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Contents Contents ............................................................................................................................................2
EXECUTIVE SUMMARY ........................................................................................................................3
LIST OF FIGURES .................................................................................................................................3
LIST OF TABLES ...................................................................................................................................3
1 Introduction................................................................................................................................4
2 Literature review .........................................................................................................................6
3 The economic crisis and the transition in methods of motivation: The need for an innovate benefits
package ................................................................................................. Error! Bookmark not defined.
3.1 Impacts of the economic crisis on employees and employers ..... Error! Bookmark not defined.
3.2 The transition in methods of motivation: The need for an innovative benefits package.....Error!
Bookmark not defined.
3.3 The traditional benefits package and its motivating effectivenessError! Bookmark not defined.
4 The flexible approach to benefits provision in a gloomy economy ...... Error! Bookmark not defined.
4.1 Effectiveness of the flexible benefits schemes in motivation....... Error! Bookmark not defined.
4.2 Factors affecting the motivating effectiveness of the flexible benefits schemesError! Bookmark
not defined.
4.3 Current issues influencing the adoption of the flexible benefits schemes .. Error! Bookmark not
defined.
5 Conclusion ...................................................................................... Error! Bookmark not defined.
APPENDIX - Changes in the British WorkForce .......................................... Error! Bookmark not defined.
REFERENCES ........................................................................................... Error! Bookmark not defined.
FURTHER READING ................................................................................. Error! Bookmark not defined.
EXECUTIVE SUMMARY In recent years, in the UK, both employees and employers have to bear negative impacts from the
recession, especially employees with their financial difficulties and diverse needs. It is more important
than ever for motivation. However, employee motivation is getting harder and harder in the face of
economic crisis. In times of gloomy pay awards, employers are finding ways motivate their workers
through benefits. Benefits than can address the financial concerns and the diverse needs of employees
would work effectively as motivational factors. The traditional benefits package is likely to be ineffective
during recession, so employers are seeking for an alternative approach to benefits provision. The flexible
benefits schemes are getting more popularity since many evidences has proven its positive effects in
motivation. However, it is not always easy to construct truly effective flexible bene fits schemes. It is
necessary to have a careful consideration for the structure, communication, implementation,
administration, the benefits of the schemes and some current issues that can influence the adoption of
this approach.
LIST OF FIGURES Figure 1: The process of strategic reward management .......... Error! Bookmark not defined.
Figure 2: Food inflation ............................................................... Error! Bookmark not defined.
Figure 3: Earnings growth and inflation (%)............................ Error! Bookmark not defined.
Figure 4: Maslow's hierarchy of needs ...................................... Error! Bookmark not defined.
Figure 5: Common structures of flexible benefits schemes ...... Error! Bookmark not defined.
LIST OF TABLES Table 1: BENEFITS STRATEGIES IN PLACE DURING TIME OF LOW PAY AWARDS
........................................................................................................ Error! Bookmark not defined.
1 Introduction
Motivation is a range of processes that directs an individual towards a goal continuously. Motivated
employees can work harder, have higher productivity and greater work performance, possess more
profound organisational relationships, stay with the oganisation longer and are less likely to leave. That
is because motivation is one of the three factors that affects employees’ performance according to
Moorhead and Griffin (1998) and it is indicated in the following formula:
Performance = Motivation + Ability + Environment
Of all the above factors, it is generally accepted that motivation is the most difficult one to manage. This
is mainly due to the complexity of human nature while the other two factors can be adjusted
accordingly to suit the needed performance. As a result, the most challenging job for every employer is
to motivate employees to work at their best for the organization.
Nowadays, what employees seek from their organisations no longer restricts to just financial rewards.
Furthermore, the tense competition between companies in talent attraction and retention has given
employees the power to demand more than just a sensible pay, and there are evidences that companies
are paying attentions to this matter. According to a recent survey cited by Sadri and Bowen (2011),
salary had only a 20% impact on job satisfaction. To motivate employees, companies are now finding
ways to satisfy their needs on both extrinsic (financial) level through monetary compensation, as well as
intrinsic (psychological) level through accompanied benefits. The constant attempt is to be innovative in
constructing a benefits package that can draw in and keep talented workers.
In recent years, employee motivation in the UK is getting harder and harder in the face of economic
crisis. Employee needs become more sophisticated and difficult to be fulfilled under economic pressure.
Meanwhile, companies’ spending on human investment needs controlling closely, which leads to the
doom and groom surrounding monetary compensation. This gives pace for employee benefits to rise in
popularity as a promising option of motivation. According to Employee Benefits Research 2012, there
has been a consistent rise in the percentage of employers that offer benefits through other mechanism
than traditional benefits (flexible benefits, voluntary benefits or salary sacrifice arrangement). This
information suggests that employers doubt the effectiveness of the traditional benefits schemes in
motivating their employees in times of uncertainty and they are looking for alternative schemes that
might have better effects.
The paper aims to discover the alternative benefits schemes that can better motivate UK employees
during gloomy economic climate. To achieve this purpose, the paper is going to:
- Investigate the impacts of the UK economic crisis on both employees and employers to find out
the trends in UK employee motivation.
- Assess the effectiveness of the traditional benefits package in motivation of British today
workforce and economic environment in order to explain employers’ shifts to a more flexible
approach to benefits provision.
- Suggest the potential approach and evaluate its motivating effectiveness in the same context as
the traditional package.
2 Literature review
Many effortshave been made to understand how motivation works and the factors that determine its
strengths. Frederick Taylor (1911) believes that employees are motivated by the economic interests
only. This view was criticized powerfully later as researchers found out that human behavior is much
more complicated than what Taylor had assumed. Other thinkers soon realized the importance of
employees’ role in organisations and form a new approach to motivation called Human Relations
Approach (Middleton, 2002). This approach suggests that employees’ job satisfaction is closely
connected with work performance and it is fueled by many other needs than financial desires. The
theories developed from the approach can be classified into two types: Need-based and Process-based
ones. Need-based theories explain how employees are motivated by satisfying their needs. Important
theories include Maslow’s hierarchy of needs (1943), Alderfer’s ERG theory (1969), Herzberg's Two
Factor Theory (1959), and McClelland’s Achievement Need Theory (1961). On the other hand, process-
based theories concerns with “how” motivation occurs and consists of three famous works: Expectancy
Theory (Vroom, 1964), Goal Theory (Locke and Latham, 1990), and Equity Theory (1963). These theories
also help to categorise types of motivation practices, which are monetary incentives, job design,
rewards, and quality-of-work-life (Kreitner, 1986).
Many studies have proven that rewards are an effective way to motivate employees. Reward strategy is
used widely and plays an important role in organisations nowadays. Employee benefits are also a form
of rewards in the company’s reward package in addition to various forms of cash pay such as pensions,
paid holidays and company cars. According to Armstrong and Murlis (2004), employee benefits are
provided for the personal needs of employees to increase their commitment to the organization and
demonstrate employers’ care for them. They generally form a significant part of the remuneration
package, with estimates suggesting that their value can account for up to around 40% of the costs of
employing staffs. Any approach to employee benefits must be considered in the context of the overall
reward and business strategy of the organization (the integrated approach).
