Employee Benefits Future Strategy 2006 – Sponsor’s comment: Self-funding benefits communication strategy the aim

Article in full

One-third of surveyed companies put the value of their benefits package at more than 20% of salary – according to Origen’s fifth annual Employee benefits survey 2005/6. Why then do employers spend so much on benefits? According to the survey, over 80% of organisations believe a good benefits package attracts and retains high-quality staff. While 63% of organisations consider their employees do attach some value to their non-salary benefits, only 13% believe their staff value them highly. So why do employers spend so much on benefits when so few employees attach a high value to them?

Insurance is sold not bought. Employee benefit packages are no different. The employer needs to “sell” the benefits to the workforce to get an employee to value them. Education is a vital role in the “sale”. Education is delivered by effective communication. Most companies, by their own admission, are not achieving this. Only 13% of surveyed organisations think their employees attach a high value to the benefits package, compared to around a quarter that think their staff either attach a low value to their benefits or are indifferent to the package. Why this gap? The answer could be that only 2% of organisations rate their benefits communication strategy as excellent and only a third feel that it is good. Even a good benefits package will not sell itself. Communication is essential and this must be budgeted for. Without communication, the employer will not get value for money or a return on investment through attracting and retaining high-quality staff.

The most popular means of communicating the benefits package is still the traditional form of written information in a staff handbook, supported by a growing usage of company intranet or email. Total reward statements also provide a tangible method of communicating the value of the benefits, but these statements are still in their infancy.

Looking at the methods used for communicating benefits and the organisations that believe they have an effective communication strategy, there is no direct correlation. No method stands out as better than any other. The method of communication must be tailored to the needs of the workforce and fit the culture of the organisation.

One employer that is making employees sit up and listen is Make, the central London architectural practice set up by Ken Shuttleworth. The components of the employee benefits package are not remarkable. But there is a remarkable story behind the package – that being the drive with which the Make management executed its branding and communicated the benefits.

A sense of ownership was achieved by branding all the components ‘Make’. So rather than employees being presented with an insurance company pension, life insurance, healthcare or income protection policy, they are offered a ‘Make protects retirement’ product – or Make protects life, health, income. From the start, the management made a commitment to communicating the benefits with a series of weekly meetings for discussion on employee benefits, and the distribution of a personalised booklet outlining the features of the benefits as they relate to each employee. This programme of financial education has continued with regular financial surgeries. The Make message is certainly getting through.

So is it possible to financially justify the benefits package offered to staff?

On average in the UK across all industries, staff turnover is approximately 15%. The estimate of the cost of taking on a new member of the workforce varies widely. Using a 15% employee turnover and a cost of this turnover say at 50% of salary, worker turnover can cost a organisation as much as 7.5% of payroll each year. If it has a budget for communicating its benefits package of 0.5% of payroll, it will need to reduce staff turnover by 1% for the communication exercise to be self-funding.

So in summary, employers must “sell” their benefits to their employees. Communication must not only be an integral part of the launch of a benefits package but must be an ongoing programme. The communication package must be budgeted for in the benefit spend otherwise the employer is not maximising its return on investment. Communication can pay.