Need to know:
- Despite the tough economic climate, evidence suggests that employers are not slashing their benefits budgets. Instead, they are making the most of what they already have, and thinking outside the box about inexpensive benefits that they could offer.
- Employers can make benefits feel personal and relevant to the struggles that people are facing in the cost-of-living crisis. Telling stories is one great way to bring benefits to life.
- They should think creatively about what employees would appreciate. Extra time off to celebrate milestones or study, as well as extra flexibility, are all currency.
Employers are in a tough spot. Not only have they had to cope with a volatile economic climate themselves, they have also needed to look after employees who are living through a cost-of-living crisis.
With operational costs rising, organisations might be forgiven for cutting their benefits budgets. However, in a tight labour market, the evidence suggests most employers are not slashing benefits.
In consultancy Barnett Waddingham’s May 2023 Benefits forecast survey, employers were asked whether they were putting their longer-term strategic goals on hold because of short-term economic demands. An overwhelming 82% said no, reports David Collington, partner and head of benefit consulting at Barnett Waddingham.
During the pandemic, the priority was wellbeing; now, benefits that help with the cost-of-living crisis have come to the fore, says Sheila Attwood, senior content manager, data and insights at XpertHR. “I have been in this role for 25 years and I've never seen anything like the cost-of-living assistance that employers are offering," she says. "I would say it’s partly tied up with the labour market over the past year, which has been very tight.”
Not every employer can afford to make discretionary cost-of-living payments. Instead of making cuts, employers are getting smarter with their benefits budgets. “Employers are definitely being sensible," says Attwood. "But they are not necessarily slashing budgets. What they're really doing is making sure they're getting the most value out of their benefits.”
Find out what people want
The best way to find out what employees want is to ask them. Reward teams can also look at benefits providers’ data to find out what benefits people are accessing. If not many employees are using the private medical insurance on offer, for example, could reward teams think about how to promote it differently? Or is it time to switch to a health cash plan instead?
Making benefits feel personal and current is key. “Employees don’t want a generic package that looks like it's been put in place 15 years ago and isn't tailored to what they need," says Attwood. "They want to know that there's something there that actually helps them, especially at the moment.”
Get the most value from existing benefits
Employees do not always understand the value of what they are already getting. Think about ways to bring benefits to life, says Barnett Waddingham's Collington. “We're working with employers around, for instance, communicating the benefit of their employee assistance programme (EAP) through telling stories. For example, [the employer] could say: ‘My teenage daughter had issues with bullying and she got counselling through the EAP. I was having a dispute with my neighbour about where a fence should be, and I got legal advice through the EAP.’”
Employers should review their benefits provider regularly and ensure they do not fall into the consumer trap of auto-renewing. “Lots of benefit providers offer value-added benefits, such as virtual GPs, and employers just haven't really been taking advantage of them," adds Collington. "So, if [they have] a benefit that's got a virtual GP as a free added benefit, why not promote that as being a new benefit?”
Get creative
Many employers cannot afford to introduce new benefits right now. So what can they do?
Jeff Fox, principal at Aon, says: “Organisations are becoming more creative about things like voluntary benefits, where they don’t have to spend from their own budget but offer the choice to exchange salary for benefits to their own workforce. We are seeing employers offering low-emission cars on salary sacrifice, which can save employees a considerable sum of money.”
For employers in a position to offer it, giving people more flexibility could be a way to boost morale, as well as helping employees to save on the cost of commuting. “Employees are demanding ever more choice," explains Fox. "There is a tension at play here between after the pandemic and the expectations which were set with employees around work-life balance and being able to work more flexibly. That created a high expectation from employees that they will have their needs met. But employers can’t necessarily just jump around and meet those needs.”
Time is also currency. “Even the smallest things can hit the right mark with employees," says Attwood. "Give people a day off for their birthday, or a few hours off for a special birthday lunch; that is always well received. Another one is giving people a couple of hours’ personal development time every week. That will benefit [the] employer as well.”
Salary advance schemes are a 'Marmite' benefit which some employers are introducing, says Jonathan Watts-Lay, director at Wealth at Work. “Of course, they tie straight into the cost-of-living crisis because people can get their money earlier and for the employer, it doesn’t cost anything because the charge is effectively passed on to the employee," he explains. "So that's quite an interesting one. Because from one perspective, [it's] great. If people are hard up and they can get their salary earlier, isn't that a good thing? But then, on the other hand, if they're paying a fee in order to get their salary, then that just means they are ending up with less money.”
Measure what you are doing
In difficult economic times, getting a return on investment (ROI) for benefits spend is more important than ever. “The challenge with ROI is how [it is] measured,” says Fox.
Employers used to be more literal, taking a direct measure of the amount of national insurance saved by implementing a particular benefit, for instance.
Nowadays, it is becoming more sophisticated. “Employee engagement is becoming a measure, as is how benefits help with recruitment and retention, and how they help employees to be more productive," he explains. "These elements are all being introduced into the ROI equation. That is the holy grail, because if [employers] can show a line between what [they] do and spend on benefits and the increase in productivity, recruitment and retention, [they] have a very powerful measure.”
Whatever the answers an employer comes to, thinking harder than ever about benefits will pay off. “There is an endless debate about what we can do to ease the tension at the moment,” says Fox. “Sometimes employees can be dissatisfied with what they see and are voting with their feet. Benefits are making a massive difference. We are seeing some data that suggests that benefits can be the difference between employees staying or going to a competitor.”
