Surveys show that employers and employees in Lithuania rate the impact of incentives on long-term motivation differently. While employers place more value on measures directly linked to work, employed persons say that other things would encourage their long-term loyalty more – solutions focused on their personal needs, like long-term pension accumulation or health insurance. That was shown by surveys of residents and company heads conducted this spring by Spinter Tyrimai for INVL Asset Management, one of Lithuania’s leading asset management companies.
Agreement only in giving first place to wage bonuses
Asked to rate incentivizing measures by importance, employers and employees only agreed about one of them. Both sides said the incentive that most encourages long-term motivation is getting a bonus on top of one’s wage. That was ranked first by 91% of heads of companies that use incentives and by 73% of people who are employed.
As regards other measures for encouraging long-term loyalty, views differed rather markedly. While employers identified personal growth opportunities as the second most pertinent motivational measure, with 69% of them mentioning that, employees ranked the measure much lower, in fourth place, with just 16% of them naming it.
Employees, for their part, rated financial incentives via long-term pension accumulation as the second most important measure for encouraging long-term loyalty, one that 34% of them would like. Employers’ responses ranked this measure fifth, though, even if 40% of them gave it a positive response.
Employers think it is other types of benefits that best motivate employees: they gave third place to supplementary benefits like a company car, a fuel card or phone expenses, etc. (68% of respondents). Fourth place went to health insurance, which 58% of employers said was a useful long-term motivator.
Employees’ responses, meanwhile, put health insurance in third place, noted by 21% of respondents. Last on their list were personal growth opportunities and supplementary benefits like a company car, a fuel card or phone expenses, etc., each mentioned by 16% of respondents.
“These surveys revealed that employers more highly value benefits that are directly linked to work activities, while employees want incentives more closely tied to their personal needs. On the other hand, it’s noteworthy how people who are employed gave quite high priority to supplementary pension accumulation. That’s obviously something that has been given too little attention until now even though it’s useful for both the employee and the employer,” said Dr Dalia Kolmatsui, Head of Pension Funds & Retail at INVL Asset Management.
What employers want is not what motivates employees
In the survey, employers were also asked what motivational measures they in fact use. It turns out that Lithuanian companies are not currently providing the incentives that are most relevant to employees. Wage bonuses, which motivate the most, are used as incentives by 60% of companies, but only 10% of them offer long-term pension accumulation, which ranks second on employees’ list of priorities. A full 65% give their employees personal growth opportunities, while 45% provide other benefits and 19% offer health insurance.
“It’s to be noted that the incentives being offered differ somewhat from those employees value most. The things closest to their expectations are financial incentives in the form of cash bonuses and health insurance, but few of the country’s companies offer the other types of incentives employees desire, like pension accumulation incentives. Still, it’s hopeful that nearly a third of employers are ready to consider that last option in coming years,” Dr Kolmatsui said. Moreover, 63% of employers said they review their employee incentive programmes at least once a year or more.
Calculations show that under the tax system which will enter into force as of 2019, there would be the same total labour costs for contributing 168 euros to an employee’s 3rd pillar pension fund as it would for giving the employee an after-tax cash bonus of 100 euros. That effect is due to the fact that the taxes which are paid when granting a wage bonus do not apply to contributions transferred into a 3rd pillar pension fund by an employer which do not exceed 25% of the employee’s annual employment-related income. Taking advantage of this effect by additionally contributing to employees’ ability to save more for retirement is recommended.
The representative survey of heads of companies in Lithuania was conducted on behalf of INVL Asset Managementin May this year. Of the 316 companies throughout the country which took part, 84% make use of incentives. In a representative survey of Lithuanian residents age 18-75 conducted in April, the total number of participants was 1015, and 673 respondents working under employment agreements answered questions about the incentives that employers offer. The surveys were conducted by Spinter Tyrimai.
INVL Asset Management, which is part of the Invalda INVL group, manages 2nd and 3rd pillar pension funds and mutual funds as well as alternative investments and individual portfolios. Over 190 000 clients in Lithuania and Latvia and international investors have entrusted the Invalda INVL group’s companies with the management of more than 650 million euros of assets.
Note: When referencing these survey results, please identify the source.
Investments in pension funds involve investment risk. The value of investments may both rise and fall, and you may recover less than the amount that was invested. Fees apply for accumulating in pension funds. If money is withdrawn from a 3rd pillar pension fund less than 5 years after accumulation began and before reaching the designated age, the disbursements are subject to personal income tax, the rate of which is 15% until 2019 and after 2019 will be 20%.
INVL and Šiaulių bankas merged their retail services as of 1 December 2023.
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INVL and Šiaulių bankas merged their retail services as of 1 December 2023.