What next for employee benefits after Brexit?

Steve Herbert is an award-winning thought leader on Pensions and Employee Benefit issues.

I doubt that anyone involved in UK business will feel anything other than a surge of relief that the recent Purchasing Managers’ Index (PMI) data regarding both manufacturing and service industries has shown a marked improvement from that published immediately after the EU referendum result. This data shows that life – and business – goes on, and is therefore likely to be welcomed by all.

There is however a danger that the latest PMI findings may (as with last month’s figures) be over used to justify the campaigning positions of each side in the Brexit debate. Indeed it is noticeable that the national spoken media continues to balance their comments between Remain and Leave spokespeople, even though that debate has now concluded and all signs indicate Brexit is the way ahead for the UK. In reality, the debate about who was right prior to the referendum now becomes much less important than the ‘what next?’ question for employers and employees alike.

So, with that in mind, what next for employee benefits?

First – and importantly – employers should recognise that most of the legislation-led change in the employee benefits space is (and has been) driven by UK legislation and/or political promises rather than that of the European Union. As a result it is unlikely that exiting the EU will in itself significantly change the rules around company-sponsored benefits provision.

That said, it is worth noting that the underlying finances of the UK are about to undergo a seismic change. The UK has made the major decision to break from a close trading relationship of more than 40 years’ duration – and whether this is for good or ill there will doubtless be some major changes to the national finances. This in turn may influence government policy around tax incentives, so could well be a driver behind the future direction of travel of workplace benefits.  In reality we are unlikely to know much more on this until the new Chancellor’s Budget statement in the autumn.

So at present it is a case of no change. But does this mean no action?  Perhaps not, and I would highlight the following two points as being worthy of employer consideration at this time:

  • As we have previously explored on this blog, the UK has a marked productivity deficit when compared to the other major economies of the G7. Although this has always been a concern, it is possible that our membership of the European Union has somewhat masked this issue in the recent past. In a post-Brexit environment it will become increasingly important that the nation (and by extension individual employers) improve this position to ensure that we remain competitive in the new world marketplace.
  • The current (and very welcome) period of fiscal calm is primarily driven by an easing of the political turmoil immediately after the referendum, coupled with the reality that until such time as Article 50 is triggered our trading relationship with Europe remains unaltered. It follows that another period of turbulence could follow once the UK formally enters the EU notice period.

Given that there is currently a period of unexpected calm, now might be a good time to look again at both these issues. The more far-sighted employer will use this time wisely to future-proof their organisation against the uncertainties ahead.  And perhaps both issues could be (at least partly) addressed by a robust use of employee benefits?

Engagement and attendance can of course influence productivity, so making sure that your employees understand (and therefore better appreciate and use) the benefits on offer can only be a good thing for productivity.

By the same token ensuring that employees are prepared for whatever personal finance challenges Brexit may present will be really important. Financial stress can be damaging to both wellbeing and engagement, so it is a good idea for many more employers to offer financial education tools and/or workshops to help employees manage their finances better in whatever turbulent times may lie ahead.

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I can’t think of a better way of ending this post than by repeating the words I wrote a little over two months ago: “As ever, it is about ensuring that the benefits package in place is competitive, relevant to employees, well communicated and (above all) that every facet of the offering is maximised to provide a return on investment (ROI) to the sponsoring employer. A quick search back through the archives of this blog will provide much information on such topics, as will a conversation with your usual Jelf consultant.

“Interesting times lie ahead, and the winners may be those that react quickly and decisively to the business challenges inherent in the Brexit decision.”