Where should employers draw the line with benefits provision?

  • If employers are not seeing a return on their investment in benefits or schemes are not achieving their desired aims, such as increased employee engagement or retention, then they might be spending too much.
  • Employers should consider whether they are offering benefits to be viewed as an attractive place to work or because they genuinely want what is best for their staff.
  • If an employer cannot justify what a benefit does to recruit, retain or engage staff, or support its culture, then it is worth considering why it has it in place.

The large amount of choice now available across the benefits market could be seen as a sign of demand from both employees and employers. As organisations look to build a package that positions them as an employer of choice in a competitive recruitment market, as well as supporting employees in key areas of their lives, it can be easy to end up with a bulging benefits package. So, given the ever-growing list of benefits on offer, can an employer end up offering its workforce too much?

How much is too much?

The key to an effective benefits portfolio is to make it broad, relevant and diverse, and ensure it is well communicated to the workforce. If employees do not know of, or understand, what is on offer, even investing in one incentive could be too many.

Why would an employers invest in benefits that are outlined as part of a new starter’s induction and then never mentioned again? asks James Malia, UK managing director at Prezzee. When schemes are well communicated, each employee will benefit in their own way, he adds.

“Whether it’s outlining benefits on the ‘working for us’ page of a website or reminding people of a different offer during each monthly meeting, employers have worked to get initiatives signed off, so should shout about them,” he says. “If even two people use a certain unique benefit and it has helped them mentally, financially or with their physical health, then the additional time investment will have been worthwhile.”

In the current climate, with employers looking at their budgets, if they are not seeing a return on their investment, or that benefits are not achieving their desired aims such as increased employee engagement or retention, then they might be spending too much.

Employers may, therefore, choose to focus on key areas and offer benefits around those, says Jeff Fox, principal at Aon. “There is an optimum number to offer, but this depends on the business, its workforce size and its priorities,” he says. “Benefits are often used to help attract and compete for staff. If they are typically low in a particular sector, employers could take advantage of that by offering a competitive package but should avoid going overboard and consider offering the right amount for their sector.”

Any benefits that are not valued by staff could also be considered to be surplus to requirements. Employers may want to focus on the quality of their provision and its alignment with their values and culture in order for it to be effective. A low take-up of a benefit could be seen as a sign that work is needed for employees to understand and engage with it, rather than removing it altogether.

Choice and relevance are also important considerations. In some organisations, the number of benefits of offer is not an accurate indication of whether they are offering too much or too little, but rather that they need to offer a wide variety in order to cater to all employees, says Chris Ronald, vice president EMEA B2B at Blackhawk Network. “Businesses have diverse workforces that require a wide variety of support and individuals who value different things,” he says. “All demographics must be considered to create impactful engagement, ensure relevance and maximise participation. Education is also key.”

He references the Blackhawk research Giving employees extra support during a cost-of-living crisis that was published in June 2022, which found that 73% of employees did not fully understand what salary sacrifice meant, whereas 98% of employers thought their staff understood it to some degree. This suggests that education around benefits for employees is important, as there is little point in offering something that they do not understand.

“There is a clear disconnect between the employer and the employee, yet salary sacrifice can save employees money and help in mitigating the effects of the cost-of-living crisis,” Ronald says.

Where should employers draw the line?

In terms of where to stop regarding benefits provision, it can depend on the organisation itself, how it defines its culture and what it wants to be. Employers have a duty of care to their employees and a good one will try to help or support its workforce whenever possible, however, there are some areas where organisations can end up encroaching on their employees’ lives.

This could be considered a step too far, particularly given the amount of data employers can gather on employees from their benefits usage, says Fox. For example, if staff receive support on debt management or credit scores, they could feel uncomfortable about their employers knowing they needed help with these issues, which they consider to be sensitive and private information.

It can be difficult for employers to know where the line should be drawn when it comes to supporting employees. They should consider whether they are offering benefits to be viewed as an attractive place to work or because they genuinely want what is best for their staff. Due to the cumulative effect of the Covid-19 pandemic, the cost-of-living crisis, rising inflation and the great resignation, benefits packages are now expected to offer a more creative range of products and services for financial, health and mental wellbeing, to name a few. Benefits that help employees’ salaries go further have also become a priority.

An employer should ensure that it understands the needs of its workforce and how its benefits provision can be reflective of the support required, says Ronald. “Providing a benefits package that doesn’t meet the needs of employees is almost as useless as not providing one at all,” he explains. “The balance of ensuring that there are enough benefits to support all demographics but also not too many that staff don’t understand them, is where the line is drawn. Education around benefits is crucial to implement a successful benefits scheme. Rolling out a smaller programme with a strong communications and education strategy would be of higher value than one spread too thinly.”

Should employers cut back on benefits?

If an employer cannot justify what a benefit does to recruit, retain or engage staff, or support its culture, then it is worth considering why it has it in place.

Benefits that are not used or valued by employees in the current climate should be cut back, says Fox. “Employers should look to optimise their benefits spend to improve employee engagement, retention and recruitment and spring clean their offerings to ensure this,” he explains.

As some organisation face increased financial pressures due to the current economic climate, there are ways of offering support that will not cost them a penny. Tax-efficient benefits, such as bikes-for-work schemes, or cash back cards, such as those provided by Byond, are both examples of how employers can provide savings to their employees at no cost to the business. Meanwhile, digital options may offer more value due to often being at a lower cost.

Understanding what benefits workers are using and what they value is critical to avoiding wasted budgets and ensuring benefits packages reflect the organisation and those within it, says Dan Mills, partner at Lemonade Reward. “It’s, therefore, important to research,” he explains. “If employers have online portals, they can monitor activity around different products and ask for feedback from providers, or they can gather this information directly from staff in surveys, feedback groups and exit interviews.”

In the current climate, incentives focused on support and care are what many will be looking for. Now might be the time to re-evaluate and engage with staff to understand what they do and do not want in terms of benefits provision.

Rather than cutting back on benefits, employers should ensure their package has options that speak to different demographics and needs, says Ronald. “How to tailor a programme comes down to three things: employee engagement strategy, challenges of recruitment and retention, and what is important to staff,” he says. “Employers need to first understand their motivations and from there can figure out which options to prioritise. Sometimes less really is more; they should emphasise maximising the benefits already on offer before adding to them.”

So, rather than focusing on the number of benefits they offer, an organisation should instead focus on what benefits are right for both it and its workforce. Whatever form this takes, employers should remember not to cut back on support that makes a real difference to the most valuable asset in any business: the employees.