How to use long-term benefits to motivate staff
Building and retaining a motivated workforce is a constant challenge for senior reward and HR management. To ignore the challenge, or take it for granted, creates an open door for competitors to steal old and new customers, poach top employees and make those leaps that set your business apart.
It’s a common misconception that staff are only concerned with pay and bonuses. Money talks, it’s true. But it’s well-known (and proven) that it isn’t the only deciding factor when it comes to staff recruitment, retention and motivation.
In fact, assuming more money equals more happiness could end up costing your business far more than just an employee’s salary. So what can you do?
Benefits that offer greater control
One of the best ways to motivate staff is to focus on more long-term benefits that give them more control over their working life. For instance, more autonomy in decision-making, better training, clear career paths, sabbaticals, team-building and flexible working – all of which can improve your employees’ work/life balance and promote wellbeing.
Another way is to help employees really get to grips with their finances. Give them the information they need to take control of their money and make more confident medium and long-term financial decisions.
One in four employees say money worries affect their ability to do their job. Ask those aged 25–34 and it rises to one in three, according to CIPD’s and Close Brother’s Financial Wellbeing: the employee view report (2017). What’s more, Capita Employee Benefits’ Insight Report (2017) found that 76 per cent of employees think better financial education in the workplace would help them to cope with “life issues” such as retirement planning.
This really rings true is when it comes to workplace pensions. It can be a powerful motivator to help your employees make the most of their long-term pension planning so they could retire earlier.
The prospect of early retirement
Many pension providers regularly shout about the importance of paying more into a pension. And why not? It’s a good habit for employees to get into. And thanks to the power of compounding, it can play a big role in growing a pension over time – especially with extra employer payments and tax relief from the government on top.
It makes sense on paper, but it’s hardly surprising that most employees don’t jump at the chance to give up some of their take home pay. It’s not always realistic for cash-strapped workers to pay more into their pension.
Thankfully, paying more in isn’t the only way for them to grow their pension.
The other important factor is investment growth.
Most people who are automatically enrolled into their workplace pension simply sit in the default fund. So long as the fund is a good long-term performer and priced competitively, this isn’t necessarily a bad thing. However, it could mean they’re missing out on a better rate of return, which can really add up over the long term.
Default funds vs alternatives
Default funds are a one-size-fits-all approach to investing. But this doesn’t reflect the mix of people in a modern workforce. For some, retirement may be a long way off, but for others it may be just around the corner. Some people are willing to take on more risk in the hope of getting a bigger pension. Others may be more wary.
We’re not all average. And, by definition, default funds cannot be right for everyone. That’s why more employers are making financial education an essential part of their workplace, rather than a ‘nice-to-have’.
Our research shows the average return of the ten most popular funds chosen by engaged members has beaten the returns of the average default fund by 4.89 per cent every year for the past five years. The reason for this remarkable outperformance is these pension members are generally prepared to take more risk than a default fund investment and they use some of the best active fund managers available.
Of course, this level of performance might not last the entire journey to retirement. But the take home message is that it’s possible to influence your long-term financial future by having the confidence and the knowledge to invest outside the default fund.
Give employees confidence to make their own decisions
It doesn’t matter whether you have first timers who want to know more, or seasoned investors looking for more choice, everyone needs to feel confident in their decisions.
As a matter of course, all pension providers should:
- make it easy for employees to compare funds and make their choices online
- give them simple, jargon-free guidance.
It’s likely your employees will all want to learn in different ways – some may be office-based and some may be remote. So make it easy for those who are curious enough to take action.
Use surveys, webinars, interactive calculators, ‘how-to’ videos, online information, and printed guides alongside face-to-face support onsite at your offices. This means they can learn in a way that suits them best.
Helping employees to understand and focus on making better decisions has been proven to boost engagement. A workplace pension is an expensive benefit – both for you and your employees. That’s why it’s important to help them get involved in their workplace pension as an active decision maker, rather than a passive participant walking blindly towards retirement. Plus, they’ll be more likely to appreciate the money the company pays in every month – boosting the return on your investment.
Put simply, engagement can deliver better saving habits, more confident decision-making and bigger pension pots. When you cut through everything else, what really matters is helping your employees grow a pension over the long term that will give them the money they’ll need in retirement.
And the flexibility for them to leave the working world with confidence – on their own terms.
The author is Stewart McIntosh, head of workplace marketing and engagement at Hargreaves Lansdown.
This article was provided by Hargreaves Lansdown.
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