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Peter Reilly

Institute of Employment Studies

Principal Associate

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Whither employee benefits?


Has the provision of employee benefits passed its peak? The answer to the question depends on the reasons why benefits were offered in the first place. If they were constructed as part of a package to attract and retain employees, the recession and public sector spending cuts have probably stalled the momentum in benefits provision. With the war for talent reduced to local skirmishes, why would organisations add more to their staffing costs? There is a plentiful supply of labour and the competition has reduced, so it is a buyers’ market. 

There will, of course, be exceptions – sectors or geographies where the economy is buoyant or there is a structural labour shortage in a particular occupation. And the very best talent is always rare. But for organisations developing a uniform reward strategy, benefits might play a lesser part. It might seem inappropriate to introduce say a concierge service for a certain category of staff, when others are being made redundant or there is a general pay squeeze. Putting on a hair shirt that has meant curtailing travel or conferences would also mean keeping benefits in check.
Benefits, of course, have also been used for other reasons – taking advantage of tax arrangements (especially regarding National Insurance payments), emphasising a brand or corporate social responsibility message (especially relating to environmental positioning), etc. These reasons may continue to drive benefits where there is a cost saving to the organisation or the financial outlay is limited but the image created is a positive one.
However, even in these circumstances management has to be mindful of the economic context and its impact on staff. Where employees are seeing their real standard of living falling, they want as much cash as possible to repay debts and limit their financial exposure. This means they put a premium on supporting base pay rather than the organisation spending limited funds on what might be regarded as unnecessary fripperies. 
The objective of greater segmentation of reward to align it with the aspirations of different groups and the desire to offer individual choice, are still important reasons for flexible benefits and they won’t go away. In the short term, however, if the proposition is that we are all in this leaky boat together, then dividing up the workforce for reward purposes into separate groups (apart from deciding who to throw overboard) seems out of kilter with the times.
Yet there is a different argument to encourage certain benefits at least and this comes from total reward thinking. We know that employees do not always join organisations or stay with them for the money. Some may be motivated by incentives, but many may be more turned on by intrinsic factors – job satisfaction, commitment to the organisational purpose and so on. When times are hard, it is worth reminding employees of this point. The problem is that that message may not go down well as it might be perceived as a fig leaf to cover up the lack of decent remuneration and an insult when workloads are rising and jobs are being cut. So organisations need to find ways of empathising with people’s pain and recognising their efforts. This is where benefit style rewards may come in, especially when you might get a bigger bang for your buck: the impact on staff is greater than the cost of the action. 
What are we talking about in concrete terms? Organisations might well choose recognition methods that align with wider corporate messages. So if there are spare employees for periods let people do voluntary or charitable work, but position it as something positive that will carry on post recession. Encouraging personal health and fitness through such things as cycling to work schemes, gym membership or occupational health advice can be presented as good for staff and good for the organisation at times of stress. Organisations might want to hold team building events that acknowledge specific individual effort by giving out  for example retail vouchers as prizes to those that helped the team the most. Offering financial planning sessions can also indicate that the organisation is aware of domestic budget pressures. 
Against the charges that either this is nothing new or this is not about benefits provision but reward and recognition, I plead guilty on both counts, but with an important caveat. Surely a good reward strategy adjusts with the business climate. The one that we are in at present emphasises organisational cost minimisation and control with employment insecurity and standards of living under pressure. Good employers should respond to this environment by choosing cost effective rewards that chime with the times and respond to employee needs. An integrated approach to pay, benefits and non financial recognition should be carefully communicated to convey what message the organisation wants to send to staff (eg empathy, togetherness, performance) and is executed in a way that is sensitive to employee concerns, as well as hopes. This suggests cutting out some of the paraphernalia of benefits’ systems and offering something much simpler to understand, cheaper to administer and one that emphasises corporate values. 

Peter Reilly, Director HR Research & Consultancy at the Institute for Employment Studies
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Peter Reilly

Principal Associate

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