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© Copyright 2000 Rogers Media. The following article first appeared in the June 2001 edition of
BENEFITS CANADA magazine.
Who cares about Pensions and Benefits?
Pensions and benefits may seem important to you. But how do you get your employees to feel the same
way? Flexible plans and marketing are two solutions.
By Sonya Felix
Like many young high-tech workers, Daisy Rey doesn't have much trouble finding a job. Nearly a year ago,
she left a position at Kodak Canada to work as a programmer in systems analysis at Hudson Bay Company's
corporate headquarters in midtown Toronto. What drew her to the new job? Better benefits? A generous
pension plan? "It was really just for more money," she says bluntly. "And, I like the job."
As far as benefits are concerned, Rey is not even sure what her new company covers since she's never used
them. "Benefits were talked about during my hiring interview but I never gave it another thought because
I'm young and single and it's not important to me," she says. After recently reading the company's brochure
describing her health benefits, Rey thinks the plan at her previous job may actually have been better
because it offered more choices.
Rey doesn't care much about the company pension plan either, which she'll have to join in September when
she turns 30. "I have no idea whether it's a defined contribution [DC] plan or a defined benefit [DB] plan,
but I do know it isn't a very flexible plan," she says. "I don't think it offers much of an incentive to
either join the company or stick around."
Rey might not be typical, but her attitude isn't an aberration either. Jodi Drury, manager of recruitment
and benefits for NorthwesTel in Whitehorse, Yukon, meets people like Rey whenever she goes on hiring quests
to Canadian universities.
"It's not easy to sell the new graduates on the company's benefits and pension plan," she says. "When I
talk to them about things like disability coverage they just say, 'Yeah, whatever.' It's not something they
really care about and I don't think any of them would choose to take a job with us because of the benefits
we offer."
The same goes for the pension plan. "These kids are very different than their fathers' generation. They are
financially savvy about non-taxable benefits like our vacation/travel allowance. But when I start to tell
them about our DB pension plan their eyes glaze over." So, what does attract these young people to
NorthwesTel? "The lifestyle, the adventure and the idea of riding around in helicopters," she says.
Employers all over the country are recognizing that employee benefits aren't necessarily key drivers when
it comes to hiring or keeping someone in a job, especially when it comes to young, highly skilled workers."
If you asked employees in general if they like their benefits plan most would say 'yes'," says Wayne
Johnson, vice-president of human resources at Maple Leaf Foods in Toronto. "But that's like asking 'Do you
like your mother?' What else are you going to say?"
However, when Maple Leaf Foods did a survey of top performers in the company, those at management and
senior management levels who are in their 20s and early 30s, reported that benefits aren't even on their
radar screen. "These employees see benefits as one size fits all and that's not what they're interested in.
Instead, they want performance-based incentives. They know they're good, they have a great track record and
they want merit increases and bonuses," says Johnson. "It makes me think that people who spend a lot of
time designing benefit plans to attract and keep top talent aren't spending their money wisely," he adds.
Although some pension and benefits managers may cringe at the thought, it's not likely to surprise others.
"I would never have thought of pensions and benefits as attractions to a job anyway, but more as
satisfiers," says Pat Suzuki, director of human resources (HR) services and pension investments with Suncor
Energy in Calgary. "People are looking more at other parts of the company, such as does it jive with my
values and is it the kind of place I want to work and how much room is there for learning, development and
advancement."
BENEFITS RANK POORLY
At a seminar given by Towers Perrin last year, Joyce Stephenson, director of pensions at Maple Leaf Foods,
says she was struck by recent research showing how employees rate their benefits and pensions. "It's a hot
topic these days," she says. "Everyone talks about it. When you're in the industry, pensions and benefits
can seem like the most important thing, but this research presented a compelling argument against that
assumption."
In fact, several recent surveys done by Towers Perrin have shown that employees of all ages consistently
rate pensions and benefits close to the bottom when asked to rank their employment rewards in order of
importance, says Jim Murta, a principal and practice leader for total rewards at Towers Perrin in Calgary.
According to the 2000 Business, People & Rewards Survey done by Towers Perrin and Economist
Intelligence Unit, quality of corporate leadership, challenging work, variable pay, open lines of
communication and involvement in decision making rate much higher, as does corporate culture, learning and
development programs, career advancement opportunities and stock options.
Another Towers Perrin study done in 1999 looked at the top five factors for someone to join, stay or leave
a job. Pensions and benefits weren't even on the list.
But that's not to say that pensions and benefits are categorically unimportant to employees. There is some
research that shows people do value their benefits. The 2000 High Tech Worker Survey Report: What do
Canadian IT Employees Really Want? conducted by PricewaterhouseCoopers and ComputerWorld Canada found that
full health benefits rate as one of the top three things information technology employees look for in a
job, along with respect, and supportive and effective management.
Miles Hammond went directly to work at JDS Uniphase in Ottawa after graduating from Carleton University two
years ago with a degree in industrial design. Although only in his early 20s, Hammond is delighted with his
benefits, which include coverage for massage and physiotherapy.
"It is something I considered when I took the job," he says. "At the interview they painted a big rosy
picture of the benefits and obviously the more they offer, the more appealing the job is. And now that I'm
used to them, it's kind of like golden handcuffs."
Murta agrees that for some individuals, benefits can make a significant difference. "Although our studies
all tell the same story, we shouldn't hit on a broad generalization which says benefits aren't important or
pensions aren't important. That isn't necessarily true, especially when you look at the impact of
demographics or unionized environments. When wage increases are limited, unions tend to focus on pensions
and benefits to get real gains."
LIFE STAGES
Where a person is in their life cycle has a lot do do with the value they place on pensions and benefits.
Even Rey of the Hudson Bay Co. admits that once she turns 30, she will probably have a different attitude
towards her benefits and pension plan. "There's something about hitting a big milestone like a 30th
birthday," she says. "It gives you a different perspective."
Sean McEwen, a computer programmer in Ottawa didn't think much about benefits either when he was in his
20s. And benefits weren't a factor when he recently joined a small start-up which creates Web site analysis
tools, because all the job offers he received from other companies had similar benefits. But now, in his
early 30s and newly married, McEwen appreciates the basic dental, drug and vision care his company
provides.
"If I made a lot more money, maybe it wouldn't matter because I could buy my own, but as it is, the
coverage really helps. And, the company started a group registered retirement savings plan which helps me
put money aside for retirement so I should be okay," he says.
Rey and McEwen seem to fit into the trends identified by the Towers Perrin Total Rewards Alignment Index.
According to this survey, workers aged 18 to 29 don't consider health and welfare benefits or retirement
benefits as significant factors for joining or staying with anemployer. For employees aged 30 to 44,
although these benefits weren't important on hiring, they became significant factors for staying in a job.
Older employees, those aged 45 to 54, were similar to the 18- to 29-year-old group in that they chose to
engage and remain with an employer more because of work environment and learning and development
opportunities. Pay was a factor for getting them to stay, whereas benefits weren't significant. But, by the
time a worker reaches age 55, health and welfare benefits, retirement benefits and pay were the most
important reasons for joining a company and pay encouraged them to stay.
Carol Ferguson, vice-president of HR at Towhey Consulting Group in Toronto, agrees that whether pensions
and benefits are important in recruitment or retention isn't clear cut because there are many variables.
"It can depend on the level of the individual in the organization," she says. "For clerical workers or
those with a low salary, benefits are critical because they can't afford to purchase their own. But a lot
of younger workers don't even think they're going to die, let alone retire, so pensions don't mean much."
Where does all this leave employers who are competing for top quality talent in today's tight labour
market? Well, it means that they should take benefits seriously--even if employees don't. Health plans in
particular are usually taken for granted these days as part of a total compensation package.
"There's a general assumption that all benefits plans are comparable to what a person is enjoying already,"
says Jim Parr, vice-president of Michael Stern Associates Inc., a recruitment firm in Toronto. So, while
benefits and pensions might not be at the top of the list of prerequisites for taking and keeping a job,
they could certainly break a deal if they're significantly different from what an employee expects.
But enhancing pensions and benefits isn't necessarily the way to go either, says Murta. "Organizations with
high turnover often ask whether increasing the pay and benefits would help retain staff, but when we
research the workplace we often find that what the employees really want is more flexible hours or a
different attitude by supervisors," he says. "Pensions and benefits must relate well within the industry
and the particular market, but if an employer is overspending, they won't get anything back for it."
Whether pensions and benefits are important to an employee or not, the cookie cutter approach doesn't work
anymore. A young worker like Daisy Rey isn't going to be drawn to the same plans as a 50-something top
manager who's biding his or her time until retirement. Flexible benefits and multiple pension options have
a better chance of at least getting new hires and current employees to take notice and appreciate what
they've got. BC
Sonya Felix is a Toronto-based writer and regular contributor to benefits canada. sfelix@interlog.com.
Throwing tradition out the window
Hybrid pension plans enable employers to differentiate themselves.
With a highly mobile and educated workforce, traditional defined benefit (DB) plans just don't cut it
anymore. "Many large plan sponsors are glad to drop DB plans," says Joyce Stephenson, director of pensions
at Maple Leaf Foods in Toronto. "But DC plans might not be the answer either. Maybe we need a greater
degree of hybrid plans."
Offering a combination of ways to save for retirement is one way to add flexibility to meet the needs of
both young and older employees. "DB plans mean nothing to most younger workers," says Jack Marshall, a
principal with William M. Mercer Ltd. in Ottawa who specializes in the high-tech sector. "We're seeing a
huge increase in DC plans and group registered retirement savings plans where employers put in matching
funds. It's often part of a retention strategy."
On the other hand, older employees tend to prefer DB plans, says Stephenson. "People in their late 40s, 50s
and early 60s don't want DC plans anymore. We have to think about how to protect these employees who want
the security of a DB plan, and at the same time figure out how to address the needs of those who want DC
plans. A hybrid helps because we can offer choice."
Bang for your buck
Marketing pensions and benefits.
In the past, human resources (HR) professionals focused on the delivery of their pensions and benefits
program. Times have changed, says Jim Murta, principal and practice leader for total rewards with Towers
Perrin in Calgary. "Today, we have to market the value proposition of pensions and benefits. Like with any
other marketing strategy, we need to know who the client is--in this case it is the employee--and know what
their interests are."
Pat Suzuki, director of HR services and pension investments for Suncor Energy in Calgary, agrees that HR
departments should take a stronger marketing approach to encourage employees to value their pensions and
benefits more.
"When employees don't see the cost of these plans they don't appreciate them," she says. "If the pension or
benefits are non-contributory there's no way to put a tangible value on it. But marketing and employee
education are difficult to do, time consuming and ultimately add to the cost of administration. On the
other hand, employers pay a lot of money for pensions and benefits and they'd like to see some bang for
their buck or at least recognition."
Better communication with employees is critical to getting that recognition, says Carol Ferguson,
vice-president of HR at Towhey Consulting Group in Toronto. She says it's important that every employee
gets an employment package at the time of orientation explaining both what their benefits are and how to
access them. "Employers often spend a lot of time at recruitment talking about the pension and benefits and
that's the last the employee hears about them. If you can give employees something concrete such as ongoing
information on an intranet or Internet site, it will make [pension and benefits] more attractive."
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