Thought leaders: Academic insights: True value of benefits must be made clear

Difficult times have led to an innovative approach to voluntary benefits, says Ian Kessler

In difficult economic times, it would be fair to assume greater managerial scrutiny of employee benefits. There is scope to debate how organisations might deal with such benefits. There is a value-for-money argument, which highlights the scope for the leveraging of benefits, particularly as more expensive elements of the remuneration package come under pressure.

As controlling pay becomes a key concern, improving certain benefits becomes a lower-cost reward option, keeping employee motivation and perceived wellbeing ticking over. There is an equally plausible cost-control case, encouraging a clampdown on benefits as part of a more general belt-tightening exercise.

Some benefits might be viewed as the soft underbelly of the remuneration package, easily cut without greatly undermining employee morale, particularly if traded off against pay protection. As far as voluntary benefits go, the choice would appear to be relatively unproblematic – such benefits typically generate limited cost to the employer, suggesting value for money as a means of reward, especially in straitened times.

Against this backdrop, the findings of the IRS Employment Review’s Benefits and allowance survey 2010 deliver a double surprise. Rather than benefits being the focus of fervent activity, the picture to emerge is one of inertia – about two-thirds of employers had made no change to their benefits regime.

Just as striking was the fact that the use of voluntary benefits had actually fallen. In 2009 they were offered by 28% of employers, but in 2010 the figure had dropped to 21%. The absence of major change in the current economic climate is a significant finding, illustrating the resilience of benefits. This is noteworthy given the relatively broad coverage of benefits across organisations. The IRS survey revealed that about three-quarters of employers provided childcare vouchers, two-thirds employee assistance programmes and almost half offer health insurance. Strikingly, 20% of employers had increased their benefits, while only 10% had reduced them.

Nonetheless, these findings raise the question of whether organisations are proactively engaging with benefits as an effective means of managing employee performance.

There is perhaps greater scope to consider issues of substance and process in relation to benefits. In substantive terms, difficult times might be seen as generating a need to innovate. The IRS survey hints at the development of new, lifestyle benefits – offers of health screening, extending health coverage to unmarried partners, and providing season ticket loans to encourage the use of public transport.

In process terms, consideration might be given to how information about benefits is disseminated. The need for good communication of benefits has become a familiar, perhaps clichŽd mantra, but this does not detract from its significance.

Research shows incongruence between employee and employer evaluation of benefits, which needs to be addressed. Employees tend to undervalue benefits, typically seeing them as a hygiene factor. Employers often take a more optimistic view, regarding benefits as a means of recruiting, retaining and motivating.

The communication mantra sometimes misses the point, presenting communication as the simple dissemination of information. Effective communication is about more than just telling staff what benefits are available. It is about giving meaning to this information. It is about framing benefits to send the appropriate messages to employees. It is about highlighting the value of the benefits on offer, both in tangible and symbolic terms; stressing that they are a benefit rather than a right; drawing attention to how they mirror and reinforce the organisation’s employment brand.

In difficult times, the value to be gained from benefits might lie as much in how they are presented as in what is actually on offer.

Ian Kessler is reader in employment relations at Said Business School at the University of Oxford


Benefits and allowance survey 2010, IRS Employment Review, (June 2010)

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