Benefits research 2012: Sponsor’s comment: Employees matter most

Staff must be engaged in the design of benefits programmes, says Stephen Watson, head of delivery, defined contribution pensions and benefits at Alexander Forbes Consultants & Actuaries

As I was reading through the results of this year’s research, a definite theme started to become clear: value, value and value. Across the board, there is a growing recognition that employee benefits are necessary if employers want to attract and retain the right people. Indeed, about 60% of all respondents now feel their benefits are linked more closely to their overall business strategy, and 80% believe benefits are an effective recruitment and retention tool.

But with economic pressures continuing, there is still a need to reduce, or at least manage, costs. With most employers now spending up to 20% of total payroll on benefits, it is no surprise that these remain a target for cost containment.

Because of this balancing act between benefits and their costs, it is also unsurprising that nearly half of all employers reviewed their benefit providers in 2011 to seek cost savings, and 31% intend to do the same this year.

In the search for cost cuts, it seems salary sacrifice arrangements were in the spotlight. Only 22% of employers now pass on the full employer national insurance saving gains to employees. Last year it was 32%.

But cost-cutting can only go so far. There needs to be a different approach to designing an employee benefits programme, with constant evaluation of current benefits to assess their real value to staff. Only benefits that really engage employees can have any real effect on the three Rs: recruitment, retention and reward.

The research shows most employers do not formally evaluate the effectiveness of their benefits, and any changes result from perceived employee value rather than any real research. In fact, 60% of employers that added new benefits over the past 12 months did so because they thought employees would value them.

Employers that formally evaluate benefits use either take-up rates (68%) or engagement surveys (69%) to assess value and to drive their decisions on adding, changing or even replacing benefits. This seems logical; if you want to know which benefits engage employees, ask the employees.

It could be this approach that is driving an increase in employee wellness-type benefits. Where new benefits were introduced in the past 12 months, either as core or flexible benefits, these were mainly private medical insurance (PMI), dental insurance, employee assistance programmes (EAPs) and gym membership.

But increased engagement is not just about the benefits provided. The way in which they are accessed and communicated is equally important. Unsurprisingly, the use of technology is gaining traction, with 64% of employers now using some sort of platform to deliver and communicate benefits. Just 35% rely on presentations or workshops run by advisers or providers.

Engagement surveys, tempered with regulatory and market requirements, are a critical part of a value-driven approach to benefit programme design and, encouragingly, are being increasingly used during the process.

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