Benefits Aren’t Perks: Strengthen Your Employee Retention
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Not that long ago employee perks were nothing more than a ‘nice to have’, with little significance beyond a fleeting break from the routine. After all, free fruit Mondays and summer parties are great, but they aren’t changing anyone’s life.
But that was then. Today a large and growing body of evidence suggests that the best employee benefits play a leading role in the recruitment and retention of the best staff in a competitive, high-employment world. Research by the Society of Human Resource Management (SHRM) revealed that 92% of employees regard employment benefits as important for overall job satisfaction. AON’s Benefits and Trends Survey 2019 found that, of companies with an Employee Value Proposition (EVP – the value a company brings to employees), 65% agreed it had a positive impact on employee engagement.
Who knew what a weekly apple could do!? Needless to say, it’s not quite that simple. While free fruit is fine, the growing impact of a good EVP reflects the transition from simple perks to strategic benefits. Increasingly, talented staff are gravitating towards companies that offer ways to make their lives easier, at work and beyond.
This guide will highlight the changing world of employee benefits, and explain how companies of all sizes can use a strategic benefits strategy to help attract and retain the best talent.
Why are benefits changing?
Benefits used to be little more than bribes – a gift, a bonus, a party.
Today, they play a significant part in meeting broader corporate objectives. Most firms are aware of this. A US-based study by SHRM found that organisations using benefits as a strategic tool for recruitment and retention reported better overall performance than those that didn’t.
This will only become more true. According to AON, over 60% of firms believe they will have to compete for talent against non-traditional competitors in the future, or are already doing so. That helps explain why 90% think they will have to change their benefits packages in response.
Staff are already demanding more from their employers in terms of innovative employee perks. This is part of a broader evolution of benefits, from what used to be the occasional incentive, often spread unevenly across a workforce, to an intrinsic part of a company’s Employee Value Proposition. But why now?
- It’s well documented that millennials (and the generations that follow) value experiences above ‘stuff’. As one recent Forbes’ article put it: “As a result of changing times, millennials want to seize the moment, and they are skipping the mall for carpe diem.” That’s as true at work as out of it. Millennials want work with purpose, and they want to work for companies that share their values.
- Linked to that is the value many modern workers place on time: time with family and friends, time for experiences, time for professional development, and the freedom to choose how to allocate their own time.
- Different groups are motivated in different ways. Older workers nearing retirement may value a sense of security most of all. Parents will favour companies that offer flexible working. According to one survey, younger workers are most likely to value health and wellbeing benefits.
So, benefits are changing, and a one-size-fits-all package of perks is no longer enough. The good news is that the best employee benefits packages are now a differentiator, helping HR recruit the talent your company needs, and managers to increase productivity. A good benefits package should help foster loyalty and a sense of belonging.
A benefits compendium
Employees like all benefits. Free is, after all, free. But benefits differ hugely in terms of their impact on broader company strategy. Here are some of the most popular benefits offered by UK employers, and their wider impacts.
Bonuses are still a huge part of the UK’s workplace benefit culture. In 2018, the average bonus for full-time workers was £2,242, though that figure masks huge disparities based on region, industry and gender.
The advantage of bonuses is that they are the one universal benefit employees can tailor precisely to their needs. The downside is that they quickly become expected, and receiving a reduced bonus can seem like a punishment.
A company vehicle or an allowance towards one has obvious benefit for staff who travel for work. One study found that nearly three-quarters of organisations offer company cars to at least some employees.
Cars are luxury perks that represent a significant investment in staff. But they can also be divisive: the same study found that only 8.2% of staff are offered one.
Many new employee rewards ideas are designed to match millennial values. One study asked what sort of benefits would persuade workers to consider a lower paying job over a higher paying one, and more flexible hours came second out of 17 options. Work-from-home options were also high on the list. A study of employees at UK SMEs found that flexible working was their most desired benefit.
Private medical insurance is highly valued but doesn’t come cheap. But the potential to cut the number of sick days your employees take – and one calculation puts the cost to the business of every sick day at £251 – should be taken into account. More than that, medical insurance feeds into a broader employee wellbeing strategy which, in turn, promotes a sense of belonging.
Free food, coffee, snacks
Fruit drops, free filter coffee, team pizza…needless to say, employees like them all, and free food and drink is increasingly popular. The SHRM report found that the percentage of employers offering free snacks and drinks rose from 20% in 2014 to 32% in 2018. Nevertheless, research suggests that free snacks have limited influence on overall recruitment and retention.
Health-centred perks like free or discounted gym membership are popular with staff and a relatively low-cost benefit for employers. Staff appreciate both the cost savings and the extra motivation to exercise. Meanwhile, companies get the advantage of healthier and more productive employees.
Traditional expense management is time-consuming and frustrating. Employees resent having to spend their own money on the company’s behalf. Research suggests that, after repeated delays in reimbursing expenses, staff start looking for other jobs. With that in mind, an expense management solution like Soldo is part of a strategic benefits package. Soldo is a sophisticated business credit card that empowers staff with controlled access to company money, while making expense capture and reporting easier than ever.
Professional employee development is of obvious benefit to your business. But providing comprehensive training opportunities is seen as a valuable benefit by staff too. Millennial staff value lifelong learning for the sake of it – as an experience to be valued – and will favour companies who invest in the continual upgrading of their skills.
Better tools of the trade
Employers are duty bound to provide the tools staff need to do their jobs. But employees will reward businesses who give them the tools they need to do their jobs in better, more efficient ways. Putting the technology in place to allow mobile working leads to increased productivity and higher morale. Automating mundane tasks reduces frustration and frees up time.
The best employee benefits package for your business will depend on your circumstances but is likely to include a combination of traditional perks (annual bonus, Christmas party) and more strategic benefits (flexible working, continual learning opportunities).
The cold hard cash of employee benefits
Which benefits bring most… benefit? That will depend on your size, sector and employee demographics, alongside your budget. Private medical insurance is highly valued but can be costly. Flexible working costs little is considered extremely important by younger workers and can boost productivity.
Assess the value of benefits to your business before you sign up:
- Ask your staff (not just HR) what they want. A survey by employment website Jobsite found a significant discrepancy in perception between HR decision makers and staff when it came to benefits. In particular, staff were less enthusiastic about office-based perks and social events than HR assumed they would be.
As one HR professional told Forbes: “People are diverse — different generations, career stages and life goals. Listen to employees when designing your offerings. Conduct company-wide pulse surveys and talk in small groups.”
- As that suggests, always take age and life stage into account. As we’ve seen, employees value different benefits depending on their status. Small businesses have an advantage here. Knowing your employees and their priorities can better focus your benefits spend.
Forbes again: “Each segment of the workforce has diverse preferences about which benefits matter, so it’s critical to understand what matters most to your current and prospective talent pools.”
- Dig deeper than headline costs. Wellbeing benefits have to be paid for, but they also reduce time off work and increase productivity. In the Jobsite survey mentioned above, HR and staff agreed that an attractive benefits package creates a happier, more motivated workforce, a sense of being valued, and staff who are more likely to stay. That’s all difficult to quantify, but hugely valuable.
Tax treatment and accounting
Benefits come with tax obligations. These differ depending on the benefit. Christmas bonuses, for instance, are treated as earnings and have to be taxed accordingly. On the other hand, most workplace nurseries and childcare voucher schemes are exempt. You can find a list of benefits and their tax treatments here.
Accounting for benefits can be complex, especially where pensions are concerned. Talk to your accountant for more details.
Selling the value of benefits to employees
According to the Jobsite research, HR decision-makers calculate the average annual monetary value of employee benefits at £402 per person. Unfortunately, employees estimate the figure at £257. A number of other surveys – this from the US – show that employees underestimate the value of their benefits or are confused by them.
Employers, therefore, need to effectively communicate the value of benefits:
- Benefits are meaningless if employees don’t know they have them. HR professionals who help administer a benefits package can assume everyone shares their knowledge and enthusiasm. That often isn’t the case.
- Create a communications plan. Dedicate a page of your employee handbook to describing the benefits your company offers. Detail benefits in offers of employment.
- Let HR use staff inductions to explain the company benefits package in detail. Email details later so employees don’t forget to sign up for the benefits they want.
When companies offer innovative employee perks, staff will sing their praises from the rooftops – and stick around. Here are some examples that mix ‘perks’ and ‘benefits’ to great effect:
Few companies can match Google’s budget but the tech giant does highlight the power of imaginative benefits. The company has been a trailblazer for perks like free food, on-site gyms and offices that resemble adult fun parks, but its benefits go deeper. Employees enthuse about inspiring guest speakers, on-site wellness services, paid parental leave for both parents and subsidies for continuing education (to name just four). In turn, those employees spread positivity about Google wherever they go, and journalists report on the company’s latest employee perks with limitless enthusiasm.
But you don’t have to be Google to create a benefits package staff will love. London-based LMA Recruitment gives employees paid time off to volunteer for charities and subsidised gym membership. Its family-friendly policies include offering school hours contracts to all staff. Since 2017, the company has rewarded long serving employees with a one month paid sabbatical, most often used for travel. Every member of staff surveyed for the 100 Best Companies to Work For list agreed with the statement: “I love working for this organisation.”
London-based management consultancy Clarasys offers paid time off for charity work, plus subsidised gym membership and profit-related pay. More unusually, it has made good mental health a priority. A hypnotherapist visits every three weeks and focuses on reducing stress. There’s also a certified mental health first-aider and a company culture that discourages long working hours. Employee development is encouraged by a ‘Personal Investment Allowance’ that can be put towards learning initiatives, external coaching and specialist certifications.
Employee benefits for the HR professional
A well-considered benefits package can play a key role in recruiting and retaining talented staff. But to meet company goals, benefits need to be expertly administered. Staff need easy access to the benefits that suit them best. Senior management needs evidence that benefits are bringing bang for their buck. Here’s how to ensure your benefits package is properly administered and benchmarked.
One recent survey of UK SMEs found that 57% want to increase the benefits they offer staff, and 34% plan to increase them significantly. The more benefits you have, the more complex they are to manage. But there are ways to make the task easier:
1. Invest in the right tools
A good HR software package can make benefits administration much easier for both HR and employees. It can dramatically cut the complexity of benefits enrollment, leading to increased take-up and a greater understanding of the value of benefits. Similarly, HR staff spend less time enrolling employees, managing files and processing benefits.
Good software should include:
- Employee self-service. Let your employees manage their own flexible benefits package.
- Reporting tools. The right software should let you pull reports from any period, on any employee, so you have the data you need.
- Performance management. Your software should answer any questions you have about your benefits package, including its impact on company goals like staff satisfaction and retention.
2. Educate your employees
Spend time and effort telling all staff – and not just new hires – about available benefits. A regular programme of HR-led Q&As, webinars and email updates will make sure all employees know about the benefits available to them and their value. Craft a plan to communicate the benefits you offer in plain English. Think about providing employees with an annual benefits statement that spells out what they’re getting and its monetary value.
3. Analyse the data
Regularly compare usage data with cost to determine ROI. But don’t count on statistics alone. Poll employees to find out which benefits they especially value, which they could take or leave, and any changes they’d like to see. Do this at least annually and amend as required.
The changing world of employee benefits: a summary
- Employee benefits were once little more than occasional bribes. Today, the best employee benefits promote loyalty and a sense of belonging.
- New benefits have emerged to help fulfil that wider remit. Cash bonuses and summer parties are great, but they have been joined by benefits that more accurately match the values of a millennial workforce.
- A one-size-fits-all benefits package is no longer enough. Employees value different benefits depending on their age and life stage.
- Popular benefits needn’t cost the earth, and CEOs should look beyond headline figures. What price healthier, happier employees? Measure the impact of benefits on wider company goals.
- To be truly successful, a benefits package needs to be properly communicated, efficiently administered and reevaluated at regular intervals.
Good expense management is one of your best employee benefits
As we’ve seen, employees – and millennials especially – want the digital tools to do their jobs efficiently and spend their time more creatively. They want to work for employers who they trust and feel trusted by.
Soldo gives your staff the autonomy they need to do their jobs well, while at the same time respecting their time and money. Modern employees want to work for companies that value their time and offer benefits that help to make their lives easier. Learn more about Soldo prepaid business cards here.