Peter Reilly: Employers will stick with cost-effective spending

Dark clouds continue to hover over the UK, with the age of austerity set to continue into 2013 and beyond.

Employers and benefits providers are likely to stick to the basics, which means cost-effective spending. With the vast majority of employees suffering real term deterioration in their standards of living, they will want the limited monies available to employers to be spent on basic pay or essential benefits rather than the fripperies of life.

Sensible employers will meet this wish and make all their spend count. This means careful budgeting and effective negotiations with suppliers to get the best price. It also means even greater segmentation of provision, so that benefits are attuned to an employer’s workforce.

A case can therefore be made for flexible benefits, so long as the administrative expense is limited and there are sufficient benefits from which to choose.

One apparently contradictory use of the reward pot is to allocate funds to an employee recognition programme. Well designed, these can make a small sum of money go a long way in motivating staff. Without big bonuses or generous pay increases, employers need to signal that approbation, especially of behaviours that help the organisation survive or begin to prosper.

Peter Reilly is director, HR research & consultancy at the Institute for Employment Studies