Over the past eight years, the benefits market has undergone much development, with many employers now offering vastly different packages from nearly a decade ago. Yet many of the issues and challenges shaping employers’ benefits packages remain similar to those experienced back in 2004, when we first carried out research into organisations’ benefits strategies.
In the Benefits research 2004, improving the perceived value of the package, making benefits more cost-effective and matching benefits to employees’ needs were the top three issues shaping respondents’ strategies. This year, these remain three of the top four challenges for benefits packages.
Ensuring employees are engaged with, and value, benefits is crucial if employers are to obtain maximum return on investment.
Economic factors also have a big influence on benefits strategies. As the economy continues to struggle, employers may still have to make redundancies and carry out other cost-cutting exercises, which can make it hard to maintain staff morale and engagement. But retaining key talent is vital to ensure employers have the skills to rebuild business when the economy improves.
This may be why there has again been a rise in the proportion of respondents that say improving staff engagement is the key issue shaping their benefits strategy this year, with 73% saying this is the case, up from 71% last year and 60% in 2010.
The need to keep staff engaged is also reflected in the top two reasons why employers say they offer benefits: because they are an effective retention tool (80%) and an effective recruitment tool (79%). Respondents rated these objectives almost 30 percentage points ahead of those in third and fourth place.
But employers can only identify whether their package is achieving its desired aims if they are willing to measure its effectiveness. Only 40% say they measure whether their package is effective. Of those that do, the most popular methods are by carrying out a survey of staff engagement with their employer or of staff satisfaction levels, or looking at benefits take-up levels.
But although 61% cite improving staff perception of the value of benefits as a key challenge for their organisation’s benefits package this year, just 31% survey staff on this variable as a means of measuring the effectiveness of their package.
The tough economic climate still poses challenges for employers. With the downturn dragging on, many reward and benefits professionals face an ongoing battle to control or reduce costs. Many have already undertaken cost-cutting exercises, so the challenge is now to identify other areas to make savings.
This may mean employers have had to shelve, or put on hold, plans they may have made for their benefits package. This may by why some of the actions that employers were planning a year ago have not materialised. For example, just 17% have implemented new benefits in the past year, but 12 months ago, 31% said it was on their agenda for the coming year. Similarly, 14% said they motivated staff to maintain morale, compared with 31% that said they intended to do so in 2011.
Perhaps there has been a greater focus on measures to help employers reduce costs than may have been thought necessary 12 months ago. Last year, 32% of respondents said they planned to review their benefits providers to get a better or cheaper deal, and the same percentage intended to renegotiate insurance-based benefits to achieve savings. A year on, 47% and 38%, respectively, said they had actually carried out such exercises.
This focus on cost-cutting looks set to continue over the next 12 months, with the same options topping the list of respondents’ planned actions.
As in previous years, improving staff appreciation of the benefits package and increasing employee perception of the value of benefits remain among the top priorities for the year ahead. This may have driven the priority topping this year’s list: improving benefits communication. After all, if staff do not understand what is on offer, they cannot appreciate the value.
Despite the changes in the economic climate, particularly over the last few years, employers’ annual benefits spend as an approximate percentage of payroll has remained relatively similar since 2004. Over the past eight years, the majority of respondents have consistently spent less than 20% of payroll on benefits (including pension, but excluding pay and cash bonuses).
A significant expense for employers is often the technology that can be used to deliver benefits to staff. Just under one-third (32%) of respondents say they do not use such systems. Of those that do, HR systems are the most popular type, followed by flexible benefits systems and voluntary benefits portals.
Linking benefits strategy to an organisation’s wider business strategy can help to raise awareness of, and engage employees with, factors such as its key business objectives, desired culture and external brand identity.
This can be achieved by offering carefully-selected benefits to support each of these strands. An organisation that wants to position itself as being environmentally friendly and socially responsible, for example, could reflect this within its benefits package by offering perks such as payroll-giving schemes, employee volunteering opportunities, bikes for work, green company cars and ethical pension investments.
Meanwhile, clearly linking an organisation’s benefits strategy with its HR strategy can help to ensure these messages are delivered consistently throughout the business in all strands of its people management.
Read more Benefits research 2012