Although employers are hiring more workers, employee engagementis down, according to Mercer's 2012 Attraction and RetentionSurvey.

In fact, more than 40%percent of respondents report that theyare bringing in more employees in 2012 as opposed to 27% in 2010,and 16% of respondents are cutting staff compared to 25% in2010.

Still, 24% of respondents say they are seeing lower levels ofemployee engagements, a jump from 13% in 2010.

“Employee loyalty has been eroding the past few years due tocompanies' responses to the economic downturn,” said LoreeGriffith, principal with Mercer's rewards consulting business.“Actions like layoffs, pay freezes and limited trainingopportunities have created an evolving employment deal foremployees due to uncertainty about what is expected and howemployees will be rewarded. Meanwhile, firms are still aggressivelymanaging people costs while finding ways to re-energize andre-motivate engaged employees.”

Turnover is a major contributor to the attention employers aregiving employee engagement as nearly 60% of respondents expect tosee higher voluntary turnover with the job market and economyimproving. Certain jobs are in higher demand than others because ofskills shortages and market demand.

Among these positions are information technology, researchand development and scientific engineering, and executive level andtop management. “Employees with the 'right' skill sets are indemand,” said Griffith. “Despite the increase in hiring, many firmsare experiencing talent shortages due to critical gaps betweenskills employees possess and skills businesses need. Now more thanever, firms need to engage and develop their high-potentialemployees and critical work force segments.”

Both cash and noncash rewards remain an important part instrengthening employee engagement and retention, and this isespecially true as many employers are cutting base pay increasesand offering smaller bonuses, the survey finds.

Merit increases are particularly popular as 95% of respondentsproviding some form of increase for 2012. Of the noncash rewardprograms implemented by organizations over the past 18 months, arecommunicating total reward value to employees at 25%, use of socialmedia to boost the employee work experience at 25%, formalizedcareer paths at 22%, internal and external training at 22% andspecial recognition at 22%.

These responses are similar to those from 2010, although morerespondents are relying on social media and team building. Despitethe higher use of noncash rewards, respondents expect the toprewards that drive employee engagement and retention in 2012 to bebase pay increases at 50%, vertical career progression at 47% andleadership development at 46%.

Rewards that are expected to have a moderate impact on employeeengagement and retention are variable pay, health care benefits, work-life programs, performancemanagement, time-off programs and training.

“While noncash programs, like work-life initiatives and formalcareer paths, are important for employee engagement all the time,employers must revisit pay in light of the changing businessenvironment to stay competitive, retain their top-performingemployees and ultimately buy or build required skills for thefuture,” said Jeanie Adkins, partner and segment co-leader ofMercer's rewards consulting business.

This article was originally posted at BenefitsPro.com, a sister siteof Credit Union Times.