How can employers' ensure their benefits strategies are future proofed?

future proof

Need to know:

Future-proofing a benefits strategy needs to take into account an organisation's wider business goals, macro-economic trends and legislation.
Benefits technology needs to be factored into any strategy, including the potential for artificial intelligence.
Any strategy needs to be adaptable and able to react to changing needs and circumstances.

It is a basic human instinct for people to want to know they have taken steps to prepare for the future, and for HR and benefits professionals this can mean knowing that employee benefits packages are fit for the needs of employees, both today and tomorrow. But doing so is not an easy matter, with workplace trends, technology and organisational priorities all subject to unpredictable change.

Yet attempting to future-proof benefits is a sensible move, says Debra Corey, group reward director at Reward Gateway. “The only way to ensure [a] benefits strategy is fit for purpose, whether it’s for one year or for 10 years, is to align it with [the organisation's] purpose, mission and values,” she explains. “This shows the business and employees that [they're] all heading and working towards the same objectives, acting as an anchor to create connection and make sure [they] don’t drift off course over the years.”

Any attempt to devise a strategy that will last should answer the three questions of why, what and how, she adds.

Data analysisThe use of data can help organisations deliver a strategy that will fit in with the business’s overall objectives, says Alex Tullett, head of benefits strategy at Capita Employee Benefits. “This approach would take a full range of factors into consideration, including reviewing the business’s position in the market, its strategy and its wider people strategy, and then leveraging employee demographic analytics combined with effective competitive benchmarking,” he says.

In terms of practicalities, there are a number of elements that need to be factored in when planning ahead. Employers should consider three elements, says Paul Waters, head of guided outcomes at Hymans Robertson. “First, look at what is going on at the macro level in the world: socio-economic changes such as people living longer or UK home ownership trends which are affecting people at work,” he says. “Second, [there are] employee benefits trends and legislation, so [pensions] auto-enrolment increases and financial wellbeing. Then the third area is what’s going on in their business, so do [they] have a growth strategy or is [their] market changing.”

Taking the second element as an example, employers will see the minimum contribution rates for pensions auto-enrolment increase from 1% to 2% in April 2018, and then to 3% from April 2019. For employees, the rates will increase from 1% to 3% this April, and then to 5% in April 2019. For employers that already pay above these minimum rates, this will not be a big change to their cost base, however, some employers will think about whether they should do more to communicate the benefit to employees and ensure they appreciate the spend as the changes come in. However, it is not the biggest issue, says Waters. "Political change and changing the tax rates, [employers] can’t future-proof for," he says, "But some of those changes which might affect future legislation, particularly if we have a new government at some point, are more concerning when employers think about future strategy than the auto-enrolment increases."

Employee-led approachOne element that should be built in is the concept of employee choice, allowing staff to choose benefits so they get what they want out of packages, says Jack Curzon, head of scheme design at Thomsons Online Benefits. “Forward-thinking employers are offering flexible wellness pots to their employees in line with this trend, which give them the freedom to spend on any benefits they choose, so long as they contribute to their wellbeing, be it drum lessons, painting classes or more traditional wellness benefits such as gym memberships,” he says.

Thomsons' UK Employee benefits watch 2016/17 research, published in March 2017, found that more than half of employees (51%) would welcome such an approach, but only 4% of employers currently offer it. “This same approach can be taken to the financial health of employees, if this is a key part of an employer’s benefits strategy,” Curzon adds. “Employees that are looking to tackle debt, increase their savings or better plan their future wealth would benefit from monthly funds that enable to them to work towards those goals. This can go towards everything from overpayments on student loans to individual savings accounts (Isa), a stamp duty savings bank or first-home deposit scheme.”

There are some obvious benefits which any organisation is likely to want to include in a strategy, although it is important that employers stress these may change over time, says Corey. “One thing [employers] can do to future-proof benefits is to put in place benefits that fit in what I call the 'sweet spot', which are benefits that are low cost to the [employer] and high value to employees,” she says. “This intersection delivers something which will not only be effective, but which will have a better chance of lasting from year to year.”

Examples of these benefits include discount platforms and salary deduction benefits for technology and gyms, she adds.

Benefits communicationA change in tone may be needed as part of any wider changes, with employers moving away from how they have traditionally presented benefits. Dipa Mistry Kandola, head of flexible benefits at consultancy LCP, says: “Currently when we communicate in this area the organisation tends to be shouting out messages fixated on being ill, dying or retiring, which really does not resonate with employees right now."

Extending the conversation to include non-traditional working practices could also help here, particularly with younger workers, she adds.

Any strategy, though, needs to be able to change over time, says James Malia, director of employee benefits at Sodexo Engage. “One of the main sticking points with long-term strategies is how unwilling people can be about updating them,” he says. “Any long-term planning needs to consider a whole host of variables that could trigger a change. This is no bad thing, as it’ll help to avoid the strategy losing relevance to the business and its people.”

Reward and the business strategyReward and benefits professionals need to work closely with operations to ensure they are up to speed on any shift in the broader business strategy. New trends around engaging self-employed workers may necessitate changes to benefits strategy in the future, says Malia. “Whatever changes come, employers need to be ready to lead the charge or, at the very least, know how to adapt,” he says.

Any attempt to future-proof a strategy will also have to factor in technology, adopting the latest trends but with the flexibility to evolve in years to come. “Ease-of-use is a big factor,” says Kandola. “Technology developers are focusing on the user interface to make it more appealing and intuitive. Mirroring the platforms [and] apps that people use day-to-day in their personal lives will be key to improving functionality and engagement.”

In the future, platforms are likely to make more use of artificial intelligence, adds Malia. “We’re already seeing HR teams and businesses using automation across employee benefits administration to reduce cost and boost employee productivity, but this is just the tip of the iceberg,” he says. “Machine learning and predictive analytics will allow businesses to deliver employee benefits in a much more personalised way, reflecting each employee’s particular preferences and previous behaviours. Businesses could also introduce financial advice ‘bots’ as a benefit for employees who want this kind of support.”

However, it is important employers make sure the use of such technology is appropriate to their strategy and workforce, rather than imposing it on employees.

Yet there are risks, too, for employers looking to future-proof. “I would counter against being too radical,” says Waters. “How people behave and interact in the workforce and socio-economic changes are really slow moving, so if [employers are] going to make radical changes to [their] reward proposition [they'll] need to really test it with [their] people and make sure that is what they want: get the framework right but go slowly on delivery.”

And it can be tricky to truly future-proof a benefits strategy, says Lauren Claydon, global HR manager at recruitment firm Mason Frank International. “It’s difficult to predict how [organisational] culture may be affected in five or 10 years,” she says. “The most important way to future-proof any system is to be constantly receptive to employee feedback, needs and ideas."

As Claydon says, by having their finger on the pulse and adapting with culture, as opposed to retrospectively, employers can ensure a benefits strategy that their staff will continue to embrace.

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