HR Connect New Zealand – Volume 1, Issue 1, 2011

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Best Employers announcements for 2011

Aon Hewitt has announced the 2011 Best Employers in Australia and New Zealand (ANZ), with construction product provider Hilti named the Best of the Best.

Eleven organisations were accredited as Aon Hewitt Best Employers in 2011, with two of these being New Zealand organizations – FedEx NZ and Frucor NZ.  Fed Ex NZ was also given a Special Commendation award for being the runner-up to the Best of the Best:

Aegis	Hilti (Aust) Pty Ltd
Boehringer Ingelheim Australia and New Zealand	InterContinental Hotels Group
Federal Express (New Zealand)	Johnson & Johnson Medical
Flexirent Capital Pty Ltd	Merck Serono Australia
Frucor Beverages Australia	Millward Brown Australia
Frucor Beverages New Zealand

Surveying over 124,000 employees across 200 companies, the study revealed three key findings:

• Employees are harder to engage - Survey results showed that employees have emerged from the global financial crisis harder to engage and expecting more from their employer
• Leadership is key - While the study showed that fewer than 50% of senior leaders are viewed as effective in most organisations, 72% of employees of Aon Hewitt Best Employers see strong evidence of effective leadership from their senior leaders
• In measuring their satisfaction, employees are asking three key questions - Is there a compelling reason to continue working here? Is it worth putting in extra effort? Am I supported to be successful in my role?

Aon Hewitt’s research into Best Employers presents a unique insight into the state of employee engagement and provides an in-depth look at how Best Employers drive business excellence by leading people practices.

To request a full copy of the 2011 Aon Hewitt Best Employers Highlights Report, please email bestemployersanz@aonhewitt.com or call +64 9 304 1590. For more information on the Aon Hewitt Best Employers Accreditation Program please visit: aonhewitt.com/bestemployersanz.

Driving workforce performance: as simple as a thermos?

At Aon Hewitt we feel it is important that organisations look through the lens of total rewards.  We believe that organisations should employ multiple levers to meet the needs of both top-down reward strategies - linked tightly to business strategy, and bottom-up engagement / psychological drivers of motivation.

Aside from our own reward research and significant remuneration data, we like to keep our clients abreast of relevant external research. We recently came across a study conducted by economists Kube, Marachel and Puppe of the University of Zurich, exploring the extent to which cash and non-monetary incentives affect employee motivation.

The study examines the performance of students cataloguing library books, measuring productivity simply by the number of accurate keystrokes entered into the cataloguing system.

Findings showed that students were significantly more productive when rewarded with the standard salary plus an unexpected gift wrapped thermos, whether or not they were aware of its cash value. Conversely, the study found the standard salary plus an unexpected 20% increase, did not yield any statistically significant change in productivity.  

A further study by the same group was conducted with 2,000 students and posed the issue as a series of theoretical questions, rather than physical participation. In this survey, 92% of respondents claimed they would rather receive the cash equivalent of the thermos than the thermos itself.

The researchers’ conclusion was that ‘the signal conveyed through the gift – and not its monetary value – determines the prevalence of reciprocal behaviour’. While gifts or prizes which have a primarily financial value attached are theoretically the preferred reward option of employees, they may be less effective in increasing productivity than those with a symbolic value.

To improve the effectiveness of reward programs, it is therefore important that organizations recognize both strategies as drivers of different aspects of motivation and behavioural change.

More changes for KiwiSaver

The 2011 budget announcements included a proposal to increase the compulsory KiwiSaver contribution rates from 2% to 3% in 2013.  There has also been discussion lately about a one-off enrolment exercise to automatically enrol all employees not currently enrolled in KiwiSaver. 

What would the increase in contributions mean for employers and employees?

The proposed increase in contribution rates might not appear large, but it is actually a 50% increase on what employees and employers are currently paying.  Employers will need to think about how to budget for this increase. Will it affect the annual pay increases for all staff or just those who are KiwiSaver members?

Employers who make both superannuation and KiwiSaver contributions should be able to offset the increase in the KiwiSaver rate by making lower superannuation contributions, meaning no additional cost for these employers and members of their schemes.

Employees may be concerned about whether they can afford the increase. An attractive option for them would be for employers to increase salaries at the time the contribution increase takes effect so that it does not affect their take-home pay, even if this is not the usual timing for salary increases.

These changes to KiwiSaver raise some concerns. People might assume that membership of KiwiSaver will provide them with enough savings for their retirement. However, even a 3% contribution rate is relatively low and is unlikely to mean people (including those who start young) have enough saved by the time they retire.

Ongoing change may also undermine members’ confidence in the KiwiSaver scheme and create uncertainty about whether it will be there for the long term. Aon Hewitt believes it is time for the KiwiSaver scheme to be stabilized and stop being used as a political football that is amended every time there is a change in government. 

For more information about the proposed changes or how these could affect you, please contact your usual Aon Hewitt account manager or phone us on 09 362 9000.

Retirement savings and market volatility

The recent volatility in the global financial markets has made a lot of people concerned about their retirement savings. Superannuation funds and KiwiSaver schemes have received a significant increase in member calls with people asking what they should do and many wanting to switch from their current investment option to a less volatile cash option.

Although ups and downs in investment markets are normal, they clearly can be very unsettling - tempting investors to make snap decisions that are inappropriate for their long-term goals. At times like this, it is important to remember that these savings are a long-term investment and:

• keep in mind your long-term goals
• focus on long-term gains rather than short-term losses
• avoid knee-jerk reactions and short-term responses.

History shows that following your long-term plan is a better response than panicking and making investment changes based on short-term factors. If your time horizon and circumstances have not changed, there should generally be no need to change your investment strategy, whether you are a scheme trustee reviewing a scheme’s investment strategy or a member contemplating changing your investment option.

People who are close to retirement may have some specific short-term needs to consider but they also need to think long-term. Based on current life expectancy data, if you retire today at age 60 you need to plan for living at least 20 years in retirement.

Investment consultants help trustees to make financial decisions based on well-considered plans rather than emotional reactions. If you would like to discuss your scheme’s investment strategy, call your usual Aon Hewitt investment consultant or phone us on 09 362 9000.

Aon Hewitt has taken care in the production of this document and the information contained in it has been obtained from sources that Aon Hewitt believes to be reliable. Aon Hewitt does not make any representation as to the accuracy of this document and accepts no liability for any loss incurred by anyone who relies on it.  The recipient of this document is responsible for their use of it.