Employee satisfaction: What is it, and what does it really mean for businesses?

Employee satisfaction hasn't always been front and centre for HR. But in 2023, the profession is increasingly focusing on this concept — both as a way of taking the temperature of an organisation, and driving its success.

But what is employee satisfaction and why is it essential for businesses? And how can managers enhance it, boost the impact of employee satisfaction on job performance, and find methods to measure it effectively?

Let's find out.

What is employee satisfaction? 

Employee satisfaction is a pretty straightforward term that means exactly what you think: it simply means how happy an employee is in their employment. 

All aspects of the job can affect employee satisfaction, including the tasks staff need to complete, the compensation and employee benefits they receive, and their work environment and relationships with colleagues.

It's also influenced by the employee's broader sense of fulfilment, motivation, and alignment with the company's goals and values. 

Note that the term 'employee satisfaction' is often used interchangeably with 'job satisfaction' — but should not be confused with 'employee engagement'. 

While employee satisfaction focuses on overall happiness and contentment, employee engagement delves deeper into their emotional connection and commitment to their work.

So while employee satisfaction often leads to employee engagement, they're not actually the same thing.

Why is employee satisfaction important?

Employee satisfaction is, most obviously, important to the employee. Most people spend most of their waking lives at work, and if that's an unhappy experience then even a good salary won't make up for it.

High levels of employee satisfaction are also important for the employer, for a number of reasons.

Firstly, happy employees are usually more productive and make a greater contribution to the company's success.

That's because when employees are content with their work, they're more likely to go above and beyond their job descriptions, leading to increased efficiency, better quality work, meaningful collaboration and more creative solutions to problems.

Satisfied employees are also more likely to be loyal. That makes them more likely to stay with the company over the long term, reducing the high costs of turnover and recruitment.

It also makes them more likely to recommend their employer to other potential recruits, helping the firm to attract the best talent possible.

Employee satisfaction is also closely linked to physical and mental wellbeing. When employees are content, they experience less stress and burnout — resulting in improved overall health and reduced absenteeism. 

How can managers increase job satisfaction of employees?

There are a number of ways that managers can help increase employee satisfaction.

1. Communication

All too often, employees feel like they're being kept in the dark about what's really going on in the company, and that can seriously lower morale. 

This feeling can, of course, instantly be alleviated through clear, consistent, open and honest communication.

That means, for example, providing clear expectations, offering constructive feedback, and keeping employees informed about company goals and changes. 

2. Recognition

Recognising employees' efforts and achievements where it's deserved can boost people’s spirits, and it doesn’t always have to be costly.

While recognition might come in a formal, organised manner, such as the giving of awards or bonuses, verbal praise can be just as effective in making employees feel valued. 

3. Facilitating professional development

Employee satisfaction can also be raised by encouraging and facilitating professional development.

No one likes to feel they're 'stuck' in a job or imagine themselves doing the same thing for the rest of their life. And so offering employees opportunities for growth and development through training and skill-building is vital to boosting their levels of satisfaction. 

4. Company culture

For many people, it's the relationships they forge that can make the biggest impact on their levels of happiness at a job. So it's also important that managers work to foster a positive work environment, where there's a culture of respect, collaboration, and open communication.

But it's also about perks and allowances. Most employees want to have a life outside of work too — so providing flexible schedules or remote work options that achieve a healthy work-life balance can also make a big impact on employee satisfaction. 

How does employee satisfaction affect job performance? 

Employee satisfaction has a direct impact on job performance in several ways. 

They're also usually more engaged in their work, making them more focused, committed, and willing to invest their energy in the success of the business. 

And if they're customer-facing, they also tend to provide better customer service, which can enhance customer satisfaction and loyalty towards the company as a whole. And they're also more likely to contribute positively to team dynamics, fostering collaboration and synergy among team members. 

How to measure employee satisfaction 

We all know employee satisfaction when we see it, but how do you actually go about measuring something as amorphous as satisfaction?

In fact, the HR profession has developed a number of systematic ways to do so. And although there's no single, universally agreed method of measuring employee satisfaction, there are a number of techniques that are commonly used. 

One popular method is by asking your employees questions, either via detailed surveys, simple pulse surveys, focus groups, team surveys, meetings, one-to-one interviews or other feedback channels. 

The nature of the questions obviously needs to be considered carefully and will vary from firm to firm. But one of the most common approaches, which gets right to the heart of the matter, is to ask: "On a scale from 1-10, how likely are you to recommend this company as a place to work?" 

This allows you to measure what's called the Employee Net Promoter Score (eNPS). Employees who answer 9 or 10 are known as Promoters, 7-8 are Neutral and 0-6 are Detractors.

To calculate your eNPS, you subtract the percentage of Detractors from the percentage of Promoters. Scores between 10 and 30 are considered good, while anything above 50 is seen as excellent.

A similar approach is the Employee Satisfaction Index (ESI), which involves these employees answering these three questions on a scale of 1-10.

• How satisfied are you with your job? 
• How well does your job meet your expectations?
• How close is your workplace to your ideal job? 

If you're not able to survey your employees, an alternative way to measure employee satisfaction is to extrapolate it from absenteeism rates.

The formula is: Absenteeism Rate = (Number of Days Absent / Total Workdays) x 100.

A high rate often correlates with lower employee satisfaction, although of course other factors may be an influence. 

Another statistic that can give you an idea of employee satisfaction levels is the turnover rate, as lower turnover rates are often indicative of higher employee satisfaction.

The formula is Employee Turnover Rate = (Number of Employees Who Left / Average Number of Employees) x 100.

Employee satisfaction is not just a buzzword — it's a critical factor in the success of any business.

By understanding what employee satisfaction is, why it matters, how to improve it, and how it affects job performance, businesses can create a work environment that fosters success for both employees and the organisation as a whole.

Regularly measuring employee satisfaction ensures that companies can adapt and evolve to meet the changing needs and expectations of their workforce, ultimately leading to sustainable growth and success.

About YuLife.

YuLife is working to reimagine the insurance industry by protecting lives, rewarding living and inspiring life. We’re on a mission to transform traditional insurance into a life-enhancing experience each employee will value and use daily. 

How does it work?

Our award-winning app uses behavioural science and game mechanics to reward your people for living well while offering protection in case of crisis. And with our top-rated employee assistance programme, your team gets access to mental, financial and social support, virtual GPs, nutritionists, life coaches and more to help them live their best lives.

Because we believe that your employees should benefit from their insurance from day one — and that wellbeing should be accessible every day, for everyone.

Request a demo for your team today.