/ 26 August 2011

Show me the money

Show Me The Money

South African companies are not only trying to push employee development but they also need to retain the people they have invested in both time and financial perspectives. And while having strong benefits in place to support good salaries is important, employers need to juggle a variety of demands and expectations from different generations of staff.

Whether it is the baby boomers (born 1946-1964), Generation Xers (born 1964-1979) or Millennials (born 1980 or later), they all require different strategies when it comes to employment, salary packages and related benefits. With approximately 2 000 permanent staff working for one of the foremost fast-moving consumer goods businesses in South Africa, British American Tobacco (BAT) understands that catering for the different employee generations is vital for the continued success of a company, says HR director Clifford van der Venter.

“We found that older employees are very concerned about pension and medical benefits and to a certain degree also share option schemes because they view it as part of their savings provision. Younger employees have a need for more disposable income and are less concerned about benefits and share plans (specifically share plans with a lock-in clause). They always tell us that cash is king and they also drive to opt out of pension and medical benefits in exchange for cash,” says Van der Venter.

This sentiment is shared by Retha Piater, executive general manager for human resources at diversified resources group Exxaro Resources. However, she feels it also applies to the different levels of employees at an organisation.

“We face a lot of pressure from unions to increase salaries and pension fund contributions for our category employees. There is also a natural overall pressure to improve on the living standards of our staff, resulting in an increased expectation to be part of the company in terms of ownership,” she says.

Piater says that managers have completely different expectations with Exxaro Resources dealing with a new generation of people who require more freedom in terms of how packages are structured, what the company contributes to medical aid and even what medical aid to be part of. This is a trend noted by Van der Venter who feels that people are negotiating much harder on their starting salaries and no longer just accepting the company’s initial offer.

A question of money
But how do companies differentiate their packages when it comes to salaries? Is it not simply a case of the highest bidder wins? This is not necessarily the case believes Van der Venter. “We offer all the standard primary benefits at market-related values. But to truly differentiate our offering, we have introduced flexibility to enable employees to structure their primary benefits in a way that better suits their individual needs,” he says.

It is this freedom of structure that Exxaro Resources’ Piater feels gives companies the edge in a highly competitive market. “All our employees participate in the share scheme of the organisation, resulting in lower staff turnovers as they take ownership of the company. And while having competitive monetary packages is important, we found that the supplemental benefits like allowing our employees to buy additional leave from their packages of up to 30 calendar days per year make a significant difference,” says Piater. Piater says the fact that Exxaro Resources focuses on the emotional cost of employment principle, where employees can structure their primary packages asthey see fit, provides the organisation with an edge.

Fighting greed
But BAT’s Van der Venter appreciates that companies need to be mindful of employees who just join for the money. “We accept that the financial aspect of an employment offer is a critical part of attracting talent. However, we do emphasise our total value proposition as an employer. We position our primary benefits as mandatory core benefits and argue that as a responsible employer we need to offer these core benefits at a basic level.

Employees can then decide if they want to increase or decrease their individual ‘exposure’ to these benefits by ‘flexing’ their cash component,” he says. And for Exxaro Resources, driving ownership in the company is a good way to protect the organisation against those who simply join for higher salaries. “Our long-term share scheme rewards those employees who are loyal. Those who leave the company early in their tenure void their share options and they leave with nothing,” says Piater.

Van der Venter agrees that monetary benefits alone do not drive loyalty. “We offer our employees a total reward proposition. This includes elements such as development opportunities, flexible core benefits, great working conditions and tools, and a very competitive variable pay.”

Where to from here?
It is only natural that companies will continue to be influenced by external elements such as the recent national strikes to offer their employees competitive salaries and to ensure that they retain good candidates. “In terms of primary benefits, we do not think there will be any major market changes in the foreseeable future. However, as is evident from the strikes, we do believe that employees will continue to demand more in the near future,” says Van der Venter.

Piater also feels that in certain industries, such as mining in which Exxaro Resources operates, organisations will have to keep legislation foremost in mind when it comes to retention strategies. “Companies in the mining sec- tor are under pressure from the Department of Labour and the Mining Charter for equity numbers. Mining companies are therefore going to have to fish from a small pool of talent and it will become increasingly difficult to get good employees, not only in the coming months but also over the next two to three years,” she says.

There is also the ever-present risk of losing skilled employees to higher- paying overseas markets such as the United States, Europe, the Middle East and Asia. Given the strong inter- national currencies of these markets, the money is good for South Africans looking to quickly build a nest egg in a contract position before deciding to either move back to the country or find a more permanent job in those markets. One should also not ignore the required commitment to corporate governance which results in transparency, responsibility and fairness, and is designed to hold companies accountable for their actions.

After all, companies want to be responsible corporate citizens and adhering to good governance will see an ethical approach not only to business, but also to the management of staff. South African employers there- fore need to look at not only strong primary benefits in their packages, but also supplementing that with non-monetary benefits such as share options, medical aid and pension fund contributions, and the like. It does seem apparent that to ultimately retain staff, companies must look at growing them in their careers for the long run and not try to find a quick fix solution for the short-term.

This article originally appeared in the Mail & Guardian newspaper as a sponsored feature