South African companies should improve communication about compensation & benefits

I have always been a fan of open communication. Knowing exactly where you stand in specific situations allows you to set yourself goals, implement strategic planning and to make provision to plan for your life should emergency situations occur.

Open communication is an important aspect of any job market, but in particular the South African job market where the Commission for Conciliation, Mediation and Arbitration are often called in to settle worker disputes. The value of employee benefits remains untapped in terms of engagement, and talent acquisition and retention due to poor communication effectiveness.

Reflective Study

A new study released by Aon Hewitt shows that most companies in the Europe, Middle East and Africa (EMEA) region, including South Africa, are not satisfied with the effectiveness of their communication to employees regarding compensation and benefits packages despite many of them communicating on a regular basis.

Aon Hewitt, the global talent, retirement and health solutions business of Aon, has released the findings of its EMEA Benefits Communication Survey 2013. Over 290 organisations across 18 countries participated.

In South Africa 80% of organisations communicate regularly to employees regarding their compensation and benefits package, using several channels such as print, email or self-service online portals. However, only 10% of them consider their communication to be effective, while 20% believe their communication is not effective at all.

From a local market perspective, 40% of participating companies don’t provide total rewards statements or benefits communications, but almost a third plan to do so in the near future. While 60% cited employee engagement and talent retention as the main reason for communicating, the low levels of efficacy of their communications is compromising the tangible value to be derived from their significant spend on employee benefits. The research also shows that the vast number of participating South African companies only communicate with their employees once a year (62%), while only 25% do so more frequently, while 13% do so less than once a year.

Best Practice Principles

Aon Hewitt’s global experience shows that the optimal approach is to develop a regular communication program that keeps the total reward , which includes benefits, top of mind for the employee, hence moving the focus from cash compensation to the total reward.

According to Jaco Kok, CEO of Aon Hewitt, only 10% of respondents feel that communication is effectively contributing to their employees’ awareness of compensation and benefits.

“As a result, the real value to be derived from employee benefits in terms of employee engagement, loyalty, attraction and retention of scarce skills and obtaining employer of choice status is being seriously undermined.

“Corporate South Africa spends billions of Rands on employee benefits each year. If one considers that benefits such as paid time off, medical aid, retirement funding, disability and life insurance, wellness programmes, incentive bonuses and so on can add anywhere from 25 percent to 50 percent to an employee’s annual cash compensation, it’s critical that benefits communication is effective, or you risk employees disregarding the ‘hidden value’ in their paychecks”, says Kok.

Another important point is that only 30% of respondents provide their employees with Total Rewards Statements, and only 30% provide any form of regular personalised communications excluding monthly pay slips.

“Total reward statements have become a strategic tool to provide employees with a personalised document that communicates the overall value of their financial rewards such as salary, bonuses and incentives, and employee benefits such as medical aid, pension, life and disability cover and so on. They are also a useful way of reinforcing the profile of less tangible benefits such as flexible work arrangements, paid time off, paternity leave, wellness programmes, learning and development programs and other non-cash benefits,” explains Kok.

Industry Challenges

Challenges such as costs, deadlines, resources, availability of accurate and up to date information, internal politics and changing compliance issues often complicate the best-laid efforts. More worryingly though, is the fact that for all the money spent on employee benefits, a significant 67% of South African respondents say they have no budget whatsoever to devote to the communication of their compensation and benefits package, compared with 51% of respondents throughout the rest of the EMEA.

“This is certainly a wasted opportunity, and managers should consider the impact that improved employee appreciation of the company’s significant benefit spend would have on engagement when deciding whether or not to devote resources to communication.

“If you find that employees don’t fully appreciate the true value of your company’s spend on their benefits, it’s most likely as a result of a failure to communicate effectively and regularly, using simple language in their medium of choice. To derive the full benefit of your employee benefits offering and reveal the “hidden value” in the pay check, benefits communication needs to be regular, cost effective and adapted to its target audience.

Aon Hewitt works with companies to integrate a marketing approach in their communication to employees, taking into account new expectations, changing technology and evolving communication approaches,” concludes Kok.

Editor’s Thoughts:

Communication programs are hard to establish as many factors need to be taken into consideration. You first need to establish who you are selling to, you then need to factor in cultural differences, and then finally you need to establish a timeline to execute the program. Are you effectively engaging your audience? How can this be improved? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughtsjonathan@fanews.co.za.