The economic difficulties of the past few years have inevitably left their mark on organisations. Tough circumstances have seen employers focus on getting the best possible return for their investment, while working to sustain staff motivation and engagement through difficult situations, such as redundancies and other cost-cutting exercises.
These remain key issues shaping employers’ benefits strategies and packages. As employers look to rebuild their businesses as the economy slowly recovers, it is vital to have the talent in place to do so effectively. This may be one factor behind the big jump in the proportion of respondents that say a desire to improve staff engagement was a key issue shaping their benefits strategy. This year, 71% said this was the case – up from 60% last year.
Although cost-efficiency still remains one of the key issues shaping employers’ benefits packages, it has slipped down the list slightly this year, relinquishing its top spot. Although cost and obtaining value for money are still an issue for employers, they may already have reviewed benefits expenditure to ensure they are getting the best possible deal and are now looking more widely at controlling costs. For example, 59% now say a drive to control costs across the organisation is the main issue shaping their benefits package in 2011.
Over the past year, there has also been a significant shift in the way benefits packages are structured and presented to employees. In particular, there has been a blurring of the boundaries between what exactly constitutes flexible and voluntary benefits schemes, with many employers moving to a more integrated total reward package. This is reflected in this year’s results – 45% of respondents say their benefits package is now presented as a total reward strategy, up from the 29% that said this was the case to some extent in 2010.
This may have the aim of achieving certain workforce behaviours in preparation for the economic upturn. Although there has been only a small rise in the proportion of respondents that say their benefits strategy has been effective to some extent in encouraging desired cultures and behaviours, that was enough to represent a rise from fifth to first place – up to 63% from 59% last year.
The difficult economic climate of recent years has made planning ahead difficult for reward and benefits professionals. The economy’s slow progress towards recovery has seen many plans swept aside or unable to reach
fruition as new priorities have emerged.
This can be seen in the actions employers have taken in response to the economic climate in the past 12 months, compared with what they planned to do a year ago. Just 16% say they motivated employees in order to maintain morale over the past 12 months. A year ago, 44% said this was on the agenda.
Similarly, just over a quarter (26%) of respondents say that they have implemented new benefits in the past 12 months, compared with the 35% that indicated their intention to do so in 2010.
Instead, there appears to have been a greater emphasis on cost-cutting or cost control than was expected a year ago. Last year, 29% said they intended to renegotiate insurance- based benefits to achieve savings, and 35% planned to review their benefits providers to obtain a cheaper or better deal. In the event, 46% have reviewed providers and 40% have renegotiated on insurances.
Looking ahead to the next 12 months, as in previous years, increasing staff appreciation of the benefits package and increasing employee perception of the value of benefits remain among employers’ top priorities – cited by 66% and 65%, respectively.
The most significant change in priorities since last year concerns employers’ plans to prepare for the forthcoming pension reforms that will come into effect next year – up to 53% from last year’s 30%. As 2012 looms increasingly large, this may have prompted all those who have not yet readied themselves for auto-enrolment and compulsory contributions to take action.
Despite the challenges posed by difficult economic conditions in recent years, employers’ benefits spend as a percentage of payroll has changed little over the past seven years. The majority of respondents consistently spend less than 20% of payroll on benefits, which has remained steady since 2004.
In monetary terms, the most common amounts spent are between £1 million and £2.999 million, and more than £20 million – each cited by 13% of respondents.
Read more articles from the Employee Benefits/Alexander Forbes Benefits Research 2011