Challenges and responsibilities much more effective motivators than pay and bonuses

This is the conclusion of a new, large-scale study by Prof Dr Xavier Baeten and Bart Verwaeren of Vlerick Business School. The study polled 4,877 employees. It was carried out in Flanders, Wallonia and the Netherlands and is a unique collaboration between 3 media partners, De Standaard, La Libre Belgique and NRC Handelsblad.

The study measured employee satisfaction with regard to salary and bonus payments, as well as a whole range of non-financial compensation components, such as time spent travelling to work, training opportunities, and support from the manager, etc. As far as financial compensation is concerned, the main issues are: the way in which pay increases are determined and how companies make pay decisions. Moreover, companies appear not to be in the habit of involving/consulting employees on pay policies, nor does the employee feel he can express his grievances if he disagrees with certain pay decisions. When it comes to employee benefits, there are still plenty of opportunities to tailor the compensation package better to suit the needs of employees. Xavier Baeten: ‘Consequently, there is clear support for greater implementation of cafeteria plans, which allow employees to choose benefits from the reward package. Furthermore, employees appear to be particularly dissatisfied with the processes that underlie the remuneration policy.’ ‘When we look at the evolution in pay satisfaction between 2008 and 2012, we notice a status quo or slight increase, except when it comes to employee benefits, where we see a marked decrease in satisfaction. This could be due to a reduction in car benefits.’ But satisfaction with pay levels turned out to be quite good. With regard to the non-financial components, it is clear that employees still feel positive about job and employment security. That is remarkable in times of economic crisis. Special attention needs to be paid to the way in which decisions are made within the organisation, employee participation and the training climate, too. Baeten: ‘This requires continued focus because it means that employees also feel that the economic crisis is leading to a decrease in training and development opportunities, things which are, nevertheless, essential to competitiveness.’

If we focus on differences within the country, we notice that Walloon employees are generally less satisfied. And specifically, too, that manual workers are clearly less satisfied with both salary and benefits. Baeten: ‘Manual workers seem to be a ‘forgotten’ group and this will certainly not make the evolution towards a single statute any easier.’ Apart from that, no real differences could be identified between the public and private sectors, except when it came to satisfaction with fringe benefits. Here, the public sector scores significantly lower. As far as the different sectors are concerned, the chemical and pharmaceutical sectors score considerably higher, while the wholesale and retail sectors bring up the rear. Overall, there are far fewer differences when it comes to the non-financial compensation components.

The study also looks at the importance of and preferences regarding the different remuneration components. This shows that the non-financial compensation component has a much greater impact on employee engagement than salary and benefits. That is good news in times of economic crisis and limited budgets. In terms of non-financial remuneration, having a challenging job is seen as particularly important. In addition, the reputation of the employer also appears to play a major role. Baeten: ‘Employers should therefore pay attention to their reputation in the labour market. This result is also a convincing argument for corporate social responsibility. Nobody is motivated by the pursuit of financial gain only - or very few are.’ It does, however, appear that financial reward plays a more important role in the decision to leave an organisation. It is striking, too, that the perceived fairness of the remuneration policy and procedures is just as important as the level of remuneration.

Baeten: ‘Our results underpin the need for careful consideration of the compensation structure of the future. This is absolutely essential as a result of a number of contextual factors, such as the ageing population and the uncertain economic climate. But also to better tailor remuneration to the needs of the employee. For instance, employees would like to see more flexibility, which instantly takes some of the pressure off providing a fixed salary. They would like more options in the benefits package too. This would allow companies still to offer a good package within the current budgetary constraints. In addition, employees would like to see salaries (and bonuses) linked to individual performance. Length of service and the index, on the other hand, are at the bottom of the list.’

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