27/08/2015

By Steve Herbert, Head of Benefits Strategy at Jelf Employee Benefits

It would be understandable if many small and medium-sized businesses sometimes feel more than a little detached from the data and trends recognised by large UK corporations and HM Government. Yet there are sometimes important mutual areas of concern in such statistics, and one such topic is that of productivity.

Figures from the Office of National Statistics published this year paint an alarming picture for employers of all sizes. Measured against the other G7 economies (7 of the largest economies, representing more than 60% of the world’s wealth) the output per hour of Great Britain, places us in sixth place. The only economy underperforming us on this measure in the G7 is Japan – an economy that has been in trouble for decades. Those with better productivity include the usual suspects of the US and Germany, but also feature some other economies that are more surprising. Close neighbours such as France and Italy (with arguably worse economic and industrial relations issues than the UK) have significantly better productivity figures. It has even been suggested that France would still outperform the UK even if the French chose to not work at all on Fridays.

Whilst poor productivity is a problem for all businesses, it is perhaps a much bigger challenge for smaller employers. After all, organisations with fewer employees will feel the impact of underperformance of one or more employees much more acutely than larger organisations which can more readily absorb such negatives.

So what can employers do to improve productivity?

One solution would be to pay higher wages. The UK is a low-payer when compared to many of our economic neighbours. Yet company-wide salary increases will be beyond the budgets of most SMEs, and in any case a pay rise may only have a short-term impact. Longer-term solutions are needed. One such response could be employee engagement.

Wikipedia defines employee engagement as:

“An "engaged employee" is one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organisations reputation and interests.”

Or - put more plainly - it’s an employee that goes that extra mile for their employer.

There is much evidence to suggest that engagement and productivity are firmly linked. The Engaging for Success grouping has been pursuing this train of thought for some time. Their evidence suggests that the difference to the employer’s bottom line between a very disengaged and highly engaged workforce is an improvement of more than 50% in operating income. Another statistic that demonstrates the value of engagement is absence rates. It is no surprise that highly engaged employees take much less sick-leave than their disengaged colleagues (2.7 and 6.2 days per year respectively). With absence being a huge cost for UK business, this alone should spark interest in this subject.

So, how to improve employee engagement in your organisation? One option might be to consider embracing employee benefits.

Organisations of many sizes provide employee benefit packages. Often this is a voluntary decision, but increasingly legislation is dictating that some benefits (for instance pensions) must be offered. Either way, when properly utilised benefit packages can provide a number of positives for the employer as well as the employee. Examples include improved staff retention and recruitment, lower absence rates, protection of key employees and also a powerful engagement tool. There are various keys to achieving these ideals, and some of these are listed below:

1) Good Communications

It does not matter how much or little you spend on benefits, if your employees don’t know about and/or understand the offering it’s unlikely that they will value or utilise same. So good and consistent communications are key to this exercise.

2) Target all employees

Different people have different needs and expectations. So seek to build a package that has attractions to all grades and ages. In this way many more employees are likely to feel engaged with the benefits package.

3) No benefit is too small

Some benefits cost very little (or even nothing). As a result they are sometimes overlooked in favour of the more expensive items, yet these can be the key components to make a benefits package appear more than the sum of its parts. Examples that fit this mould are Employee Assistance Plans and/or Healthcare Cash Plans.

4) Health benefits

Most importantly, remember that some benefits are a genuine win-double for the employer. Any benefit that targets employee health and wellbeing – be it providing free fruit or fully funded Private Medical Insurance – can engage employees as well as improving staff health and reducing absence.

The bottom line is that smaller employers are clearly exposed to the UK productivity gap, and employee benefits and engagement may present one route to reduce this deficit. Or to put it another way, can your company afford not to do this?