Remember the days when the corner desk with the window view, plus company car and somewhere to park it, was the measure of your status within an organisation? Boy have things changed. Over the past 15 years the deterioration of the hierarchical company structure, and moves to define the total cost of employment have done to corporate perks what ACT’s Rodney Hide did to parliamentarian freebies.
The whole idea of “perks” was more prevalent in countries like New Zealand and the UK, where employers could offer incidental staff benefits that avoided the eye of the IRD as taxable income. For the most part, these days are long gone. Two key drivers have changed the dynamics associated with staff benefits. Many employers moved to reduce the spiralling costs associated with administering car fleets, plus litany of US-styled bolt-on goodies, by simply opting to pay larger base salaries. What accelerated the push by employers to “cash-up” benefits was increases in the tax paid on fringe benefits.
But Andrew Mackmurdie, operations manager with Hay Management in Auckland, suspects that subsequent hikes in fringe benefit tax charges, plus potentially higher tax rate (39 percent), could raise the spectre of salary packaging yet again.
“Many companies haven’t stopped to work this out. But taking $15,000 off $75,000 annual salary and replacing it with vehicle effectively reduces both the personal and FBT tax rate. Employers don’t really care what option an executive chooses as long as the tax element doesn’t increase the total cost of employment,” says Mackmurdie.
Show me the money
Tax issues aside, KPMG director Fay Sowerby, says the desire for good staff has forced employers to become less rigid in the remuneration stakes.
In other words, while paying higher base salary (in lieu of benefits) suits most employees, simply offering more “lolly” isn’t the “be all” for staff.
In fact, she says organisations are becoming increasingly aware that if performance-based benefits are going to be successful, they need to be closely aligned with the company’s culture.
There was time, says Sowerby, when most staff were almost guaranteed Christmas bonus. Today, she adds, staff are hard pressed to even get thank you.
“We suspect the speed at which businesses now operate means small, yet important factors get overlooked. What employees want most is recognition, simple thank you for their efforts.”
Equally important, Sowerby says, with staff working longer hours these days, they’re also looking for extra time off, time away or just more time out.
In fact, the hours people are now being forced to work has spurred the new term, “presentism”. Simply put, Sowerby says it describes the phenomenon where the hours people are working every day, far exceeds their ability to operate at an optimal level.
“Ironic as it might seem, this phenomenon is said to be as bad as absenteeism. This is one reason why increased flexibility over how and where people work is benefit more employers are willing to offer.”
Give me life
Remuneration specialist Helene Highbee has also witnessed move by many employees towards more esoteric benefits. She says the notable shortage of talent within hyper-competitive markets, especially IT, has given potential recruits greater artillery in negotiating their own terms of employment. Instead of cash, Highbee says many people now want to trade career with lifestyle considerations.
“Employers now realise that providing greater autonomy within job roles, more interesting projects or implementing ?family friendly’ practices [for example, parental leave] are often valued higher than more material benefits,” says Highbee.
Retention bonuses for IT staff have become one way organisations have curbed the turnover of key talent, especially during one-off critical events. Findings to recent survey (commissioned by DHL International) on retention bonuses for IT staff showed that bonuses varied from between five percent to 50 percent of base salary. In some instances half the bonuses on offer were paid purely for staying with the company during the Y2K switch-over.
Give me project
Retention bonuses are an obvious carrot, but the best way to reward IT staff, says Highbee is to let them work on the latest projects. What this sector values as much, if not more than extra cash, she adds is the opportunity to update key skills.
This is equally true of generation Xers (20 to 30 years), says Mackmurdie.
“Employers are having to ask themselves how they can get generation Xers to stay beyond one to two years, especially when they can’t compete with overseas salaries. What these people really want is short-term promotion needed to enhance immediate job opportunities.”
But with the exception of some IT and other highly specialised roles, most employees are no longer being rewarded for simply turning up to work every day.
Popular within manufacturing environments in the early 1990s, gain-sharing schemes were good for the first two years. Trouble arose when employees came to expect them, well beyond the company’s ability to make further gains. Consequently they were sidelined, before they became negative factor.
Sure, there are still “perks” to be had. But the bottom-line, says Highbee is that unlike the old days, they’re more likely to be based on accomplishments.
“The death of perks, has indeed given way to an era of incentivisation. In other words, if you want to earn more than the base salary… earn it.”
So how should performance-based incentive programmes be established? The way Kirra Schaffler, co-director with Highbee-Schaffler, sees it incentive-pay programmes should increase productivity by focusing individuals on key objectives closely allied to company strategy.
But she says if incentives are cleverly structured to cover both the short and longer term, they can also encourage job retention. Schaffler warns employers not to view bonuses as an incentive device in their own right.
There are three factors she sees as critical to the success of the incentive pay programmes, these include:
? There must be well tested measurement system.
? Performance expectations must be explicit and highly quantified.
? Employers must communicate results openly and regularly.
Underneath performance-based incentive programmes, there needs to be less formal recognition systems working in tandem, says Schaffler.
“Companies that don’t get the hard remunerative aspects in sync with the softer cultural issues, risk turning over quality staff, and being left with the mediocre.”
In Schaffler’s experience, New Zealand companies are not good at valuing less formal recognition systems. Nevertheless, more recent examples aren’t hard to find.
For example, NZI general manager Mike Hannan recently purchased new BMW with view to making it available to product managers for weekends based on performance.
But even after three months, the scheme has been tweaked to reward net growth instead of just sales.
Similarly, Telecom operates company-wide recognition system. Employees can nominate fellow employees in recognition of commitment to company values. Rewards are paid in vouchers ($50 to $200) that can be redeemed in local stores.
But Schaffler believes an unwillingness by boards to acknowledge senior management achievements explains why most Kiwi companies are weak in the recognition stakes.
“It’s almost implied that CEOs should operate in stratosphere where cultural niceties are not necessary. So if the CEO isn’t receiving pat on the back, he or she is less likely to give them to other staff.”
Nevertheless, the tide is turning, says Mackmurdie. Experience working alongside major corporates like Telecom, Air New Zealand, The Ware