United Kingdom

Benefits – Understanding why the landscape impacts your costs, value and ROI

March 2018

Employee benefits offered by businesses today are radically different to those available several decades ago. When employers started offering so-called workplace perks in the 1950s, partly as a response to wage increase demands from unions, they tended to focus around holiday entitlements and in some cases, minimal pension provision.

These days, employees are spoilt for choice when it comes to employee benefits. From health screenings and gym memberships, cycle-to-work schemes and retail discount vouchers, not to mention legal entitlements such as auto-enrolment and the right to request flexible working.

Bearing in mind the benefits landscape plays an important part in any employee benefit strategy, we shouldn’t forget that employees are people, too. What happens with the economy, inflation and government policy on welfare impacts us as humans and affects what we ultimately want or need from our employer.

“Employee benefits are now supplementing or replacing state support,” says Alex Stewart, Business Development Manager at Aon Employee Benefits. “Now, more than ever, the onus is on the employer to look after the wellbeing of their staff, whether through group income protection schemes, Employee Assistance Programmes or increasing employer contributions to workplace pensions.”

Private Medical Insurance in particular has become increasingly popular: a direct result of increasing pressures on the NHS. And, over the past five years, there’s been a raft of legislation which has had – and continues to have – a massive impact on benefit provision. Auto enrolment, state pension age increase, pension freedoms and Optional Remuneration Arrangements reforms have forced more employers to revisit their benefit strategies.

But more than these, the employee demographic has changed exponentially over the past few decades. Not only are employers having to grapple with a multi-generational workplace and the demands of each generation, but the ageing population is bringing its own specific challenges. Aon’s August 2017 whitepaper on the Ageing Population revealed that there are more older people in employment than ever before, with 9.2m workers aged 50 plus in 2015 compared to 7.2m in 2003.

Employee mobility too is on the increase. As Stewart points out, with the demise of the ‘job for life culture’ came the end of the long-serving employee who stays for ten years or more. Now, employees are more mobile than ever and employers are having to work harder to retain key skills.

It’s no surprise then that employee benefits has a huge part to play in workforce retention, not just to maintain a competitive edge over other employers, but to give staff something of value in addition to their monthly remuneration package.

“Employees are a lot more savvy these days,” says Stewart. “It’s relatively easy to find out the going rate of pay and/or benefits of any given role. It makes a strong business case for benchmarking - it’s in the interests of employers to know how their current scheme stacks up against competitors, how meaningful it is and how much of an impact it’s having, all within the context of the changing benefits landscape.”

By benchmarking, employers look at the whole benefits picture within their organisation and assess its competitiveness against their industry and competition. The Benefits Score from Aon is the first quantitative way of measuring the success of a benefits plan and strategy, making it accessible and understandable for employers.

Without such an in-depth understanding, benefit packages are often chopped and changed in a knee-jerk response to budget constraints and the latest legislation, and employee engagement levels may remain low as a result.

“Businesses wanting to improve the effectiveness of their employee benefits packages and in turn demonstrate return on investment can use benchmarking to help shine a light on existing workplace benefits and analyse their overall performance,” says Stewart, “Otherwise, it’s like feeling around in the dark with no guidance and no idea which way to turn.”

“The Benefits Score also takes into account the communication of the benefits which is often the missing step even if the benefits package is at the right level – without effective communications or benefits access/flexibility through a portal then appreciation and engagement levels can still be low.”

How The Benefits Score works

Key variables such as business aims and strategies and industry practice are taken into consideration, generating an overall score out of 100. This score is then compared to sector best practice and highlights areas which need addressing. Written responses and numeric employee data are used to generate the score and cover areas such as business and reward and benefits strategy, compliance, cost, employee input and engagement and employee demographics.

Download The Benefit's Score paper


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