Finding benefits that appeal to and motivate employees on low wages without busting either their own budgets or that of their organisation can be a challenge.
For this reason, many employers have been guilty of overlooking the needs of this group. Tobin Coles, head of flexible benefits at Jelf Group, says: “Until fairly recently, low-paid employees were overlooked from a benefits perspective, or given benefits that weren’t really relevant. But now, these staff are regarded as just as critical to the company as their higher-paid colleagues.”
Certainly from a cost perspective, it is worth holding on to this group of employees. Coles adds that even when salaries are low, high levels of turnover can add an extra 25percent or more to the salary bill in recruitment and training costs. “Delivering benefits that staff want will help to reduce turnover and can cost an employer a lot less than the cost of recruitment if they do nothing,” he says.
Employers that want to tailor benefits to the needs of lower-paid staff can choose from a number of options. Discounts on the organisation’s goods or services are a relatively common perk, especially in the retail sector, and can help to boost staff engagement with their employer, as well as helping to increase their familiarity with its products.
For example, Asda offers all employees a 10percent in-store discount regardless of the hours they work or their earnings. Nick Frankland, senior consultant with Punter Southall Financial Management, says: “This can be attractive as it makes a significant difference to how far their money goes. It can mean a lot in terms of goodwill without costing employers a huge amount.”
Some employers take this concept further by offering voluntary discount schemes for employees covering just about anything from entrance fees to theme parks, to groceries and clothes. Brian Morgan, business development director at Heath Lambert, says: “It’s relatively easy for an employer to arrange voluntary benefits that are available at a discount to staff.”
Some providers, such as You at Work and Asperity Employee Benefits, provide ready-made voluntary benefits schemes. The Jelf Group, for example, offers a scheme that includes more than 2,000 discounts and costs around £5 per employee a year.
Employers can enhance the value of an off-the-shelf package by marketing it to employees or branding it with the organisation’s logo. “Consider branding the benefits with the company name or run some face-to-face marketing, as this will improve take-up,” says Morgan.
Staff on a low wage will also value perks that boost their take-home pay. Bonuses, therefore, are often an effective incentive. As well as linking these to either the employee’s or organisation’s performance, employers could offer an attendance bonus to encourage staff to take less time off unnecessarily.
But employers should not ignore some of the more traditional benefits, even if they may initially be seen as too costly. “An element of life assurance is affordable and lower-paid employees can be in a demographic where life expectancy is lower,” says Frankland.
Ensure appreciation
Healthcare cash plans, which can cost as little as £1 a week per employee, are also commonly provided to this group of staff. Appreciation levels tend to be high as most people will see some return each year and, by taking care of employees’ health, employers may also benefit from reduced sickness absence.
But when designing a benefits package for lower-paid employees, employers should also remember there are many reasons why staff might be on a low income. Ann Bevitt, a partner at law firm Morrison and Foerster, says: “Among the low-paid, you find mums returning to work part-time and retired people who are coming back into work. This means there are people who won’t necessarily be earning a lot but will have additional funds that they could spend on benefits.”
This can mean that some benefits that initially seemed inappropriate, such as pensions or share schemes, are actually suitable for some low-paid staff.
Not all perks will come at a cost to an organisation or its employees. “Flexible working arrangements can be a significant benefit, especially for mums, students or older people who might be returning to work after a period of retirement,” says Bevitt.
This type of arrangement can work particularly well for retailers or organisations that operate shift patterns. For example, at McDonald’s, employees can’t dictate the hours they work, however they are encouraged to flex their hours to fit in with their studies or family commitments.
Neal Blackshire, benefits and compensation manager at McDonald’s, says: “When I managed a restaurant, I had five employees at university. Every holiday they would come back and work for us. This suited them and us as they were well trained and could easily slot back into the team.”
Problem areas
Irrespective of whether or not staff can afford to take up a benefit, there are situations where it isn’t possible for employers to offer certain perks. Tax-efficient benefits offered through a salary sacrifice arrangement are an example. If staff who are on a low salary participate in these schemes it could push their net pay below the national minimum wage.
Pensions are another problematic area. “When they retire, low-paid staff could find themselves caught in the means-testing trap, with their pension serving to reduce the benefits they would have received from the state,” says Frankland.
However, many low-earners will be starting out in their careers so these early contributions to a pension can make a significant difference to their final pot on retirement. Furthermore, pensions rules may change in the future, which could remove the means-testing trap and make self-provision more important.
Because this can be a complex area, Coles says it is important for employers to offer guidance to staff. “If you’ve gone to the trouble of putting in benefits, you don’t want employees to make the wrong choices. Advice and information can be delivered online cost effectively and will help to maximise the value of benefits packages,” he says EB.
Part-time staff
Part-time employees are often among an organisation’s lower-paid staff and when it comes to benefits provision their rights are protected by the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.
These regulations state that part-time staff must be treated at least as well as equivalent full-time employees, unless the reason they are not can be ‘objectively justified’.
Part-time employees will usually receive benefits on a pro-rata basis. This works well with benefits such as pensions or income protection, where there is a link with income or with a bonus or holiday, where entitlement can be based on the hours worked.
Some benefits, such as private medical insurance (PMI) and gym membership, are not so easily split. In these cases, employers can choose not to give the perk to part-time staff if there is an objective justification for such a course of action. For example, an employer might argue the cost of PMI is too high to justify providing it to an employee who works one day a week.
†
CASE STUDY
McDonald’s puts perks on the menu for all staff
Around 70,000 people work for McDonald’s in the UK, some of whom are on annual salaries, while others are on an hourly rate or employed through franchises.
This affects its approach to benefits. Neal Blackshire, benefits and compensation manager, says: “Whenever we introduce a benefit we try to make it as applicable to as many as possible.” A prime example is its bike scheme. “The government’s cycle-to-work scheme is offered through salary sacrifice, so wouldn’t have been available to all our employees. Instead, we negotiated discounts of up to 60percent,” says Blackshire.
The company also offers a staff discount card and bonus schemes that include an extra 50p per hour for a fortnight if staff are judged to work in one of the top 50 restaurants identified by mystery shoppers, service awards for those who have worked for the company for five years, and an employee of the year scheme.