Using benefits to support low-paid staff

Lower-paid staff can be particularly vulnerable during a recession, but carefully targeted benefits can help them cope, says Nicola Sullivan

Times of economic crisis pose financial challenges for many, however, those on low salaries are often the most likely to feel the pinch. Employers can make a number of provisions through their benefits package to support their low-paid staff, for example, shop assistants in the retail sector.

Trying to ensure the welfare of staff who are more likely to feel the financial strain of recession can have advantages for employers, such as helping to increase retention rates and productivity levels, and reducing sickness absence. It makes good business sense to support these workers because they often play a crucial role in the front-line delivery of services and products.

A voluntary benefits scheme is one of the simplest ways for employers to increase the spending power of low earners. Plans can be tailored to help staff meet the cost of everyday living, plus some luxuries. For example, schemes could include retail vouchers, which staff can buy to obtain discounts on goods such as groceries and petrol. These can be offered alongside discounts on luxury items, such as meals out. Matt Waller, chief executive officer at Benefex, says: “It is about understanding the workplace demographic and what appeals to them.”

Employers could also offer staff discounts on their own products or services, either as part of a voluntary benefits scheme or as a standalone perk. As well as helping employees to make their money go further, it may also boost their knowledge of, and loyalty to, their employer’s business.

But Waller says organisations should ensure any benefits are appropriate for staff. For example, offering tax-efficient benefits, such as childcare vouchers, via salary sacrifice, may help employees save money, but not all staff on a low income will be able to take part in such schemes if the sacrifice pushes their take-home pay below the national minimum wage. Even if staff want to take up the perks, they may not feel financially able to commit to salary sacrifice schemes, he adds.

Employers can support lower-paid staff with any financial decisions by providing workplace financial education programmes. Workplace financial education seminars, for example, can help staff understand the basics of personal finance. David Whitely, spokesman for financial capability at the Financial Services Authority (FSA), which runs such seminars, says financial education can be vital in supporting low-paid staff through times of economic difficulty, because such workers are more vulnerable to slight changes in circumstance, such as increases in household bills, a cut in working hours or a partner being made redundant.

“The key barrier we find is that when someone is earning a low wage and managing [from] month to month, they do not see the need for financial education because they do not think they are having any problems,” says Whitely. “What seminars try to do is point out it may take only a small change in circumstances for staff to suddenly find themselves in a tough financial situation. We try to educate people on how they can avoid that, but also help them plan for it if it does happen.”

When offering lower-paid staff financial education, employers must bear in mind that this group may be reluctant to make long-term savings. “We find people on lower incomes better at managing [from] week to week or month to month because they have to make that money go as far as it can,” says Whitely. “It is more about addressing the problems of long-term saving and pensions.”

To help staff think about setting some money aside to fall back on, employers could provide them with access to suitable savings plans, such as sharesave schemes or individual savings accounts. They could also make sure that any financial education that is provided explains the value of savings-based perks such as share schemes and pensions.

Gary Smith, a senior consultant at Watson Wyatt, says: “Many employers invest a significant proportion of payroll in pensions and other employee benefits, but they are frustrated that the value of these benefits is too often not fully understood or appreciated, and that some employees make financial decisions they will later come to regret.”

If staff have already run into difficulties or require emotional support in times of hardship, employee assistance programmes (EAPs) or other types of counselling service can provide guidance, advice and support on a range of problems, such as debt, housing issues or relationships. This can be made available through confidential helplines or face-to-face counselling sessions. Alex Bennett, head of health consulting at Aon Consulting, says: “An EAP is arguably more relevant for low-income workers, if [employers] accept they are more likely to be affected by the credit crunch.”

Low-paid staff are also likely to appreciate help with healthcare costs. Healthcare cash plans, for example, are a low-cost perk that typically provide cash back on a range of treatments, such as dental and optical care, physiotherapy and health screening. These benefits have traditionally been paid for by employees, but there is now a trend for employers to fund them. “It is impossible not say cash plans have been the most successful benefit in terms of penetration in the case of lower-paid workers,” says Bennett.

Alternatively, dental insurance plans can help staff who are struggling to meet the rising cost of treatment on the NHS.

Employers may also wish to consider providing low-cost online health checks to enable staff to assess their own health and wellbeing, and access information and advice on how to deal with existing ailments and conditions.

All these healthcare perks can be promoted to staff through workplace health and wellbeing days. Whatever benefits employers offer to support low-paid staff, ensuring they know what is available is key to maximising take-up and boosting employee appreciation. Communication to this group can be tricky because they often do not work in an office environment, so may not have access to a computer with the internet or email.

Face-to-face meetings are often a good way to communicate with off-site workers, while information should also be passed on during new joiners’ inductions. Other good ways to engage staff with perks include telephone helplines and paper-based information, plus benefits fairs and roadshows.

Good communication can have long-term gains as staff who feel supported in difficult times may well pay this back with increased loyalty when circumstances improve

What to consider when providing benefits for low-paid staff

Voluntary benefits schemes are a good way of helping to increase the spending power of low-paid staff.

  • Employees on a low salary will not be able to commit to paying for tax-efficient benefits through salary sacrifice if this will take them below the national minimum wage.
  • Financial education seminars can be used to encourage those on low incomes to make long-term investments and manage any changes to their circumstances.
  • Confidential counselling services, such as those offered through employee assistance programmes, can help low-paid staff cope with problems.
  • Workplace health and wellbeing days are a cost-effective way of offering employees health checks, while also promoting the value of an employer’s healthcare benefits.
  • Cash plans and dental insurance are popular with low-paid employees.
  • Employers should ensure communication is suitable for employees who do not have access to a computer or the internet at work.

Case study: Tesco perks are all-inclusive

Tesco strives to offer benefits that appeal to all its 275,000 staff, many of whom are on low salaries.

All staff are entitled to the same core benefits, including a defined benefit pension plan, sharesave scheme, staff discount card, and a range of voluntary benefits. Louise Pocock, Tesco’s UK benefits manager, says: “Our lifestyle benefit options can be tailored to suit each employee’s circumstances. Tesco offers a defined benefit pension scheme to all staff, which provides long-term benefits to each member of staff regardless of their wages and is arranged to support every employee once they have stopped work.” The retailer uses a wide range of communication methods to ensure all parts of the business receive information on perks. For example, in November it issued staff with an annual benefits report to highlight their individual benefits and pension contributions.

To reach staff who do not have computer access at work, Tesco issues printed leaflets, and key information is sent to home addresses.