Whether we are aware of it or not, benefits packages are undergoing a fundamental restructure that will leave them looking more streamlined, sustainable and affordable.
The recession has already forced employers to question the value of the benefits they offer. The good news for us benefits professionals is that there has been plenty of opportunity to rebroke and otherwise cut costs without losing too many benefits.
However, news is now trickling through of employers that have cut all they can and are questioning the purpose of offering some stalwart benefits, such as private medical insurance. Unless the answers have a strong business focus, these types of benefit are being removed.
The same has been happening to final salary pension schemes for many years and we are all aware of the irreversible demise of these.
But, as so often happens when a new world order emerges, it is the convergence of several major catalysts that results in long-term change.
The tax changes announced in April’s Budget affecting the incomes and pensions of high earners have yet to be widely felt, but thought leaders in reward point out that what happens at the top echelons of an organisation will trickle down to influence the rest of the workforce.
As always, it is primarily tax breaks that drive the types of benefit offered by an employer. After all, why offer benefits if they cost more than cash salary? Healthcare benefits are the obvious exception, because of their broader impact on driving down absence. But the lack of hard, quantitive data on whether this is true in the vast majority of organisations puts these benefits at risk in a world where offering perks because it is the ‘right thing to do’ is vanishing before our eyes.
It would be dangerous to believe that cuts are inevitable, and there are good business reasons to restructure rather than remove packages. There will be an upturn in the next few years, and the war for talent will resume. Any damage done to staff morale now will not be forgotten.
So streamline, review and make the changes needed for the 21st century, but bear in mind that we won’t be in a recession for ever – so plan for the long term.