The economic difficulties of the past few years have focused employers’ minds firmly on getting the best possible return on any investment they make.
When it comes to investing in reward and benefits for staff, organisations have taken a number of steps to reduce or control costs, including freezing pay, reviewing benefits providers to obtain a cheaper deal and rebroking insurance-related benefits.
This looks set to continue over the coming year, with 68% of respondents saying the main issue shaping their benefits strategy this year is the need to make benefits more cost-effective.
But no matter how much employers have to spend on benefits, ensuring staff understand and appreciate their package is often considered to be the only way to obtain maximum value. There is little point investing (often significant sums) in benefits that employees do not appreciate or do not use.
There has been a big jump in the proportion of respondents that believe their benefits strategy is effective at ensuring employees clearly understand the strategy. This year, 64% of employers say their benefits strategy is effective in achieving understanding – up from 55% last year. This represents a rise from fifth place to joint first.
This is particularly important at a time when cuts may have been necessary to avoid damaging factors such as employee motivation and morale.
The economic climate over the past year was responsible for forcing many employers to sweep plans aside and redirect their focus on achieving greater cost-efficiency. This can be seen in the changes employers say they made in response to the recession, compared to the changes they planned to make a year ago. Just under half (49%) of respondents say that they have frozen pay in their organisation in the past 12 months. However, when asked a year ago, just 29% said pay freezes were on the agenda.
And although 43% said last year that they intended to motivate employees to maintain morale, a year on, just 23% say they managed to do so. But it is not all bad news – a quarter of employers have also introduced new benefits over the last 12 months, compared with 17% that planned to do so last year.
Looking ahead to the next 12 months, employers’ top priorities remain increasing employee engagement and communicating to increase staff perception of the value of benefits. There has also been a slight increase in the percentage of employers planning to use communication to increase staff appreciation of the benefits package, which has risen from 50% in 2009 to 50%.
But despite the challenges posed by the difficult economic climate, employers’ benefits spend as a percentage of payroll has changed little over the past six years. Just as in 2004, the majority of respondents spend less than 20% of payroll on benefits.
The past few years have seen the increasing globalisation of businesses. This trend has bought a number of challenges with it for reward professionals, particularly where compensation and benefits are managed centrally across all locations. In particular, getting to grips with varying tax rules, legislation and the provision of state benefits, not to mention cultural differences, can prove complex. This may be why most respondents with operations outside the UK say all or some of their overseas locations are responsible for managing their own benefits strategies.
Read more articles from the Employee Benefits/Alexander Forbes Benefits Research 2010