Employee engagement across Australia and New Zealand is facing a growing reality check, with new research revealing a sharp disconnect between how leaders perceive workplace culture and how employees actually experience it.
The latest Workplace Engagement Index by Reward Gateway | Edenred found that while business leaders remain confident about workforce engagement, employees are far less convinced, and many are already eyeing the exit.
Drawing insights from more than 2,000 employees and HR decision-makers across Australia and New Zealand, the report highlights what experts are calling a widening “engagement perception gap” in modern workplaces.
Nearly half (46%) of business and HR leaders believe employee engagement has improved over the past year. Yet only 25% of employees say they actually feel more engaged at work.
The disconnect deepens when it comes to recognition. While 57% of leaders believe employees frequently feel appreciated for their contributions, only one-third of workers agree.
The findings arrive at a time when companies across industries are battling retention pressures, burnout and shifting employee expectations in the post-pandemic workforce.
Retention Warning
The report found that 56% of employees have considered leaving their jobs within the past six months, signalling rising dissatisfaction beneath the surface of many organisations.
Researchers point to one surprising factor driving disengagement: a lack of joy at work.
Almost half (47%) of employees who reported feeling less engaged said the absence of joy in their daily work experience was a key reason. Among deskless workers, that figure surged to 76%, exposing a major challenge for frontline-heavy industries.
According to Kylie Green, Managing Director APAC, Reward Gateway | Edenred, many organisations continue to underestimate the emotional side of employee experience.
“For many organisations, engagement can feel like a complex challenge to solve,” Green said. “But our research shows that the fundamentals still matter, employees want to feel recognised, supported, and able to experience genuine moments of joy in their work.”
She added that perception gaps emerge when leadership assumes these experiences are already happening consistently, while employees continue to feel disconnected.
Workplace Reality
The research suggests emotional wellbeing is increasingly becoming a business performance issue rather than simply an HR concern.
Around nine in ten employees said feeling joy at work directly improves productivity, engagement, purpose, retention and workplace connection.
Employees identified flexible working arrangements, positive company culture, supportive leadership and better benefits as the biggest drivers of workplace happiness.
However, one in five employees said their organisation does not actively enable joy at work.
The divide is particularly visible across generations and work styles. Only 10% of Gen Z employees felt their workplaces lacked joy, compared to 32% of Baby Boomers. Frontline workers were also significantly more likely than hybrid employees to report feeling disconnected from positive workplace experiences.
Culture Crisis
The findings reinforce a growing shift in workplace strategy, where organisations are being pushed to move beyond traditional engagement surveys and focus on everyday employee experience.
Experts say recognition, communication, wellbeing and flexibility are no longer viewed as “soft culture initiatives”, but critical drivers of productivity and retention.
As businesses continue navigating economic uncertainty, labour shortages and changing workforce expectations, the report suggests companies that fail to close the engagement gap may struggle to retain talent in 2026 and beyond.
At the same time, organisations that successfully build cultures centred on recognition, connection and joy could gain a significant advantage in attracting and keeping employees in an increasingly competitive labour market.