Benefits on a budget

Targeted voluntary benefits and versatile perks like gift vouchers help in the thrift stakes, says Alison Coleman

In the war for talent, an attractive package of employee benefits is almost a necessity. But not all employers, especially those with a limited budget, feel they can justify investment in sophisticated high-tech flexible benefits schemes and total reward programmes. These organisations are often inclined to adopt a more creative approach to employee benefits instead.

With careful planning and input from employees themselves it is possible to offer a range of benefits that achieve maximum staff retention and engagement with minimum outlay. And for many organisations, a voluntary benefits scheme that offers products and services to staff at a discounted price is a good place to start. These schemes can be designed to include valuable perks such as childcare vouchers and bikes for work, which can be payable through salary sacrifice, resulting in additional benefits for staff and employer alike by virtue of tax and national insurance (NI) savings.

Mark Carman, marketing manager at benefits provider Motivano, says: “The beauty of this is employers can reinvest their NI savings into additional benefits.”

Voluntary benefits plans are understandably popular among firms working with limited financial resources; however, there are issues to consider when choosing a scheme.

Kevin Hammond, UK sales manager at voluntary benefits provider AIG Benefits, says: “Employers need to decide the best way of engaging their employees. This can be done in a number of ways, including surveys to determine exactly what employees want to see within the scheme or looking at other successful schemes with similar employee audiences.

“Products should be appropriate for the audience and supported by an effective communications strategy that incorporates the corporate ethos and branding. Timing is important to ensure that any launch works with other business initiatives.”

Tailor to demographics
Voluntary benefit schemes need to be flexible enough to support the demographic profile of a workforce. Therefore, employers need to source a provider that enables them to be able to pick and mix products from a menu selection and to exclude any that might create a conflict, while at the same time including their own negotiated products.

Richard Davies, head of employee benefits at P&MM, advises employers to shop around for a provider and understand how their schemes operate.

He says: “Rather than charging a fee, some [providers] secure their revenue through online advertising – pay-per-click advertising can be extremely lucrative – but it is important to know which products will be featured and whether they are right for the workforce. A cost-neutral scheme that fails to deliver what people really want is a false economy.”

Other cost-effective options that come under the umbrella of staff benefits include gift vouchers. While these are often associated with instant reward and recognition strategies, Martin Cooper, sales and marketing manager at voucher company Love2reward, says these also work well in a more structured, long-term scheme.

“Vouchers are popular with employers and staff because they are so versatile. Individual employees can personalise their reward by choosing from a broad range of merchandise options, and they can be incorporated into a larger and longer term scheme, for example, where staff can bank points awarded for good performance and then use them to purchase something of higher value,” he says.

Low-cost benefits strategies can be enhanced by offering less tangible extras, such as flexible hours and the option to buy and sell holidays, which hardly cost anything to implement, but may be more highly valued by staff than cash-based benefits.

Whatever their budget, employers need to keep their benefits relevant to their workforce, which involves carrying out regular research into employees’ views about what they feel should be in the programme.

This should involve the organisation as a whole, including the often-overlooked human resources department, says Graeme Slocombe, department manager at human resources consultancy HR Access.

“Managers know the costs of recruiting and developing staff, and recognise the value of benefits in helping to offset those costs, but unless the benefits match the needs of the workforce it is money wasted.

“Members of the HR team tend to know individual members of staff quite well and can play a key role in assessing what they want, and what they don’t want, and then feeding that information back to management,” he says.

Employers that opt for a budget-led benefits scheme may be worried that it could be perceived by staff as a cheap option when compared with what other companies are offering, and that as a consequence employees might feel undervalued.

However, AIG’s Hammond says that employers should take steps to maximise the value of the available benefits through effective communication and managing staff expectations. “A communications programme has to be interesting and effective – linking ongoing tactical benefit communications to consumer purchasing trends is extremely effective. Some employers make their schemes fun by running competitions, which are frequently sponsored by the benefit supplier,” he explains.

Clear explanation
Motivano’s Carman suspects that giving too much financial detail about the benefits on offer could backfire on employers.

“If people know that their employer has spent £50 on benefits, their attitude might be that they would rather have the £50 in their hand,” he says.

However, Neil Winter, managing consultant at business psychologists YSC, believes that if benefits are communicated in the right way, the actual cost is likely to be irrelevant to most employees.

“Employers should be straightforward about what they are offering and open about their philosophy, perhaps explaining that their benefits spend is lower because they are putting more money into base pay and salary,” he says.

The worse thing employers can do is give no explanation of their benefits strategy at all. “It is the way that you communicate what you are providing that can build engagement,” he adds.

Most experts agree that regardless of the amount spent on benefits, communication is key when it comes to employee engagement.

Marcus Underhill, head of flexible benefits at IT firm Vebnet, says: “Things can succeed or fail by virtue of how they are communicated, and this doesn’t have to be expensive. Have competitions, frequent updates, reminders and generally get people involved. New technology tools can also be used at low cost; wikis and blogs and podcasts of presentations can easily be set up and used to encourage usage and acceptance by staff.”

He also believed that attitudes to benefits spend need to change, as it is the outcome that matters as well. “The current thinking is that if we do what our competitors do then we are semi-happy. At the end of the day, it is spend and return that matters, not just the spend,” he concludes.


Core benefits on a budget†

A limited budget may exclude certain benefit options, but it should not stop an employer from putting some kind of package in place. Employers should generally be able to see some return on the provision of core benefits such as life cover, income protection, pension contributions, and holidays, says Vebnet’s head of flexible benefits Marcus Underhill.

“At the next stage, this can be supplemented by some form of stock ownership to encourage everyone to focus in the same direction. You can add childcare vouchers to this list as they are hugely popular and, using salary sacrifice, are so easy and cost effective to do, even for small organisations,” he adds.

Commission from some products can also help to offset the costs of provision, for example, things like life assurance and income protection broking can be done for free, with the broker receiving the commission on take-up. “It is becoming possible for a small employer to implement flex, total reward and voluntary benefits [for] free under these models,” adds Underhill.

Case study: Niche Hotels caters to interest†

The leisure sector has earned a reputation for high levels of staff turnover, and when Niche Hotels, a collection of four boutique hotels in Cardiff, the Cotswolds, London and Newcastle, was set up, it was something that co-founder and sales and marketing director Alison Corlett was determined to avoid.

She says: “We only employ around 200 full-time staff, so implementing a formal benefits scheme wouldn’t be cost effective.” Instead, the company turned its modest, close-knit workforce – and the appeal of the industry sector – to its advantage. Under the group’s ‘Never Say No’ staff recognition and reward scheme, cash awards of up to £150 are made to the peer-voted award of Employee of the Month, in bronze, silver, gold and platinum categories.

Every 12 weeks, an extra £1,000 is presented to the Hotel of the Season, and a further £2,000 to the Hotel of the Year, which staff can spend on themselves however they wish. “We also offer a family and friends discounted rate of £25 to stay at our own hotels, which has been extremely popular,” adds Corlett.

She explains that Niche Hotels doesn’t offer pension contributions due to limited interest among its staff. However, for those who decide they want to start a pension, it invites financial advisers and pension providers to come in and offer advice.

Corlett says: “Allowing people to have the main say in their perks engages them.”