There was a time when a decent salary was sufficient to identify and retain the best talent in your sector. However, as the employment market continues to face an acute candidate shortage, attractive benefits are the bare minimum for keeping employees happy and providing enticement and motivation to make best use of their output and loyalty, especially in mid to senior positions.
The introduction and development of benefits in the UK is still immature, unlike in, say, the USA, where the success and attractiveness has been driven by their healthcare system. In the UK, there is a real opportunity to use benefits to create and build a contented workforce.
Why offer benefits?
A competitive base salary and the offering of benefits will differentiate you as an employer and make your business more attractive to existing and future employees. A recent survey found that 80% of job hunters enquire about a potential employer’s benefits package. Staff receiving benefits will have a monetary incentive for perks such as health plans, which the employee may have otherwise funded themselves.
Benefits provide a boost to employee morale; the same survey found that 70% of employees are more motivated and likely to stay at a company when offered attractive benefits. Consequently, benefits will minimise the threat of disruption to day-to-day business and avoid the cost of replacing employees.
What is the cost to business?
Although providing employee benefits will cost the business in the beginning, the results will definitely outweigh that cost. The expenditure can be justified through employee retention, a more productive workforce and, if healthcare is provided, a healthier one – eliminating the amount of sick days.
Types of benefits
Without wishing to preach to the converted, flexible benefit plans permit employees to tailor their benefit package to suit their personal needs. Altering the benefits offered could adjust their salary by taking the minimum or maximum benefits on offer. Flexible benefits could include health schemes or various insurance, including critical illness, long-term disability or life assurance.
Other areas of flexible benefits include enhanced pension or holiday entitlement – these are usually described as core benefits. Non-core benefits could include superior health entitlement, such as family cover and the provision of gym membership.
Other types of benefits include ‘voluntary’ benefits. If offered, these are benefits that employees can choose to opt into. As with flexible benefits, employees can use part of their salary in exchange for the employer paying. In a salary sacrifice arrangement, the employee relinquishes their right to part of the cash remuneration due under their contract of employment. The sacrifice is made in return for the employer’s agreement to provide them with a non-cash benefit. Some of these arrangements are tax efficient, including areas such as childcare vouchers, cycle to work schemes and increased pension contributions.
A recent survey of UK employees found that half of us would sacrifice 5% of our annual income for benefits such as an enhanced pension and more annual leave.
The UK has come a long way in providing enhancements other than salary, but job seekers and employees are increasingly seeking ‘lifestyle’ benefits. While employees will tolerate exchanging some of their salary for the best benefits, employers need to be pioneering and go the extra mile to keep their best workers through the right perks.
Innovative areas adopted by some of the leading employers include additional days off for employees’ birthdays, a day off for Christmas shopping, or time off for paid volunteering days – examples include working directly for a charity or through health or education support.
Softer perks could include providing breakfast and free or subsidised lunches. Generous benefits might include complimentary or discounted air travel or holidays, and paid sabbaticals in recognition of long service. While all these have a tax and National Insurance implication and undoubtedly would be a headache to administer, employers need to pay attention to what a more demanding and modern workforce desires, rather than assuming the minimum is adequate.