Between a quarter and a half of UK employees think they will lose their jobs in 2008.   And they’re just as worried about the value of their pay and benefits packages. 

But are they right to worry?  The UK’s HR professionals don’t think so.  The majority say that employers are planning to increase headcount and improve benefits.

This is the top line finding from a research study – involving 300 HR professionals (HR directors/managers and 1011 employees.  The findings suggest that HR professionals may not be communicating effectively with employees about the ‘health’ and value of their benefits packages.  Employees’ responses to every question in the study indicate that they have lower expectations about their job prospects and related benefits than the HR professionals who serve them.

Selected Findings

Employee pessimism 

• One in three employees expects a cut in their benefits package.  But over 95% of employers have no plans to do this.  Indeed, 45% are planning to enhance benefits in 2008.
• One in ten employees fear cuts in their pension.  However, only two out of 300 HR professionals – less than 1% of those surveyed – foresees this outcome.
• Only one in ten of employees think that their benefits package is above average.

Jayne Mee, HRD, Barratt Developments PLC, said:  “Employees’ disconnection from HR professionals views is largely driven by lack of information, but I suspect there’s a tendency for people to favour the ‘glass half empty’ scenario.   Constant media speculation about an economic downturn is bound to influence employees’ views about the health of their employment packages.”

What do employees want in their benefits package?

• Holidays (93%) and pensions (73%) are the most valued. 
• 16-24 year-olds value company cars, season ticket loans and dental insurance far above any other age group – only 40% thought pensions were important.

Jayne Mee, HRD, Barratt Developments PLC, said:  “Employees always prefer benefits which they can use straight away.  In our sector, bonuses count for a lot more than long-term incentive programmes:  people want their ‘jam today’ rather than waiting for an intangible tomorrow.”

Remuneration – the great divide?

• The most common form of pay rise for UK employees in 2008 will be an inflation-only increase (49% of employers).
• 30% of employees of all ages don’t expect a pay rise in 2008.  But only 12% of employers foresaw no pay increases in their business.
• 84% of HR professionals expect to maintain or grow their remuneration budgets.  Only one in a 100 is planning benefits cuts – the only reductions are in businesses with more than 1,000 employees.
• London-based businesses are the most likely to be offering above inflation rises (41%), while those in the North (28%) and Scotland (27 per cent) are the least likely.
• Londoners are most bullish about pay – 11% expect a rise above inflation and 66% expect a rise in line with inflation.  Midland-based employees are the gloomiest – 36% don’t expect any kind of rise and 2.5% expect a pay cut.
• In terms of company size, employees in small businesses (less than 250 staff) are the most pessimistic – 53% don’t expect a rise.

Benefits packages and the war for talent

• As the study indicates, employees have mixed views about the nature and value of benefits, but employers are convinced that benefits boost employee engagement – only 9% say that benefits have no impact.
• 35% of employers cited competition for top talent and 35% cited retention as the principal reason for enhancing benefits packages.  However, less than 5% of those employees planning to leave in 2008 say their current benefits are above average.  In short, benefits may persuade people to join but they don’t stop employees leaving.
• In London, 56% of employers are planning to increase benefits.  This compares with 36% in Scotland and 32% in the Midlands.
• Increases to annual leave, private medical insurance and gym membership are the most common, suggesting employers’ increasing sensitivity to employee ‘wellness’ issues.

Jayne Mee, HRD, Barratt Developments PLC, said:  “It’s always tricky to second guess an individual’s preference.  That’s why flexible packages are becoming more common.   Moreover, employees’ active involvement in decision-making about benefits appropriate for them obviously enhances their engagement with their employer.”

Nicholas Shepherd, HRD, Reliance Facilities Management, said:  “Pay always comes first but, in the current sellers’ market, the right benefits can be the critical decider in attracting and retaining top talent.”

Are HR directors and HR managers on different wavelengths?

There is a marked divergence of opinion between HR directors and ‘shop floor’ HR managers. 
Nearly two thirds of HR managers think their benefits budget will be maintained at current levels in 2008, but nearly two thirds of HRDs see budgets growing.

HRDs board room intelligence – their understanding of a company’s real financial conditions – also contributes to this divergence.  Where benefits packages are expanding, HRDs are more likely (46%) to attribute this to strong trading conditions in their sector, but 37% of HR managers cite competition for talent.

There is also little consensus about what constitutes a ‘real’ pay rise:

• Nearly half of all HRDs (46%) believe that there will be a bigger pay budget in 20008, but only 34% of HR managers.
  55% of HR managers believe that salaries will only be maintained in real terms, but only 39% of HRDs agree.
  Half of the HRDs expect an increase in headcount, but only a quarter of HR managers.
• 59% of HRDs believe that their 2008 benefits package will boost employee engagement compared with 41% of HR managers.

Hymans Robertson partner Clive Fortes said:  “A quarter of all the employees admitted they had no idea about whether their benefits had increased or decreased last year.  The study shows the level of disconnection between HR professionals’ views and plans and employees’ expectations.   Regular, open communication about remuneration between HR professionals and employees is crucial.  An organisation may have a competitive, well structured benefits and remuneration strategy, but employers have to know  this and to understand the value of their reward package.  Good communication about pay and benefits should be integral to HR activity.”

Full copy of survey

 HRD Survey 0208.pdf

Notes to Editors

Hymans Robertson research – Trends in Employee Benefits in 2008
The research was carried out online by Opinion Matters/Tickbox between 9/1/08 and 21/1/08 amongst a nationally representative sample of 300 HR Directors/Managers and 1011 employees from a wide variety of business sectors.