In a post-recession economy, wages don’t tell the whole story of employee compensation.
Employee appreciation and other benefits are on the rise, according to a recent article in the Washington Post’s Wonkblog.
“Broader measures of compensation cast a rosier light on what Americans take home,” writes financial reporter Ylan Q. Mui.
In many cases, employees actually prefer benefits over raises. Employers are discovering that employee appreciation builds a relationship beyond a paycheck, and the growing emphasis on benefits may be the new norm.
The ‘Seismic Shift’ in Compensation
“Wages tell you almost nothing,” said John Silvia, chief economist at Wells Fargo, as quoted in the recent Washington Post article. “It has changed over the last 20 to 30 years as companies try to compensate workers in a way that matches their lifestyle.”
Gary Burnison, an executive at the executive search and talent management firm Korn Ferry, described the change as a “seismic shift.”
The raise “has gone the way of the gold watch,” he said.
Average wage growth has stayed at about 2 percent for the past five years, according to the Washington Post’s Mui. Bloomberg reported last week that U.S. wages and salaries rose in the second quarter at the slowest pace on record.
At the same time, benefits are rising steadily and outpacing wages. Government data shows companies’ spending on benefits such as bonuses, perks, vacation time, gifts, health insurance, commuter discounts and tuition reimbursement has jumped 16 percent since 2004, adjusted for inflation, compared to the 2 percent increase in wages. Benefits now make up 31.6 percent of workers’ total compensation.
More than a third of companies in the SHRM 2015 Employee Benefits Survey reported increasing spending on benefits this year, up 7 percentage points from 2014.
The Power of Employee Appreciation Benefits
Why use benefits to compensate employees? Three reasons:
- It’s cost-efficient.
- It feeds a growing desire among young workers for flexibility and other non-wage lifestyle perks.
- It builds engagement in ways a raise simply can’t.
The shift toward bigger benefits and smaller salary increases stems from the 2008 financial crisis, but it “is rooted in broader demographic changes in the nation’s workforce,” Mui writes.
Younger workers value benefits such as flex-time, on-the-spot rewards, gym discounts and paid time off.
“Millennials say they prize the freedom to work away from their cubicles, while businesses have learned that flexible compensation can help the bottom line,” Mui writes.
Above all, employees — especially those in their 20s and 30s — value an engaging workplace.
HR experts say rewards such as gift certificates and paid time off provide a more “immediate psychological boost” than raises, Mui writes.
A raise can reward overall performance, but it doesn’t connect the reward to a specific behavior in a timely way. Small gifts, reward success, reinforce good behaviors on the spot, and communicate appreciation in a meaningful way.
“That’s why we give people gifts at Christmas and not just bags of money,” Andrew Chamberlain, chief economist at Glassdoor, told The Washington Post. “They can build a relationship that goes beyond a paycheck.”
For more great tips and insights into building a vibrant culture of engagement and recognition, be sure to download our free e-book, “The Top 20 Employee Engagement Blogs You Should be Reading.”
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