A crisis of confidence has overtaken employees and employers alike, but that’s where the similarity ends. In one corner, employers are insisting on cost control and maintaining the flexibility to initiate further pay and benefit cuts should a tepid economy take a turn for the worse. While employees want financial and emotional security after surviving a decade of layoffs and declining real value of their total rewards package.
Perhaps its time to seek middle ground as 52 percent of U.S. employers say it’s already difficult to attract employees with critical skills and 25 percent say it’s hard to retain top performers, according to Towers Watson’s “Global Talent Management and Rewards Survey” of 1,176 companies conducted earlier this year. The study highlights substantial gaps between the perceptions of employees and employers regarding the influence of security and flexibility on employee engagement and retention. Unless steps are taken to close the disparities, employers risk losing valuable employees who no longer believe their current employers offer viable opportunities for growth, security and wage gains.
“Realistically, most companies have already cut to the bone, but may be caught flat footed if they don’t come up with a game plan to reward and retain top performers and employees with critical skills,” says Rick Beal, consulting director for the Rewards, Talent and Communications Practice at Towers Watson.
Smart Business spoke with Beal about the secrets of balancing employer flexibility with employee desires for security.
What’s the best way to retain high performers and critical-skill employees?
Salary freezes and reduced increase pools have made it difficult for companies to recognize top performers by awarding them larger shares of the annual merit budget or variable incentives. Pay differentiation is essential to controlling fixed costs and maintaining flexibility while giving vital employees the security and real wage growth they crave.
There is some movement in the right direction as organizations have started awarding top performers larger raises and incentives. Global companies are delivering approximately 1.5 times more in short-term incentives to those exceeding performance expectations and two times more in merit increases.
Leading edge employers aren’t stopping with pay differentiation; they’re also turning to non-cash improvements to retain core employees. Nearly 86 percent of the 22,000 employees surveyed in the 2010 “Towers Watson Global Workforce Study” cited improved work-life balance as a retention factor, so now’s the time to offer flexible schedules, telecommuting and the chance to work in convenient locations.
But more can be done. It doesn’t cost a lot to recognize employees or offer them opportunities to enhance their skills, yet only 33 percent of employers view skill enhancement as a retention factor compared to 62 percent of employees.
