Attracting and retaining employees in the recent tight labour market has begun to emerge as a challenge and employers are doing all they can to snare the right individual. To do so, companies have to take the first step of offering an appropriate salary package to a candidate. The question is, how?
Money talks, indeed. These days, however, an employee’s salary does not simply comprise monetary value. Benefits and rewards are offered within salary packages to ensure that employees are satisfied. In China, for example, Procter & Gamble has begun issuing offshore stock options to its local employees. With the seal of approval stamped by China’s State Administration of Foreign Exchange (SAFE), more foreign companies will step up and offer offshore stock options to their Chinese employees. The trend that threatens to emerge from this is expectations from mid- and senior-level executives to have stock options as part of their standard compensation packages.
Mavis Yeo, regional compensation & benefits manager, Air Products, shares some trends that she has observed when it comes to employers offering salary packages. “There’s an upward trend for employers to link salary packages with the company’s objectives, either company-wide or specific business objectives. So, the salary packages are pegged to employees’ performance and company performance. Depending on how employers assess a candidate’s value and contribution, some employers are moving towards pay-at-risk compensation where about 10 to 50% of employees’ total cash is pay-at-risk. The payment is variable and would have to be earned through meeting specific company objectives.
“At senior level, some employers adopt paying-for-person based remuneration and about 50 to 60% of their remuneration is tied to specific company objectives of profitability growth and shareholder return. There’s also prevalence towards wealth accumulation programmes such as supplementary retirement and savings plans for the purpose of employee retention,” she informs. By doing so, it seems, employees have no choice but to meet specific company objectives in order to receive their remuneration.
Another trend which shows up clearly is that employers hardly present standard salary packages to employees these days. “Employers are increasingly categorising employees and their benefit desires by some identifiable traits and then determining what’s valuable to each cross-section. The best benefits are those that are perceived as being somehow unique,” states Cedric Ng, compensation & benefits manager (Asia) Gemalto. “This is one reason why airlines, for example, give air travel perks to their employees,” he adds.
Chan Yoke Fun, principal consultant, regional health & benefits, Mercer Singapore outlines an ‘in-vogue’ trend that she currently sees among employees across companies. “Employees have diverse needs and they use their flexible benefits according to that. Often, they have a spending account from which they may claim for various disciplines such as physiotherapy, acupuncture and medical fees,” she notes.
Na Boon Chong, director, consulting, Southeast Asia, Aon Consulting, observes that stock options have lost their lustre to other forms of stock-based compensation such as performance shares. “What’s common in publicly-listed companies is stock-based compensation for senior management. In today’s hotly competitive talent market, competing only on the basis of base salaries and annual incentives only help to fuel the high wage costs, risking the cost-competitiveness of the business. While annual incentives provide flexibility to the business by varying payouts based on annual performance, they don’t recognise the multi-year performance and the long-term sustainability of the business or retention of the employees,” he states.
Much talk and thought have been put into employee generation gaps that seem to affect organisations around the globe. In Singapore, the situation is no less different. A recent global study by Robert Half and Yahoo! HotJobs has shown that salaries are the biggest concern for Generation Y. “Many fresh university graduates and even a number of seasoned job seekers are often tempted to evaluate job offers on the basis of salary alone,” agrees Ng. He offers some other factors that employees should consider in addition to salary such as “stock options, tuition reimbursement, professional memberships, sign-on bonus, relocation reimbursement, free parking and more. Job seekers should also evaluate whether they’re comfortable with the work culture, as some companies may ban access to instant messengers, external e-mails and social networks”, he adds.
For an employer, it is important that the needs of employees be recognised. Different groups of workers have individual requirements and it is when these are ignored that workers become disgruntled. Chan adds that separate generations have diverse requirements. “Generation X employees are geared towards more traditional benefits. These would range from insurance premiums to allowance for their school-aged children’s education. Generation Y would like holidays, iPods and technology-based benefits,” she says. Regionally, the requests differ as well. In Hong Kong, shares Chan, employees have been known to request for allowance for visits to the bonesetter or herbalist as part of their benefits package. In Philippines, she continues, housing and rice allowances feature as prevalent requests.
Na reminds us that talent is not just about young employees. “Many companies don’t have systems and processes in place for the retiring employees to transfer their knowledge and experience to the company. Thereby when they retire, that knowledge is lost,” he says. He continues that it is necessary for compensation to keep pace with employees’ development. “We expect to see companies paying more attention and investing in resources to manage the increasingly diverse workforce – intergenerational as well as cross-cultural and cross-disciplined, and creating a collaborative culture where different generations of employees can work to their best abilities,” he says.
Employers are not mind-readers, but the least they can do is to find out what their employees want. Many workers resign because they are dissatisfied with the offerings at their current company. If this happens too often, perhaps it is time to review company salary packages. Ng reveals that at Gemalto, a variety of perks are provided. They include stock options and stock purchase, annual leave of up to 24 days, fully paid medical outpatient treatment, examination leave and paternity leave.
Companies should offer benefits packages according to what their staff want. For example, in a technology company, states Chan, employees are expectedly more tech-savvy. Hence, it is encouraging to present them with perks relating to technology, such as high-speed broadband connections or the latest phone. Organisations with older employees should look at more family-oriented programmes such as additional vacation days to spend more time with the family.
“At Air Products, we place high emphasis on and promote respect, work safety, ethics, diversity and inclusion, and wellness in our work culture to engage and inspire our employees. We invest in reliable systems and deploy continuous improvement tools and work processes, and communicate regular information about the company’s performance so that our employees can work effectively and contribute toward the organisation’s goals and vision,” reveals Yeo. “We create and provide learning programmes and leadership development opportunities to motivate and develop our talent and workforce. Additionally, our managers are trained on compensation basics to enable them to execute fair and equitable salary management practices and career counselling with their staff,” she adds.
To keep employees happy, informs Chan, HR should have a clear profile of each and every worker in the company. That way, she says, the organisation is able to provide staff with perks and benefits that they truly appreciate. This, she emphasises, is the best way to attract and retain talent. Companies in different sectors should use their unique selling points to hook employees and to facilitate research; and HR should regularly conduct surveys, gather feedback and hear from staff as to what they really want.
Every organisation has different employee levels. Benefits packages often vary according to the role a worker plays in the company. Chan suggests that organisations in the IT industry generally follow egalitarianism. That is, for example, the CEO enjoys similar benefits that a clerk does. In other sectors such as the hospitality sector, though, employees are differentiated according to grades. Ng feels that packages should be tailored according to the profile of the employee. “For example, Generation X employees tend to be less motivated by promises of pay and more motivated by personal satisfaction with their jobs. They want to grow in their jobs and learn new skills. Generation X employees want and expect their employers to hear what they have to say. They want to understand the ‘big picture’ for the company and how this influences their employment and growth,” he says.
“Our benefits packages don’t differ very much among employee categories. Don’t try to ‘offer it all’ in an attempt to attract quality candidates, only to find that the business suffers as a result. Instead, try to cater to the unique needs of your employees,” adds Ng, from the perspective of Gemalto.
At Air Products, Yeo reveals that staff benefits are differentiated by employee categories according to prevailing market practice. “For example, consistent with market practice, the use of equity awards is targeted at employee categories that have made or will make significant contributions towards the company’s success,” she affirms.
With the competition for talent becoming stiffer than ever, it is imperative for HR to design salary packages that attract and retain employees successfully. Yeo agrees. “HR needs to think outside the box and be creative in terms of salary package design for key critical talents. An organisation doesn’t have unlimited financial resources to pay premium salaries to each employee. Pay differentiation and linkage to specific target business objectives for these employees is the key to retaining them,” she comments. She adds that high performance employees would not be content with simply market competitive salaries; instead, they would look for the upside potential and want to have a share of the company’s success upon having made significant contribution towards it. Yeo suggests two solutions: “The advocacy for pay-at-risk element with a no-ceiling upside potential could continually excite them. Employers can also consider good wealth accumulation programmes to retain high performance employees in
the organisation.”
Dhirendra Shantilal, senior vice president, Asia-Pacific, Kelly Services, focuses on specific industries. He outlines that there is an ongoing talent crunch in IT and that flexi-timing and telecommuting were now the baselines. “Given the nature of IT professionals, the opportunities for deep and wide learning would be much cherished; even per diem benefits when on overseas assignments. When catering to IT employees from overseas, companies may have to consider housing and transportation subsidies and allowances to attract and retain,” he informs.
Ultimately, Shantilal sums it up completely. “It must be noted that there isn’t a retention and attraction model that will fit all companies and also at different management levels. The total compensation & benefits package needs to be continuously reviewed and fine tuned as demographics and the business environment continues to change.”
what’s HR to do?
Kelvin Chan, business leader, health and benefits, Singapore, Mercer reveals some tips for HR on how to design the ideal benefits package for employees:
Step 1: Look at your employee demographics and understand where/who your key talents are.
» Who are you hiring?
» Are they coming from your competitors?
» Who is leaving? What does age/tenure tell you about effective compensation and benefits strategies?
Step 2: Understand your employees’ needs and preferences.
» Employee needs/perspectives are largely driven by age/demographics and the corporate culture of your organisation. Employee surveys or focus groups are valuable in understanding employee preferences and can be critical in making the correct decisions.
Step 3: Make sure pay is competitive – fix internal equity issues.
» While you must look for ways other than wages to differentiate yourself from your competitors, pay is still a very critical driver. Given the pace of turnover in the market, it is critical to monitor internal equity issues and correct these first. Otherwise, the turnover cycle will continue.
Step 4: Consider career development and career path opportunities within your organisation.
» In Asia, high potential talent find career opportunities to be the number one factor as to why they stay with an organisation. As such, you need to assess whether your career development programmes are focused on the right talent and provide the right skills, including linking back to employee preferences.
Step 5: Look for ways to differentiate yourself from your competititors.
» Offer supplemental benefits
» Consider increased flexibility – choices for employees
» Balance employee contract across pay, benefits, careers
» Establish an employment brand
Chan adds that many employers in Asia are adopting flexible benefits programmes in order to take a holistic approach to pay, benefits and careers. “A flexible spending account allows a variety of deductions to be selected to meet the differing needs of your staff,” he says.
Step 6: Take a long-term view – forecast future needs. This starts with the basics of sitting down with your finance department and trending compensation, benefits and training and development for three years. This will help keep a balanced perspective and make sure solutions are sustainable in the long-term.
under the spotlight:
The Body Shop
Jonathan Price, regional director, The Body Shop International (Asia-Pacific), reveals some benefits the company offers to its employees.
1) LOVE Money
‘LOVE’ stands for ‘Learning is Of Value to Everyone’. The objective is to encourage staff to pursue learning and to hone their creative talents and to help encourage a work-life balance and build a better-rounded employee.
How it works: Each employee (everyone including store staff) is given S$500 ‘love money’ a year to spend on a course in their area of interest. Many employees at The Body Shop have used their love money on creative courses such as pottery, dressmaking, nail art, cookery, horse riding, etc.
“Our LOVE Money scheme aims to create more well-balanced and happier employees. This scheme has been hugely popular since it was first implemented. Employees have used the money to learn various skills and pursue different interests outside of work, from cooking classes and horse riding to pottery and music lessons,” says Price.
2) Children On The Edge Playschemes (Aceh and East Timor)
Children On The Edge is a non-profit organisation supported by The Body Shop, working to relieve the suffering of vulnerable and marginalised children around the world through community-based programmes. The playschemes give employees an opportunity to immerse themselves in a marginalised community supported by the company.
How it works: Up to four playschemes are organised each year, with up to 10 staff volunteers from the region participating in each 10-day trip. Each volunteer has to be creative in the activities that they plan for the children from the communities, as well as come up with interesting fundraising activities to raise money for their trip.
“By participating and volunteering in the Children on The Edge playschemes, staff develop a deeper sense of commitment and understanding of our values and our company culture, and are given a money-can’t-buy-opportunity only open to them, while at the same time, doing good work with the children at the centres in the marginalised communities,” he shares.
3) Volunteering days
The Body Shop also organises corporate volunteering programmes (that take place on working days) in which staff are encouraged to participate. For workers who wish to volunteer their time with organisations of their choice, the company offers up to four days off per year for them to do so.
“Our volunteering days encourage our staff to pursue a social concern that they are passionate about, which they can do so during office hours. Response to volunteer activities organised by our values team is very positive every time,” states Price.