With the employment climate predicted to remain volatile for 2023, and as the UK continues to face a labour and skills shortage, businesses are looking at how a reward and recognition strategy can play a key role in helping their business to retain a high performing and engaged workforce in 2023.
What does the employment climate look like for 2023?
Whilst still in the first month of 2023, we canable to anticipate the employment climate for the year ahead. We know that the cost-of-living crisis remains ongoing and will continue to do so for some time.
Employer costs are due to increase from April, recruitment continues to be a challenge for many businesses and there is also proposed significant changes to employment legislation at the end of the year.
Given all these challenges, the one important factor for any business is to have a stable workforce. Employee reward and recognition are two areas of people management that can ensure businesses can retain and attract their best talent and therefore significantly enhance business performance through high performance and engagement.
What is employee reward and recognition and why is it important?
Employee reward is about how employees are rewarded in accordance with their value to an organisation, whether this is their contribution, skill, or competence. It can also reflect a person’s market worth too. Employment policies, processes and practices all play an important part in rewarding employees, which don’t have to be financial, they can include non-financial rewards too.
Employee recognition relates to how an employer shows their appreciation and is a vital tool for ensuring those employee needs, such as the feeling of belonging, feeling accomplished or feeling fulfilled can be met. Managed correctly, it can lead to high employee engagement, job satisfaction and motivation, which ultimately results in high performance.
Why is it important?
You may be familiar with Maslow’s hierarchy of needs, which is a motivational theory in psychology of basic human needs. Maslow believed that meeting these needs directly impacts on job satisfaction and motivation.
Maslow’s theory of motivation tells us that people’s actions are motivated by certain physiological and psychological needs ranging from basic to complex (basic being 5 at the bottom, with complex being number 1 at the top).
Applying this theory to employment and, how you reward and recognise your employees, will lead to an effective reward and recognition strategy that ultimately boosts performance, productivity and creates a high performing workforce. The 5 needs, according to Maslow are:
- Esteem needs
- Love and belonging needs
- Safety needs
- Physiological needs.
If we consider Maslow’s hierarchy of needs in the context of employee reward and recognition:
At the very bottom, which is the most vital and basic of all the physiological needs, is how reward is a key factor in providing job satisfaction and motivation. Employees will feel their most basic needs are met, if they feel they are in receipt of steady income that is sufficient for them to look after themselves and their family.
Next, is safety needs, which will impact job satisfaction positively, if met. Safety in the context of reward and recognition, can mean the feeling of being emotionally safe and supported. Worries about possible job losses or budget cuts for instance, can impact negatively on motivation.
The need for love and belonging at work is vital for helping people to feel engaged and motivated to succeed. It is about having the right processes in place to be able to recognise excellent performance and provide feedback throughout the year.
Esteem needs is about having policies in place that can help people to feel they are contributing to a higher goal and that their own performance and contribution is recognised. It is about building confidence in a person’s abilities and showing them encouragement, because by doing so, the person is more likely to succeed.
The most complex of needs, at the top of the hierarchy is self-actualisation, which is about maximising a person’s potential. It is about taking steps that helps encourage growth and personal development and encourage career advancement.
It should be recognised that even though it is a hierarchy, it doesn’t always work in that linear way. Employers should therefore focus on all of the levels and not necessarily expect individuals to work their way up the pyramid.
Introducing a reward and recognition strategy
We know that through rewarding people and recognising their achievements you can create job satisfaction, employee engagement and motivation just by meeting a person’s basic and complex needs. When you have a highly engaged workforce, you are more likely to have a high performing business.
Having a reward strategy will ensure the business is focussed on delivering employment practices that fundamentally lead to greater business performance. It must therefore be targeted to ensure alignment to both people goals, and the goals and objectives of the business.
What should you consider when designing the organisation’s reward and recognition strategy?
- Your strategy must consider the type and size of the organisation, the range of workers employed and the current market in which you operate. It must also be based on your organisation’s values and beliefs
- It should flow from your business strategy and contribute towards it as well as aligning to the overall people plan
- Ensure that it rewards and recognises results and behaviours that are consistent with organisational goals, values, and beliefs.
What is the current state of reward and recognition?
- Undertaking a pulse check to find out what your workforce think of the current reward and recognition initiatives, will help to create a targeted strategy that is more likely to be effective both in terms of cost as well as employee retention and attraction.
Identify what the key components are to your reward and recognition strategy
- Recognition shouldn’t be about recognising someone’s efforts just once a year, say through the appraisal process, nor should it be from just one source, such as the line manager. Consider how recognition can be given throughout the year, and from different groups of the workforce, such as peers, other managers and even customers.
- Reward is both financial and non-financial, and what one person perceives as beneficial, another person may not. Think about how using flexible benefits can aid employee motivation and provide job satisfaction.
- Allowing employees to pick and choose their benefits package that suits their lifestyle will be a targeted way in which to aid job satisfaction because you are giving people what they need and therefore want. Compared to when offering a set package, not all elements may be needed.
Benchmarking – how do you compare to what leading employers in your local area offer and whether your own pay and reward is equitable and fair internally?
- Benchmarking is an excellent way of evaluating an organisation’s or department’s performance and comparing it to other, similar organisations or other areas of the business.
- Benchmarking creates a better understanding of the current position, which helps to establish goals and objectives for improvement, assisting in leading and managing the organisation through change, and promotes best practice as well as encourage innovation.
- Internal benchmarking is vital for ensuring equitable pay, as well as ensuring that you are also paying market worth externally, which is vital for employee retention.
- Understanding what other employers are offering also enables you to offer a reward package that can attract the best candidates.
Directors and senior executives – what do their overall pay and reward package include?
- The main elements of directors and senior executive’s remuneration are different to the rest of the workforce, and are most likely to be set based on the views about the market worth of the individual concerned.
- Their remuneration needs to consider basic pay, short and long term bonus or incentive schemes and benefits like share options.
A proven tool used by many businesses, salary benchmarking is used to attract and retain the right people that are valuable to their organisation.
It is now more important than ever for businesses to retain their top performers as we continue to see how employee retention continues to be a problem for businesses with more employees looking for the most attractive role.
Some of the key factors that can influence an employee to change roles include working hours, benefits and of course, salary.
Salaries and benefits can often be a rather taboo subject, with many not wishing to discuss exactly how much they are earning with their fellow colleagues. Salary benchmarking allows all your employees to essentially be on the same page, with the understanding of how and why the people working around them earn the salary that they do.
Our Salary benchmarking service gives an impartial and accurate indication of salary information. This can help businesses to attract and retain the right people, with great effectiveness.
If you would like to learn more about our salary benchmarking service, please visit our dedicated page.
High performing business
A high-performing business achieves superior results, whether it is regarding customer satisfaction, employee retention, better financial and non-financial results and competitiveness over a sustained period of time.
There are many similar traits in a business that is high performing, whether it is empowering employee’s reinforcing positive behaviour, collecting feedback and most importantly, highly effective leadership skills.
Those businesses that are high performing, recognise that their people are their most important asset and so invest in its employment practices that are used throughout the employment lifecycle in order to attract, retain and develop the best talent. Reward and recognition play a crucial part in this for example:
- Using skill-based pay to ensure the right people with the right skills are in the right place at the right time
- Ensuring there is competitive pay to attract and retain the best skilled employees in the market
- Rewarding employees for developing their competencies and careers
- Individual and team-based rewards
- Incentive plans.
We recently hosted a webinar that looked at reward and recognition strategies in greater detail. Throughout the webinar, we discussed how a reward and recognition strategy can play a key role in helping businesses to retain a high performing and engaged workforce.
If you would like to watch this webinar on demand, you can do so here.