Employer Branding

Do Employee Perks Translate into Employer ROI?

Let’s revisit a subject I haven’t heard much about in a while – the subject of employee perks.

Incredible employee perks aren’t as incredible as they used to be. Not because companies have let up on what they offer, but on the contrary, because so many companies are offering amazing perks that the novelty has worn off. The result is a new generation of entitled employees for whom a paycheck isn’t nearly enough of a reward for their work. But are the employers who are offering these perks getting an adequate return on their investment?

Who offers what?

  • Google seems to remain the undisputed king of employee perks with a vast array of free food choices cooked by professional chefs, in addition to oil changes and car washes, massages and yoga, a play room, child care assistance and concierge service.
  • Deloitte offers employees sabbatical programs of up to four unpaid weeks off for any reason, or three to six months off, partially paid, to pursue career-enhancing opportunities.
  • Discovery Communications offers free classes and events such as African dance classes, chocolate-making lessons, water color painting, fly-fishing and improv seminars, in addition to an in-house wellness center offering primary care doctors and a pharmacy.
  • And finally, Facebook offers free transportation to and from work, free meals, a company gym, an onsite candy shop and free bike repair. (Incidentally, if you’re employed at Facebook with the title “Bicycle Mechanic,” I beg you to send me a LinkedIn invitation.)

In an effort to recruit the top employees in any given industry, the bar is continually being raised. In today’s workforce, salary alone doesn’t speak as loudly as it once did. According to the Society of Human Resource Management (SHRM), benefits are the second most important driver of job satisfaction, with the first being job security. So when a handful of cutting-edge companies offer perks that are so enticing that they virtually eliminate employees’ mundane daily tasks and enable them to focus more time on work, other companies feel the pressure to follow suit. Presumably, the companies offering these fantastic perks aren’t sacrificing employee salaries, so are they paying off for employers?

What effect do perks have?

According to the Harvard Business Services (HBS) Blog, social and relaxing activities increase creativity. These activities cause a spike in the superior anterior temporal gyrus (aSTG), the part of the brain responsible for drawing together distantly-related information. This in turn enhances creativity, engagement and innovation. While many employers may view lavish perks as costly and a waste of company time, those who offer such perks will attest that the results can be seen in employees’ work.

But creativity and innovation are subjective. What about those employers who want to see numbers and dollar figures supporting the ROI of offering employee perks? According to Incentive Magazine, since 1998, Fortune’s “100 Best Companies to Work For” have reported a 10.6 percent annual return. In contrast, companies with 40 percent or less employee engagement had a total shareholder return that was 44 percent lower than average. Highly engaged workforces generate an average of 29 percent more revenue and are 50 percent more likely to have above-average customer loyalty, and engaged organizations report 44 percent higher retention rates.

A 2011 IES/Work Foundation Report found that a 10 percent increase in employee-engagement practices can increase annual profits by $2,400 per employee, while a one percent boost in employee commitment can increase monthly sales by nine percent. In one study conducted by Towers Watson, a highly engaged workforce improved operating income by 19.2 percent within a year’s time, while a 32.7 percent annual decline was reported by companies with low engagement scores.

Reload Media, a small digital strategy company in Brisbane, Australia, was able to calculate its ROI based solely on its employee perks. For every dollar spent on massage therapists, iPhones, a game room, travel and similar items for about 40 staffers within a 12-month period, $11 was returned. The company spent an estimated $80,000 on perks, then factored in 20 percent lower turnover than the industry average, as well as an estimated $20,000 to train each employee. In addition, client revenue increased by $720,000.

A 2010 Time magazine poll found that fewer than half of working Americans were satisfied with their jobs – the lowest percentage since 1987. However, according to Bob Nelson, Ph.D., the best-selling author of 1001 Ways to Reward Employees and 1501 Ways to Reward Employees, those companies whose employees report being more satisfied show a 700 percent greater shareholder return. The takeaway is that it benefits employers significantly to make the workplace enjoyable for employees, as happy employees result in increased creativity, work quality and profitability.

By John Feldmann

John Feldmann is a Senior Communications Specialist for Insperity in Houston, TX. With over a decade of marketing and employment branding experience in the recruiting and human resources industries, John specializes in employment- and HR-related content development for a variety of media types in order to communicate Insperity's brand to both business professionals and job seekers. Follow John on X @John_Feldmann.