Charles Cotton: Employees need to make informed decisions

EB_011215_018.pdfPaternalism has become somewhat of a pejorative term in HR. It commonly refers to the slightly patronising attitude that the manager knows best what their employees should have in terms of workplace benefits. Such an approach reminds me of the TV series Downton Abbey, where those living upstairs feel a moral obligation to look after the interests of those living downstairs, not always in a way that is appreciated by their servants.

But HR professionals have actually adopted a rather laissez-faire approach to workplace benefits, where employers typically offer a range of options and then leave the workers to select those that best suit their needs and wants. This reflects changes in our economy and society, where social aspirations and technological change now means that working for just one or two employers over one’s working life is no longer the norm, and benefits need to be equally flexible and tailored.

However, the Chartered Institute of Personnel and Development’s (CIPD’s) recent report, Show me the money! The Behavioural science of reward, published in March 2015, indicates that offering individuals a smorgasbord of choice may not encourage staff to join, stay and engage with an organisation. Too much choice could encourage inertia because individuals are more worried about making the wrong choices than the correct ones. They can also make inappropriate decisions because they are forced into instinctive rather than deliberative thinking, while myopia and discounting the probability of the very unlikely means that they don’t explore risk benefits and pension plans.

If employers want to harness staff enthusiasm and ideas, then they have to adopt an outlook somewhere along the continuum between paternalism and a laissez-faire approach to benefits. When it comes to choice, firms should consider limiting the size of the benefit buffet by offering employees a restricted menu of meaningful and appropriately framed options; they should also be given sufficient time to make their selections. In addition, employers need to adopt an approach that offers staff the financial information, advice and guidance that they need to make informed decisions.


Charles Cotton is performance and reward adviser at the Chartered Institute of Personnel and Development (CIPD)