Each month, we ask our panel of business and HR leaders about the hottest topics impacting employee engagement in UK businesses.
This month, we focused our questions on reward and the impact it has on engagement.
When we’re referring to reward in our questions, we mean monetary compensation, such as basic salary, bonuses and paid-for benefits.
Here’s what our leaders told us....
(To find out more about how we conduct the survey, or to get involved read to the end of the article)
Are pay and reward the most important element of employee engagement?
We asked our panel how important they thought pay and reward was for maximising employee engagement.
Whilst our leaders found it to be important, they didn’t think it was the most important element in an employee engagement strategy.
Taking a closer look, 70% of our panel said that it was one of the most important elements of engagement, with only 14% identifying it as the most important element.
Our panel told us:
“For me it’s not linked directly. Reward can help make people feel valued but it doesn’t result in engagement if the culture or communication is non existent or flawed”
“In my experience, though, reward (including salary) is just the hygiene factor and the better driver of engagement is clarity of vision, clarity of expectation, consistency of message, telling the truth, empowering people, etc. Reward on its own doesn't buy engagement because for someone to be engaged in something it has to be engaging.”
Does a higher salary mean higher engagement?
We asked our panel if they thought that a higher salary was linked to higher employee engagement. The answer was “no”!
Almost 60% of our respondents strongly disagreed that higher salary meant higher engagement.
It seems that when it comes to high employee engagement, it isn’t necessarily something that can be “bought” with a high basic salary.
Here’s what our panel said:
“Think the pandemic has proven that reward and recognition only go so far to engage employees …there’s also a lot to be said for care , psychological safety and the relationship between team and line manager.”
“Pay rises / counter offers only keeps people engaged for a small period of time. The issues are still there, so in my view it has never worked. Bonuses and benefits are good, but mean nothing if people can't afford their bills. The best way is to provide flexibility for staff, so they have a choice.”
What type of pay strategy impacts on engagement the most?
We gave our panel a choice of different pay strategies to choose from and asked them which they thought had, or would have, the greatest impact on employee engagement.
We asked our panel to choose from individual performance-related pay, pay transparency and pay equity. There wasn’t much differentiation in terms of what our panel chose as the top engagement approach. This could indicate that the most impactful approach depends on the organisation, or that possibly there is more research needed in this area.
Our panel ranked them in the follow order:
1 - Individual performance-related pay
2 - pay transparency
3 - pay equality
4 - pay doesn’t impact engagement
“I chose performance related pay, but that's only true if you start with a baseline of pay equality for comparable levels of skills and experience in a role. From that fair baseline, I would expect to see greater contributions rewarded greatly.”
“I think there is a bigger link between individual engagement and individual reward- basic salary plus commission etc than there is over the organisational level engagement”
What reward practices have the biggest impact?
Finally we gave our panel a list of reward practices, to understand the importance they placed on them for employee engagement.
Here’s how our panel ranked the choices:
- Basic salary
- Additional benefits, such as pension and healthcare
- None of the above.
We had no votes for overtime / on-call payments - which may be expected. But also no votes for commission, which may call into question some of the traditional performance-related pay metrics used in sales-led organisations.
Here’s some of the experience our panel shared with us:
“People like to know their worth and are therefore can be motivated by their salary along with their individual perf related pay. They also love having monetary benefits including gym membership, car allowances, medical/health insurance - anything that helps save them money in the long run…’
“Although reward does have an impact on employee engagement, there are other factors to take into account. I think that if the workplace is good enough and the staff feel fulfilled in their roles, then monetary rewards wouldn't be as important. That being said, I believe bonuses are very effective when increasing employee engagement. Teams should always be rewarded for the effort they put in and sometimes that goes beyond basic salary, additional benefits and non-monetary rewards.”
So what are the key takeaways here?
From our research some key themes emerged;
- A great engagement strategy is likely to include reward and pay, but it’s unlikely to be the only/main focus to a successful approach
- Throwing additional salary at employees to “buy engagement” is unlikely to be effective
- When it comes to influencing engagement on an organisational level, individual performance-related pay comes out on top. But only just. The other options of pay transparency and equality were not far behind. These felt somewhat at odds, to the most popular choice, individual pay.
- When it comes to a reward strategy - basic pay is still the best place to start, closely followed by additional benefits. Our research really called into question the engagement impact of commission schemes.
Some of the other insight, experience and comments our leaders shared on this topic can be seen below;
Be part of something special....
The Space HR 'Feedback 500' is a piece of monthly research we conduct to understand more about the topics affecting employee engagement. Each month we send our leadership community 5 short topical questions via WhatsApp. All responses are captured anonymously. We have leaders from a wide range of sectors including: HR consultants, recruitment, retail, automotive, creative arts, construction, technology, utilities, e-commerce, digital, marketing, legal, health, public sector and education.
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