Why respondents’ organisations offer benefits
They are an effective retention tool 82%
They are an effective recruitment tool 81%
To support employee health and wellbeing 80%
They support the employer brand 61%
Because their industry or regional competitors do 49%
They promote work-life balance 48%
They are seen as entitlement by staff 39%
They have to by law (for example, to comply with auto-enrolment legislation) 35%
To drive desired employee behaviours 33%
They help to reduce the national insurance (NI) bill 29%
They are good value for money 27%
They help control sickness absence 25%
Perceived moral or ethical responsibilities 24%
They produce a measurable return on investment 16%
They are cheaper to offer than cash salaries of similar perceived value 14%
They feel they have to 13%
To meet Transfer of Undertaking (Protection of Employment (Tupe)) obligations 11%
Other 3%
Sample: All respondents (246)
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Since the inaugural Benefits research was published in 2004, the political and economic landscape has undergone considerable change. Yet, while this has inevitably impacted businesses in myriad ways, employers’ rationale for offering benefits has changed little over the years. In 2017, just as in 2004, the effectiveness of benefits as a recruitment and retention tool are the top reasons respondents offer benefits for staff.
The role of benefits in supporting employee health and wellbeing, the part they can play in supporting the employer brand, and keeping up with either industry or regional competitors have also consistently remain towards the top of the list of reasons why respondents offer benefits over the past 13 years.
However, some factors impacting this decision are no longer as popular as they once were. For example, this year just over a quarter (27%) of respondents say they offer benefits because they are good value for money. Although this is in line with the 26% that said the same in both 2016 and 2014, it has dropped considerably from 64% in 2009 and 50% in 2011.
The issues shaping respondents’ benefits strategies
Desire to improve employee engagement 72%
Desire to be seen as an employer of choice 65%
Employee influence or expectations 54%
Desire for flexibility 48%
Multi-generational workforce 46%
Aligning benefits strategy with business strategy 43%
Advancements in technology 41%
Desire to reduce or control costs 38%
Aligning benefits strategy with HR strategy 35%
Corporate reputation 34%
Tax and legislation changes (such as those affecting salary sacrifice) 34%
Driving a high-performance culture 33%
Pensions auto-re-enrolment 31%
Increasing workforce diversity 27%
Ageing workforce 27%
Desire for cultural change 23%
Perceived moral or ethical responsibilities 21%
Organisational change (such as merger, acquisition, downsizing, expansion) 20%
Poaching of staff by competitors 19%
Operating on a global or multi-national basis 17%
Remuneration strategies for high earners 15%
Pay freezes or low pay increases 15%
The economy 9%
Breaking down workforce hierarchies 8%
The vote for Brexit 3%
None of the above 1%
Other 1%
Sample: All respondents (235)
How respondents see their benefits strategy changing to adapt to future challenges within the industry
Better or more targeted communication of benefits 73%
Better integration of a wider range of technology within benefits offering 51%
More closely align reward strategy to business strategy 50%
Offering multiple savings vehicles (in addition to pensions) such as individual savings accounts (Isas) or share plans 44%
Flexing all benefits to give employees more control over their benefits spend 37%
Identifying alternative funding options for benefits spend 33%
None of the above 4%
Other 1%
Sample: All respondents (192)
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Employers’ desire to improve employee engagement remains the top issue shaping organisations’ benefits strategies in 2017, cited by just under three-quarters (72%) of respondents. This has changed little since 2011, when 71% of respondents said the same, remaining consistent in the intervening years.
Perhaps unsurprisingly, respondents’ desire to become an employer of choice remains the second biggest issue shaping benefits strategy, rising by four percentage points year on year. This is now a key objective for organisations competing to recruit and retain the top talent from an increasingly mobile workforce.
Advancements in technology are also continuing to drive employers’ benefits strategies. Just three years ago, 15% of respondents said this was a key issue shaping their organisation’s benefits strategy; this year, 41% said the same. This trend only looks set to continue as developments in artificial intelligence and augmented reality move these further into the workplace and people management sphere.
Looking to the year ahead, it will be interesting to see how external events impact the issues shaping employers’ benefits strategies. Just 3% of this year’s respondents cite the vote for Brexit as such an issue. Following the triggering of Article 50 on 29 March, however, it remains to be seen how far this could change as more detail emerges about the impact on business of the UK’s decision to exit from the European Union.
Given the number of legislative changes impacting reward, which came into effect in April 2017, this might have been expected to appear higher up the list of issues shaping respondents’ benefits strategies. This could well change over the coming 12 months as new measures such as gender pay gap reporting and the limitations on salary sacrifice arrangements take effect.
In order to adapt to future challenges within the industry, almost three-quarters (73%) of respondents anticipate they will require better or more targeted communication of benefits.
Around half (51%), meanwhile, say they will need better integration of a wider range of technology within their organisation’s benefits offering. A similar proportion (50%) plan to more closely align their reward strategy to business strategy, a rise of seven percentage points year on year.
The barriers to respondents introducing benefits they would like to offer
Budget 76%
Time 38%
Technology limitations 19%
Not applicable 16%
Lack of engagement 13%
Parent company guidelines 9%
Other 7%
Sample: All respondents (167)
Budget remains, by far, the biggest barrier to respondents introducing benefits they would like to offer, cited by 76%.
This year’s research also bears out an issue that we often hear anecdotally from reward professionals: that they are time poor. In 2017, time is cited as a barrier to introducing benefits they would like to offer by 38% of respondents, up from 29% in 2016.
The percentage of respondents citing technology limitations as a barrier has also grown year on year, up to 19% from 13% in 2016.
The main ways in which respondents’ organisations currently fund benefits
Part employer and part employee funded 56%
Employer funded 40%
Employer funded through national insurance savings 3%
Employee funded only 1%
Sample: All respondents (231)
How respondents see benefits funding methods changing in the future
They will remain broadly the same 54%
Employers will share the cost with employees more often 23%
Employers will fund more options for staff 10%
Employers will move away from funding benefits through national insurance savings 7%
Employers will pass on the full cost to employees more often 5%
Other 1%
Sample: All respondents (229)
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The shift in employers sharing the cost of benefits with employees more often, predicted by 29% of respondents to 2016’s research, looks like it is beginning to happen. This year, 56% said their organisation’s benefits package is part employer and part employee funded, up from 49% that said the same last year.
Correspondingly, there has been a slight drop of four percentage points in the proportion of organisations that fund benefits for staff, down to 40% this year from 44% in 2016.
In the future, 54% of respondents expect their organisation’s benefits funding method to remain broadly the same.
Do respondents outsource any aspect of their benefits package?
No 53%
Yes 47%
Sample: All respondents (171)
The benefits-related services outsourced by respondents
Benefits administration 46%
Technology 29%
Scheme design 8%
Help desk 6%
Scheme implementation 4%
Communications 3%
Other 5%
Sample: All respondents that outsource any aspect of their benefits package (79)
The benefits for which respondents outsource these services
Pensions 69%
Voluntary benefits or group discounts 59%
Flexible benefits 52%
Healthcare and wellbeing 48%
Group risk 37%
Cars 20%
Financial wellbeing 13%
Share plans 11%
Motivation and recognition schemes 9%
Other 3%
Sample: All respondents that outsource any aspect of their benefits package (75)
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Just under half (47%) of respondents outsource some aspect of their benefits package. Of those that do, 46% outsource benefits administration, while 29% outsource benefits-related technology.
Pensions are the most popular benefit for which respondents outsource services, cited by 69%, followed by voluntary benefits or group discounts (59%), flexible benefits (52%), and healthcare and wellbeing (48%).
