Employers need a co-ordinated strategy to ensure the workplace savings benefits they offer align with the organisation’s businessobjectives
A number of challenges are encouraging HR professionals in larger organisations to examine workplace savings. One is that the average life expectancy of employees is gradually rising due to medical improvements and better lifestyles.
Because of this and the shape of public finances, the state pension age is being progressively raised to 68, and this increase may be accelerated.
Also, employers are no longer able to remove someone just because they have reached a certain age, unless they can objectively justify having a default retirement age.
Because of the demographic changes, employees will have to work for longer to build up a decent retirement income and, because there is no default retirement age, they will be able to stay on at work. In some instances, employers may be happy to see some individuals stay on, while for others it may be less welcome.
As a consequence of these changes and the gradual introduction of pension auto-enrolment, employers are looking at how they can help staff build up a fund that will allow them to retire with a reasonable income. To a certain extent, this is a return to the traditional role of a workplace pension. It was a talent management tool to attract and retain staff and then transition employees out of the organisation when they reached a certain age.
Of course, just because an employer offers savings benefits, this does not necessarily mean they will be understood and appreciated by employees. For that to happen, staff need to understand why they are being offered, how they work and why they are relevant.
About one in five employers already offers a workplace financial education programme. Many of these highlight what employee benefits are on offer, how staff can use them to build up and manage their wealth, and the pros and cons of certain decisions that need to be taken.
Some of these programmes go beyond simply informing employees about the benefits on offer. Some also examine money management to help workers take control of their finances and feel financially secure. The assumption is that employees who are worried about their personal finances are less focused at work.
However, offering such benefits and education will not have much impact for the business unless there is a strategy. That is why, when it comes to savings, more employers are adopting a strategic approach that allows them to consider what they need to do to ensure they support the organisation’s objectives.
Once alignment has been achieved, employers will be able to assess existing and potential offerings and how they support business objectives and the acquisition and development of the employee behaviours, values, attitudes, skills and achievements that are needed for the organisation to be successful. It will also aid its communication to employees about what is being offered, why and how it could be relevant to them.
One manifestation of a joined-up approach to wealth creation is HR starting to examine their employer’s defined contribution (DC) pension arrangement to see that it is delivering good outcomes, both from an employee perspective and a business perspective. For instance, how do such elements as charges, fund options, employer contributions and communications help or hinder organisational resilience and agility?
Employers are beginning to see that offering workplace savings benefits sends a powerful signal to prospective and current staff about what type of employer it is. By offering these benefits and financial coaching, the employer is showing it sees itself as a partner in helping employees build up their financial understanding and wealth through the workplace. This can also foster engagement as staff perceive that their employer is concerned about their future wellbeing.
However, for the employer to reap these advantages, there needs to be alignment between its business and people management strategies, engagement with employees over what benefits exist and why, and a mechanism that allows these benefits to be assessed and evaluated.
Charles Cotton is reward adviser at the Chartered Institute of Personnel and Development
Read more articles from the Workplace Savings Quarterly