Can you measure the return on your benefits investment? How much is it costing you? Alan Fergusson, Director of the Employee Benefits Division of Kudos Independent Financial Services has the answers.
Twenty to thirty per cent of an employer’s total outgoings can be spent on employee benefits. According to Alan Fergusson, Director of Employee Benefits Division of Kudos Independent Financial Services, employers should undertake regular reviews of their employee benefits provision in order to ensure that it is both cost effective for the employer and provides the best value to the employees.
Fergusson comments, “Employers need to consider whether or not the employee benefits schemes that they have in place are the most effective solution for their business. Due diligence can be carried out to determine whether or not the existing schemes are delivering value for money and also to provide an accurate assessment as to whether the company has the appropriate cover in place to ensure that all employees are on risk.”
According to Fergusson carrying out such an evaluation of employee benefits has advantages for both the employer and the employee. “Undertaking a review of the employee benefits is normally associated with identifying potential liabilities. Employers can also use this as an opportunity to review the employee benefits that they offer to their employees. Some businesses may have in place very traditional employee benefits schemes which are very inflexible and therefore do not provide value for money to the employer or best value to the employee.”
Carrying out due diligence on an employee benefits scheme can identify a need to update the benefits which are offered to employees. “Introducing a flexible benefits system which incorporates a total reward statement ensures that employees are aware of the total value of their remuneration package. The total reward statement details each component and shows its monetary value.”
Recent research showed that 82% of companies agree that a good benefits package attracts and retains high quality staff. “In today’s competitive employment market it is important for employers to be sure that they are offering the best package possible so that they can both attract and retain personnel. Giving employees the opportunity to flex benefits allows them to really own their employment package as they can tailor it, within reason, to suit their individual circumstances.”
Employers sometimes think, wrongly, that altering an existing employee benefits scheme to introduce a varied and flexible range of benefits will be a costly exercise. Alan says, “Whilst there will undoubtedly be costs associated with reviewing and revamping the employee benefits scheme employers could stand to recoup these in a variety of ways.
“Depending on how the employer wants to introduce such a scheme, it may be possible to fund part or all of the costs through National Insurance savings generated. They may even find that some of the more expensive benefits are less popular and savings could be created this way.”
Attraction and retention of quality staff remains at the top of many HR agendas, and every opportunity has to be looked at when considering how to plan for this. Fergusson suggests that as well as ensuring that their employee benefits provision is cost effective employers should also consider the impact that their employee benefits could have in terms of staff recruitment and retention.
For employers, finding the right person for a specific vacancy can take a long time. It can also prove to be an expensive exercise as, at the very least, the employer is likely to incur advertising costs. In addition time will need to be set aside to both to sift through applications and subsequently to carry out the interview process.
“Almost three in 10 employers in the UK either have implemented or are in the process of implementing a total reward approach. This means that the employer is able to tailor the remuneration package according, as far as practicable, to the needs of each employee,” comments Fergusson. “In terms of staff retention this should have far reaching effects because in addition to understanding the value of their package the employees will also have been able to provide input regarding the make up of their remuneration, perhaps through some flexing of the benefits.”
Fergusson adds, “The total reward approach has an additional benefit; Total Rewards Statements. These provide each employee with a breakdown of their Total Reward, detailing each component and showing its monetary value. Although there are many reasons why people choose to change jobs their reward package will figure in this decision so providing them with a Total Reward Statement will assist in staff retention.”
“Everyone’s circumstances are different. Just because people work for the same organisation or in a similar role does not means that their remuneration package should be made up of the same components. Utilising flexible benefits in order to create an employment package that is of optimum value to the individual should be of benefit to both employees and employers.”
“Without generalising too much it is probable that younger employees are likely to be attracted by the possibility of increased annual leave entitlement or opportunities for salary progression. However benefits such as a contributory pension scheme or childcare vouchers will almost certainly be a determining factor for those that are some way along their career path. This information should be borne in mind once the interview process has been completed and the preferred candidate has been selected.”
Fergusson continues, “Using flexible benefits the employee can tailor a remuneration package towards their preferred package, probably within certain parameters set by the employer, which will suit them better than the default ‘one size fits all’ option.”