Crisis focuses employee benefits

WHEN companies started feeling the pinch of the economic crisis, employee benefits like free beverages, tickets to cultural events, fitness centre memberships, pension contributions and free health check-ups, were among the first things to go. Firms began to examine which benefits actually boosted employee loyalty the most with so-called cafeteria plans, where workers choose their own benefits and flexible work schedules, proving the most motivational.

“During the pre-crisis period companies almost competed in which benefits they provided to their employees,” Miroslav Dravecký, senior product manager at Profesia, the biggest job portal in Slovakia, told The Slovak Spectator. “They wanted to attract people and it was not always possible to motivate them with a salary and, thus, they provided various benefits. After the crisis arrived, it was necessary to curb or completely scrap some benefits. For the time being the visible trend is to provide to employees benefits enabling them to attune work with their family life.”

Among the most commonly provided non-financial benefits used to be contributions for sports activities and cultural events, financial compensation for commuting, contributions for old-age pension savings, health check ups, mobile phones, cars for personal use and extra sick days or holidays.

Based on a survey conducted by Profesia, employee training saw the deepest cuts during company belt tightening, with companies opting for internal training over those held outside the office or abroad. A big cut was also reported in benefits for sports and cultural activities and health check-ups, Dravecký said.

Andrea Lišková, corporate marketing and PR director at McRoy Slovakia, added that benefits decreased the most in sectors with lower added value where there is limited space to improve worker motivation through benefits.

“Creative and sophisticated positions [in IT, telecom, pharmacy and other sectors] have not felt that change so much,” said Lišková, adding that the frequency of free trainings, either for professional or language skills, team buildings, commuting benefits and others, have decreased.

The economic crisis also lowered employees’ and job applicants’ requirements for benefits.

“Current employees see the current situation on the labour market and know that it is not simple,” said Dravecký. “Most employees prefer the certainty of employment to desired benefits. This is also why there is no reason to leave a job when some benefits are cut because it is complicated to find a job under the conditions of a 14-percent jobless rate.”

Dana Blechová, country manager of Iventa, agrees, adding that this attitude is also apparent in interviews with job applicants.

“Candidates [for work positions] are aware of the changed conditions on the labour market and have lower wage expectations,” said Blechová, adding that the difference now when making offers for new positions is that people want their current work conditions to remain unchanged.

Effects of benefits

While benefits, either financial or non-financial, can motivate workers to perform better and fuel loyalty, their overall effect is not infinite.

“Benefits, when we perceive them as a financial or non-financial service of the employer towards the employee, whose task is to enhance the quality of his life, are not a tool of motivation from the viewpoint of the employer,” Igor Šulík, partner at Amrop, told The Slovak Spectator. “They work rather like short-term stimuli, as endearment of the soul, which pleases, but does not decide... Motivation factors work on a different neurological principle – rather, factors like leadership, interest level or advisability of the work, the possibility to see results affect the motivation, loyalty, quality and quantity of performance.”

According to Blechová, it is a question of whether benefits increase loyalty among employees and managers.

“It is rather the work atmosphere, fair relations and open communication [that foster higher loyalty],” Blechová told The Slovak Spectator, adding that during the crisis loyalty often increased when companies took care of their employees; some companies tried to avoid layoffs in spite of diminishing economic results, or to help those made redundant find new jobs. “When other important parameters do not work in a company, benefits do not always need to increase motivation and loyalty.”

According to Lišková of McRoy Slovakia, any benefits significantly boost employee motivation.

“The influence on performance used to be more significant in segments with higher added value,” said Lišková. “In the case of simple manual activities and low-qualified work, the room to improve the performance is often limited by the nature of the work itself. A cleaning lady or an employee working on the production line have a significantly lower possibility to show their gratitude than, for example, a worker of a software company.”

Dravecký of Profesia stressed that companies should know why they are providing individual benefits and what they want to achieve by providing them. Thus, companies employing mostly young people offer a lot of benefits focused on sports, entertainment and relaxation, while in companies with more senior employees there is a tendency to reward them for loyalty to the company and years worked, and provide benefits related to health care and old-age pension savings, or organise family events.

“The system of benefits should have its philosophy – why I provide the given benefit, and this should be communicated to employees [for whom this benefit is provided],” said Dravecký. “This strengthens the brand of the company.”

Another category is financial benefits, where HR experts have reported a shift towards a bigger portion of flexible wages than in the past.

“Companies cancelled benefits like variable parts of salaries, for example, financial bonuses, [like] 13th and 14th wages, while this has not affected those linked to the performance of the employee,” said Blechová. “In general companies try to change the remuneration model in the way that they reduce the fixed portion of the wage and put stress on the variable part depending on the performance of the given employee.”

Mariana Turanová, managing partner in Slovakia for Target Executive Search, added that the ratio between the fixed and variable portion of the salary is important. When the fixed portion is too high, the employee’s attitude to his or her work duties might be rather lukewarm. On the other hand, when the variable portion is too high and especially when goals are not set realistically, people become frustrated.

Benefits in the future

HR experts have observed improvement and expect an increase in the provision of benefits, but in a different, more sophisticated form than in the past.

“After a significant drop in 2009 the situation is gradually improving,” said Lišková. “For example, thanks to the development of information technologies, the possibility to work from home, flexible work hours or the ability to use a company’s mobile phone, also for personal purposes, have increased considerably.”

Šulík of Amrop pointed out that individual benefits experienced a boom, but not all of them proved to be effective, and only some of them still exist today.

An emerging trend is the cafeteria system, which gives employees a set budget to choose from a variety of benefits that most suit their needs.

Šulík listed among the more traditional benefits, which will likely always remain popular, the company car, with the stress on car brand and model, as well as various kinds of insurance (health, pension, life insurance, with a trend towards health care in private health facilities), a mobile phone for personal use, participation at conferences and other specialised and social events, and the quality and size of the work space. Employees and managers have begun to prefer benefits like flexible work hours or the ability to work from home. He also emphasised benefits in the form of higher education and life-career consultancy, with company-funded trainings, free time for studying or intensive language courses abroad. Dravecký of Profesia added that such benefits are advantageous to companies because highly educated employees help the company to grow and develop.

“The amount and quality of benefits provided will depend on the economic results of companies,” said Šulík. “Another important thing is that equal to setting up an optimal benefits package, it will be important for employers [to receive] their regular evaluation and re-assessment over whether they still meet the needs of employees and what are their effects.”

Blechová expects that companies will opt for benefits with added value, which may encourage people of key importance to stay with the company.

“In the past companies often provided benefits which employees did not even value and many times did not need,” said Blechová. “For the time being everybody is looking for a bigger balance between work and private life, and companies that provide this will win more loyal employees.”