms in all sectors and regions, and they affect small and medium–sized enterprises (SMEs) and large corporations alike, but perhaps in different ways. One of the big questions which the research in this report by Moorepay is asking is, if employers are to compete for skills in what is an increasingly buoyant labour market, how can they differentiate themselves from their competitors? More specifically, it is also asking what SMEs, with perhaps more constrained resources and less immediate access to specialist HR support, can do to make employees feel valued and make their reward and benefits packages fit for purpose, flexible, personalised and effective. One of the many valuable insights from the research contained in this report is the slightly uncomfortable mismatch between the needs of those who work in SME’s (to feel valued, to get recognition etc) and the perhaps misplaced confidence with which the leaders of many SMEs claim they are meeting these same needs. While this is by no means a new phenomenon, it seems to me that the existence of this ‘perception gap’ is worrying if SMEs are going to avoid losing out in the ongoing war for talent as the squeeze on labour supply tightens further.

I’m very conscious that it is easy for people like me, who are paid to provide an ‘informed’ commentary on the changing world of work, to lecture busy employers about getting better at managing uncertainty, change and precariousness. To be honest, in the last thirty–five years, I’ve not met a successful business yet which hasn’t had to master all of these challenges – and a few more besides – as they strive to be sustainable, innovative and competitive. But even I have to admit that we are living in pretty extraordinary times. Of course, Brexit is a dominant source of disruption and uncertainty, but even without this the UK has a persistent productivity problem, we have almost stagnant real wage growth even though unemployment is at a record low, and we also have growing fears about rampant automation and the ‘casualisation’ of work through the so–called ‘gig economy’. On top of this, UK employers have the demographic challenges of an ageing workforce and the growth of chronic ill–health in the working age population to contend with.

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My other reflection is that closing this gap shouldn’t be beyond the wit of most SMEs because many of the tools which can help them are not as complex or expensive as they might believe. The report does a good job, I think, of both highlighting the problem as well as presenting some neat solutions. It makes a compelling case that doing nothing is not really a credible option and neatly differentiates between the kinds of traditional staff benefits which have a financial element and those which respond more to the need for flexibility and the benefits that help employees navigate the tricky boundaries between work and home or help them invest in personal development. My experience is that many leaders of SMEs ‘get’ this. They argue that agility, flexibility and being ‘fleet of foot’ are attributes which they need to hone just to respond to the sometimes fickle demands of their customers and clients. My argument is that, if they treated their employees as just another important group of customers and clients and constructed an ‘offer’ which both anticipated and responded to their needs, then much of the ‘perception gap’ would be eradicated. It’s no coincidence that many of the companies which have achieved the best rates of customer loyalty also have high levels of staff loyalty – they are strongly linked and are often driven by the same philosophy of management.

One of the other messages from the report is that SMEs are not just smaller versions of larger firms. Their character and purpose can often be different, their ability to ‘turn on a sixpence’ is more pronounced and their willingness to experiment and innovate can be higher. The report also seeks to reassure SMEs that they don’t necessarily need the resources of their larger cousins to put together a compelling and effective package of benefits which can deliver loyalty, engagement and discretionary effort from their employees. I found this to be an ultimately optimistic message at a time when it would be easy to be disheartened by the challenges the UK jobs market is posing many employers.

“It’s no coincidence that many of the companies that have achieved the best rates of customer loyalty also have high levels of staff loyalty”

Stephen Bevan, Institute for Employment Studies

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Methodology

The employee survey was conducted using an online interview administered to members of the YouGov Plc UK panel of 800,000+ individuals who agreed to take part in surveys. All figures are from YouGov Plc. The total sample size was 2,053 employees. Fieldwork was undertaken between 13th – 19th June 2019. The figures have been weighted and are representative of British business size.

The employer survey was conducted by Moorepay using an online interview administered to a combination of Moorepay contacts and a SurveyMonkey Audience panel reached through the Cint Insights Exchange. The total sample size was 556 UK employers, of which 334 are SMEs with between 1–250 employees. Responses were sought from the individuals whose primary role in their organisation was as either an HR Manager, Senior Manager, Chief Financial Officer, President/CEO/ Chairperson, C–level Executive or Director. Fieldwork was undertaken between 26th June – 12th July 2019. The figures have been weighted and are representative of British business size.

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Introduction

Anthony Vollmer Managing Director, Moorepay

At the same time employers are having to contend with a dangerous cocktail of a shortage of candidates with the right skills; demographic changes leading to a decline in the number of 18 to 24–year olds entering the workplace and fears about Brexit which have deterred many EU citizens from seeking employment in the UK. The balance of power between employees and employers is changing. Even the language surrounding recruitment and retention signals how hard it is to find the employees companies need. It’s now a ‘war for talent,’ and ‘a recruitment battlefield.’ This reinforces the gravity of the issue, as the productivity and growth plans of companies are affected. As a partner to SMEs we wanted to see whether the benefits companies offer have an impact on how valued employees feel. We asked the views of employees and also those of employers. In the struggle to recruit and retain the best staff are companies giving their people the benefits they want? At Moorepay we know that some SMEs feel that they cannot afford to offer benefits or that administering them will be too time–consuming. But can SMEs afford not to as they compete for the best recruits? SMEs shouldn’t underestimate the power of recognition and acknowledgement. Expressing how much you value your employees increases their engagement with your organisation. We would urge companies to carefully consider what will make them a great place to work, whether that’s a great atmosphere, a well–designed and administered benefits system that responds to what employees want, a defined sense of collective purpose or promoting a better work–balance. Being an ‘engaged employer’ is vital to the health of businesses. I hope you will find the results of our research interesting and that they offer some insight into how benefits could help you succeed in the recruitment and retention of employees.

As the company that manages payroll and offers HR services to over 10,000 businesses nationwide, Moorepay has conversations with the leaders of SMEs all over the country every day. Overwhelmingly the issue that concerns SME leaders is how and where to recruit the skilled staff they need, and then how to keep them. has never been so many of us in work. However, although this is heartening news, wage growth has been depressed since the financial downturn of 2008 and has only picked up over the last 12 months according to the ONS. In real terms (after adjusting for inflation), total average annual pay is estimated to have only increased by 1.9% compared with a year earlier. 1 “Wages may be rising but so are prices, particularly food and clothing, which has a big impact on families. They have less disposable income so many feel compelled to look for better remunerated employment.” The latest figures from the Office of National Statistics show that with a UK employment rate of 76.1%, there

1 Office of National Statistics: Average weekly earnings in Great Britain, September 2019

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Executive Summary

Introduction

Chief among the challenges faced by SMEs is how to attract and keep good people – the beating heart of any organisation. More than three in four SMEs taking part in our research (77%) said they find it challenging to recruit suitably qualified staff for their business. And two– thirds of SMEs we surveyed (64%) said they found staff retention an issue. The recruitment and retention challenges facing SMEs have been exacerbated by a ‘perfect storm’ of low unemployment, and slow wage growth that has squeezed household incomes. This has encouraged people to start looking for new opportunities at a time when good people are in high demand. But employers can’t simply blame macro–economic factors for their employee woes. They must look closer to home and identify what factors are contributing to a lack of staff satisfaction in their own organisation, from low pay to a lack of flexibility, poor career progression opportunities or the absence of real responsibility. 1. The Value Gap: employees feel undervalued, but employers are often unaware SMEs need to ensure they are aware of their employees’ expectations, in order to be able to minimise the threat of losing key staff to competitors and having to embark on a costly and time–consuming search for suitably qualified replacements which may be unsuccessful. The four key findings

However, our study reveals that a large proportion of employees feel undervalued, many of them seemingly without the knowledge of their employers. • 85% of SMEs surveyed think their employees feel valued, compared to just 15% who believe their workers don’t feel valued. • Just 71% of SME employees say they feel valued by their employer, 14 percentage points below the finding from the employer survey. More than one in four SME employees (27%) say they don’t feel valued, 12 percentage points above the corresponding finding from the employer survey. SMEs can’t afford to be complacent when they are under constant threat from competitors of all sizes who are fighting hard for the top talent. 2. Benefits Barometer: SMEs are being out–gunned by larger rivals Keeping employees happy is a complex task, influenced by a broad range of factors from the transparency and clarity of HR processes and policies to the content of a job, working conditions, the personalities and relationships between colleagues, or the workplace culture. Many of these are complex issues requiring a high degree of HR expertise, but SME owners are usually time–poor and without the kind of dedicated HR support enjoyed by larger businesses. Employee benefits, if correctly considered, administered and communicated, can provide a relatively simple yet effective weapon in the fight against dissatisfaction in the workforce.

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3. London leading the way There are significant disparities between the prevalence of benefits offered in different parts of the country and in different industry sectors. • According to employees, it is businesses (of all sizes) in London who are leading the way on the provision of employee benefits. • Just 10% of employees surveyed who work in London said their employer provides none of the benefits listed, easily the best result around the country, compared to 29% of those working in Yorkshire & the Humber and 27% of those working in Wales and the North East respectively. • Companies in the capital are particularly far ahead in the provision of financial benefits, with over half of London–based employees (52%) saying they receive financial bonuses or incentives for example, but workers in London are also much more likely to be offered the opportunity to work flexibly or remotely (52%), with the next most likely region for employees to be offered this the South East (33%). • On a sector basis, companies in the IT & telecoms sector seem to be offering the most benefits, with just 9% of employees in this sector saying their employer doesn’t provide any of the listed benefits. At the other end of the scale, more than one in three workers in the hospitality & leisure sector (37%) claim their employer provides them with none of the perks listed.

In a competitive labour market where small businesses are in direct competition with larger firms, unsurprisingly SME’s are being comprehensively out–gunned by their larger rivals on employee benefits packages. Large businesses, which usually have dedicated HR teams, are more likely to provide almost every type of benefit listed in our study. • One in five (22%) of all employees said their employer provides no benefits, rising to one in three (34%) for employees of SMEs. • According to employees, the most common benefits being provided by SMEs are financial benefits, with six of the top ten most common benefits offering some form of financial reward or discount such as financial bonuses; pension contributions over the minimum legal requirement; discounts on leisure and shopping; or free or subsidised travel. • The single most commonly–provided benefit, according to employees of SMEs, is flexible and/ or remote working, provided by 28% of small and medium sized firms. However, other ‘perks’ offering flexibility or increased work–life balance are relatively uncommon. • Benefits revolving around socialising are also relatively prevalent in SMEs, with 22% of SME employees saying their employer organises team social events or functions, and 10% saying they have socialising space within the work environment, such as a games room or a chill–out area. • There is a huge disparity between the benefits employees say they are offered, and what employers say they offer. This suggests that SMEs have a communications challenge. They are either not making it clear to employees what benefits they are entitled to, or they are providing benefits that are irrelevant to employees and therefore not stimulating their interest, or even awareness, at all.

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4. Employees want flexible as well as financial benefits There is widespread agreement from employers that in 2019, employees are looking for more than just a salary, with 87% of SMEs participating in our study believing this to be the case. But one in three SMEs (30%) believe ‘soft’ benefits have no or only slight importance in recruiting and retaining staff. However, some of these benefits are, according to our study, of real appeal to employees. • The benefits that employees believe are most important for their employer to offer are traditional financial benefits. The single most important benefit for workers in smaller businesses is financial bonuses and incentives, cited by 30% of respondents. This is followed by the provision of pension contributions over and above the minimum legal requirement, cited by one in four employees (27%). • Beyond the top financial rewards, it is flexibility that holds most appeal for SME employees, with four of the top eight most attractive benefits offering some form of flexibility or improvement to work–life balance. Flexible working or remote working is viewed as the third most important benefit overall, cited by one in four SME employees (26%). The option of working a four–day week is important to 24% of respondents, and performance–based leave is prioritised by one in ten (10%). • While attitudes to most financial benefits are fairly uniform across ages and genders, there is greater disparity in the attitude of different age groups to some flexible benefits. This is most striking when it comes to flexible and / or remote working, which is much more popular for younger age bands.

• Women place significantly more importance than men on benefits that allow flexibility – particularly flexible and/or remote working, which is cited by 35% of female employees compared to just 26% of male employees. • Female employees and younger age groups place much more importance on family–related benefits such as childcare vouchers, parental leave beyond the minimum requirement, or the provision of childcare in the workplace, than their male counterparts. • Benefits providing some form of social interaction, including the organisation of team social events or the provision of social space within the work environment, are also more important to the younger age groups. • Other types of benefit cited by employees include professional development and training, Employee Assistance Programmes, and community leave.

The top 10 most important benefits For SME Employees

Benefit

%

Financial bonuses / incentives

30%

Pension contributions over the minimum legal requirement

27%

Flexible and/or remote working

26%

Four–day working week

24%

Professional development and training

20%

Life insurance and/or critical illness insurance

15%

Performance–based leave

10%

Holiday buy, sell and trade schemes

9%

Free or subsidised travel (e.g. Cycle to Work scheme, company car etc)

8%

Team social events / functions

7%

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Conclusion

In a job market where companies are fighting tooth and nail for top talent, businesses have their work cut out, and they can’t afford to be complacent about disaffection in the ranks. SMEs must do more to find out if their employees are happy and what they expect from them as employers and use this knowledge to form the starting point of a deeper relationship with employees. By understanding their expectations, employers can adapt and take actions to build relationships with their people that are based on much deeper–seated foundations, such as care, collaboration and respect. While doing this effectively requires a good deal of HR expertise that many SMEs simply don’t have and can’t afford, there are a few simple steps they can take to start developing a more loyal and productive workforce.

One of these simple steps is employee benefits – an important area where SMEs are lagging behind larger businesses. Benefits programmes must be employee–focused, taking into account the value and relevance of different benefits to employees of different ages and life stages, genders, and interests, from those who are primarily motivated by financial incentives to those who value flexibility and work–life balance, or training and professional development opportunities. Modern technology means many benefits can be easily implemented and managed without making unrealistic demands on the precious time of business owners or senior management. Benefits don’t have to be expensive for employers, and if well–conceived and executed, can generate a lot of value for businesses from improved staff satisfaction and productivity to increased appeal to prospective employees and reduced churn.

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The People Challenges Facing Employers

SMEs make a vital contribution to the UK economy. They currently deliver £202bn to the economy and this is expected to grow to £241bn by2025,accordingtotheSMEGrowth Watch. The health of this sector is crucial to UK productivity. However, when it can take many months to find suitably qualified candidates then that can severely impact the growth plans of these companies and the economy as a whole. 2 According to the CIPD 3 , recruitment and retention continue to pose major tests, with 41% of employers reporting that it has become harder to fill vacancies during the past year, and 33% claiming that retaining staff has grown more difficult. A recent report from the British Chambers of Commerce 4 suggested that half of UK businesses now find it takes longer to recruit people compared with five years ago, with one in five saying it now takes up to six months to fill a skilled role. Our findings back up these studies. More than three out of four SMEs taking part in our research (77%) said they find it challenging to recruit suitably qualified staff for their business.

The undervalued employee

The recruitment and retention challenges facing SMEs have been exacerbated by a ‘perfect storm’ of low unemployment, and slow wage growth that has squeezed household incomes to levels not seen since the recession of the mid–1990s. This has led employees to look elsewhere in a labour market where good people are in high demand. But employers can’t, of course, simply shrug their shoulders and blame macro–economic factors for their employee woes. They must look closer to home and identify what factors are contributing to a lack of staff satisfaction in their own organisation, from low pay to a lack of flexibility, poor career progression opportunities or the absence of real responsibility. More than ever, SMEs need to ensure they are aware of their employees’ changing expectations and are able to respond to them to minimise the risk of losing staff to competitors and finding themselves in a potentially drawn–out and costly search for suitably qualified replacements. Our findings suggest that the vast majority of SMEs don’t consider this to be a problem in their own organisation. Some 85% of SMEs surveyed think their employees feel valued, compared to just 15% who believe their workers don’t feel valued. This is broadly similar to the feeling amongst representatives of larger businesses taking part in our study. However, employees themselves paint a different picture. Across all sizes of company 64% of workers feel valued by their employer compared to one in three (34%) who don’t. Just 71% of SME employees say they feel valued by their employer, 14 percentage points below the finding from the employer survey, suggesting that employers are unaware of the scale of the problem. More than one in four SME employees (27%) says they don’t feel valued.

And two–thirds of SMEs we surveyed (64%) said they found staff retention challenging.

2 SME Growth Watch CEBR and Hampshire Trust Bank 3 CIPD Labour Market Outlook Spring 2019 4 British Chambers of Commerce, 25 June 2019

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Percentage of employees who don’t feel valued, sector by sector

This is a more positive picture than in large companies, where just 57% of employees feel valued and 41% say they don’t feel valued. However, it still reveals a significant problem for SMEs, with a large proportion of employees feeling undervalued, many of them seemingly without the knowledge of their employers. “While employees of smaller businesses appear to feel more valued than their counterparts in larger organisations, SMEs can’t afford to be complacent,” explained Anthony Vollmer, Managing Director of Moorepay. “As businesses grow it can become more difficult to stay truly engaged with their employees, and they are under constant threat from competitors of all sizes who are fighting hard for the top talent. Keeping staff satisfied is of paramount importance to smaller businesses, and our study suggests that there are currently far too many unhappy workers to ignore.” Retail and Transport sectors face the greatest challenge with disaffected workers On a sector by sector basis, businesses (of all sizes) in the retail and transportation & distribution industries face the greatest challenge with disaffected employees. In total 44% of employees surveyed in each of these sectors say they don’t feel valued by their employer. This may be linked to the particular economic pressures impacting these sectors, or the relentless demand for customer service which is so fundamental to them. In contrast, businesses in the construction sector have the lowest proportion of employees saying they don’t feel valued (22%).

Industry sector

%

Retail

44%

Transportation & Distribution

44%

Medical & Health Services

39%

Media, Marketing, Advertising, PR & Sales

38%

Hospitality & Leisure

36%

Finance & Accounting

35%

Manufacturing

33%

Legal

32%

IT & Telecoms

31%

Construction

22%

27%

The Value Gap

15%ofSMEsbelieve their workers don’t feel valued 15%

27%ofSMEworkers don’t feel valued by their employer

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North–South satisfaction divide

Percentage of employees who don’t feel valued, by region

Workers in Wales are the most disaffected, with four in ten of them (39%) saying they don’t feel valued by their employer, closely followed by workers in the North West (38%), North East (37%), and Scotland (36%), demonstrating something of a North–South divide. By contrast, just 27% of employees in the South West said they don’t feel valued. With so many unsatisfied workers, businesses are doubtless suffering from reduced productivity levels, regardless of whether those employees move on or not. For those businesses who do lose more employees than they would expect, the additional burden of finding suitably qualified candidates and then training and integrating them into the workplace can be significant, and costly.

SCOTLAND 36%

NORTH EAST 37%

NORTH WEST 38%

YORKSHIRE & THE HUMBER 34%

EAST MIDLANDS 33%

In short, unhappy staff make for very unhappy business owners.

WEST MIDLANDS 35%

EAST OF ENGLAND 32%

WALES 39%

LONDON 34%

SOUTH EAST 33%

SOUTH WEST 27%

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Benefits Barometer: The Perks Provided by Employers

Why benefits? Keeping employees happy is a complex task, influenced by a broad rangeof factors fromthetransparency and clarity of HR processes and policies to the content of a job, working conditions, the personalities andrelationshipsbetweencolleagues, or the workplace culture. Many of these are complex issues that can be improved over a period of time, with a high degree of governance and people management expertise. But while SMEs should undoubtedly strive for these high standards in their human resources function, SME owners are usually time–poor and without the kind of dedicated HR support enjoyed by larger businesses. Consequently, for SMEs to start addressing these problems they need to make greater efforts to engage with their workforce and they need a relatively simple but effective starting point. Employee benefits, if correctly considered, administered and communicated, can provide a highly potent weapon in the fight against disaffection and disengagement in the workforce.

Large businesses, which usually have dedicated HR teams, are more likely to provide almost every type of benefit listed in our study. In some cases, the disparity between large and small businesses is vast. For example, over half of employees of large businesses (53%) say their company provides discounts on leisure and shopping, such as gym memberships, cinemas or restaurants, compared to just one in ten (9%) SME employees. Similarly, employees say 47% of large businesses provide an Employee Assistance Programme, which typically offers services such as confidential counselling and advice on personal issues, compared to just 7% of SMEs.

SMEs lagging behind large businesses

In a competitive labour market where small businesses are in direct competition with larger firms, unsurprisingly they are being comprehensively out–gunned by their larger rivals on employee benefits packages – particularly on financial ones.

Most businesses provide some form of benefits to their employees over and above a salary. However, the findings of our study amongst employees reveal that one in five (22%) of all employees said their employer provides none of the listed benefits, rising to one in three (34%) for employees of SMEs.

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Top ten largest disparities between large and small firms’ benefits

Percentage of SME employees (