As the economy slides closer towards recession, it's time to take precautionary action and tighten belts. Ian Luck outlines some of the ways companies can reassess employee benefit provision.
Individuals and businesses are facing the same challenges – rising prices, falling stock markets and a higher cost of borrowing. Money is tight within most organisations and companies are resisting excessive pay increases. While low salary rises may make good economic sense, they do little for employee relations. In spite of the prospect of a tougher job market, companies will want to look after their people and prevent unnecessary staff turnover.
Getting Value For Money
When spending more is not an option, spending more wisely is an absolute must. Employee benefits take up a large part of a company's overall costs, yet there are many ways to save money.
When companies look towards maximising the impact of their employee benefits provisions much is made of flexible benefits arrangements. While this is certainly an increasingly popular and, in many cases, sensible route to go down, there are less costly ways of getting the most out of an existing employee benefits package before companies need to commit to the expense of a fully fledged flexible benefits package.
By introducing a range of voluntary benefits to staff, such as life assurance, critical illness cover, medical and dental insurances, the employee benefits package can be enhanced without any additional cost to the company.
For many years, employers have offered discounted goods arrangements as an added benefit. Usually restricted to local suppliers, the impact can be magnified using a discount club that has negotiated discounted goods with larger national affiliates. These opportunities would rarely be possible for smaller companies.
Salary Sacrifice
Salary sacrifice benefits are probably the easiest way for a company to save money and boost staff benefits at the same time. It is a legitimate method of using the tax rules to the best possible advantage and the vast majority of companies will already be offering salary sacrifice childcare vouchers.
There is no real reason why more should not offer their pension benefits on a salary sacrifice basis. Savings in employer National Insurance Contributions can be used to offset the cost of installing such a scheme or of reorganising existing pension arrangements. Alternatively this saving can be shared with employees, all or in part, as additional encouragement for them to join the plan.
What Do Your Staff Want?
An appropriate benefits package is one that meets both the needs of the workforce and the requirements of the company in terms of recruitment and retention of quality staff. But what does an appropriate benefits package look like? Obviously it will be different for each company and to some degree each employee. Rather than make an assumption as to what motivates and helps retain staff, why not ask them? Perhaps run a survey asking your employees what benefits they think they receive, what benefits they would like to receive and what benefits would make them stay.
Reiterate Existing Benefits
It may be that you already offer a comprehensive benefits package to staff. But how many actually know the value of the benefits they are enjoying?
Why not send each member of staff a total rewards statement reminding them of the value of their current package? Something that confirms salary, outlines pension costs, premiums paid for insurance benefits, and the cost of other non-monetary benefits provided can be a powerful staff retention tool.
At the very least it will stop staff leaving the company ignorant of the fact that they may be walking away from a better overall package.
Keeping Senior Staff Happy
It is important to look after senior members of staff, especially during a downturn, as their experience will be vital during the potentially difficult times ahead. Even within organisations that operate uniform benefits provision with, say, the same pension contributions for all levels of staff, there is scope to design a more attractive benefits package for key personnel. The greater investment flexibility offered by individual and group Self-Invested Personal Pension (SIPP) plans for example, can make them quite sophisticated wealth management vehicles.
Employers can arrange for senior staff members to have their pension portfolios and personal wealth managed using a much more holistic approach, without changing the basis of pension contributions. With the advent of a new type of SIPP designed specifically for professional partnerships, SIPPs are now available to pretty much every type of organisation.
Revisit Old Defined Benefit Schemes
Now is also a good time for companies to take another look at any defined benefit pension arrangements still in place. Any company providing this type of arrangement will know that it is far from easy to walk away from them. But there has been an upsurge in the managed buyout market, with one insurance company specialising in managed buy-outs recently announcing that it is receiving over 40 enquiries per week. Employers who can afford to do it are already thinking about making sizeable changes to their employee benefits packages.
Absence Management
Finally, in these difficult times, it is easy to forget some of the basic elements of dealing with staff. All of the above benefits are designed to encourage staff retention and keep your workforce happy. But experience suggests that during times of trouble, absenteeism often rises. This can lead to higher premiums to cover risk such as for long-term sickness benefits. It is therefore important for employers to have robust absence management tools in place, not only to highlight the occurrences, but to put in place early intervention measures that curtail the problem and immediately bring down risk premium costs.
Recessions are not pleasant to endure but experience has shown us that companies that tighten their belts sufficiently come through them looking much fitter for business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
What Employers Should Be Doing To Comply With The Gender Pay Gap Report (Video)
