Recruitment pressures, shifts in employee expectations and the sheer volume of products available mean benefits strategies are evolving. But, while the old paternalistic approach may be on its way out, employers must still be aware of their responsibilities when providing benefits.

Rather than take the one-size-fits-all package, today’s employees want to be able to select benefits that are relevant to them. Carl Chapman, head of marketplace at Ben, says: “Anything other than choice and flexibility is archaic. The workforce is diverse: everyone is an individual with their own unique set of needs.”

Expectation shift

As well as the importance of recognising this diversity, employees’ expectations have shifted. Charles Cotton, senior policy adviser, reward at the Chartered Institute of Personnel and Development (CIPD), says: “Employees are more demanding. They expect their employer to provide them with a benefits package that meets their needs.”

This is particularly the case for the younger generations, according to Debra Clark, head of wellbeing at Towergate Health and Protection. “Gen Z are much more likely to speak out than the older generations,” she explains. “This is good as it creates an open working environment but it is changing the relationship between employers and employees.”

Broader benefits

The pandemic helped to rewrite the dynamic too. As organisations adapted to lockdown, employees saw what was possible, transforming niche benefits such as flexible and hybrid working, mental health support and virtual GP services into the norm.

Working through the pandemic also blurred the line between employees’ home and work lives. Gus Vickery, director, advisory at Gartner HR practice, explains: “This gave benefits professionals a sharper lens on the areas where employees need help and support. Suddenly, the fact they had three young kids or a parent in a care home became much more real.”

Alongside this, the range of employee benefits has expanded significantly over the last few years. Products and services focusing on issues such as fertility, menopause and elder care are all recent additions to the benefits arena and further innovation is certain.

Cost and competition

More traditional influences also feature. Cost has quickened the death of paternalism, says Matthew Gregson, executive director at Howden Employee Benefits and Wellbeing. “Employers want more control over the cost of providing benefits: expensive final salary pensions have been replaced by defined contribution and more and more disability benefit schemes are written on a limited-term basis rather than to retirement,” he explains.

Keeping up with the competition has also driven the evolution of benefits strategies. More than 75% of employers take a market-facing philosophy then consider what is right for their employees when deciding what to offer, says Vickery. As more organisations adopt greater flexibility and different types of benefits, this ripples out across the market.

Benefit wish list

These influences mean that today’s benefits packages must enable employees to personalise selections. This can mean offering a much broader range of benefits, says Adrian Firth, employee benefits consultant at Mattioli Woods. “Different groups want different things,” he says. “Someone who’s young, fit and single might prefer gym membership to medical insurance while someone who’s getting married or saving for a house will appreciate workplace savings. Employers need to cater for all these differences.”

Benefits packages also need to be fluid enough to reflect the broader landscape. As an example, Firth points to the shift from mental wellbeing support during lockdowns to financial wellbeing as the UK went through the cost-of-living crisis. “Benefit selection is driven by the economic cycle,” he adds. “Higher interest rates mean employers are saying employees are struggling with increased costs so we recommend mortgage advice services to support them.”

Key components

Choice may be king but some benefits remain a must-have. Pensions are on this list, even where someone is saving for a more short-term goal such as a wedding or mortgage deposit.

It is a similar story with healthcare, as Gregson explains: “The provision of health benefits is increasingly seen as the employer’s responsibility. Organisations are spending more in this area, whether that’s to expand eligibility or increase cover. It’s almost a return to paternalism, but there’s more accountability being placed on employees now.”

Flexibility is a key demand too. As well as wanting to be able to choose their own benefits, employees want to be able to flex where and when they work. Even where employees need to be in the workplace, there can still be flexible arrangements around the days and hours worked, says Cotton. “This can help employees balance work and life commitments, such as child or elder care,” he adds. It can be a huge benefit.”

Meeting expectations

The general trend may be towards more choice and flexibility but understanding the specific needs of the workforce will give the benefits package the edge. “Organisations must ask employees what they want,” says Clark. “Focus groups and surveys can help but it’s also good to keep up with what’s available. Benefits have changed so much in recent years: a consultant will be able to provide this insight.”

Given the importance of personalisation, flexible benefits schemes, which can now cater for organisations with as few as 20 employees, can work well. “There are more constraints at the smaller end due to underwriting,” says Firth. “This can mean an employee can only flex their life insurance annually or if they have a life event such as marriage or buying a home.”

Developments in this space may chip away at these rules. For instance, by pooling risk across smaller organisations to create community schemes, it’s possible to remove some of the limits, says Chapman.

Ultimate choice

There are other ways to inject flexibility too. Voluntary benefits are an option, giving employees access to a range of products that are endorsed by the employer and are often available at preferential rates.

Allowances or benefits pots, where employees select exactly what they want, also offer freedom of choice. As an example, Chapman points to the Ben Mastercard, which gives him £100 a month to spend how he likes. “I don’t like the gym but I do play golf so I spend it on golf club membership,” he explains. “No benefits package can cater for everyone.”

Offering employees choice and flexibility may be key in today’s benefits packages but an element of paternalism still exists. “Organisations must make sure employees know what’s available,” says Clark. “Employees only listen when something is relevant so it’s important to keep getting the message out.”

Ensuring communications, both in terms of content and media, are diverse will help to reach as many people as possible. Line managers can also help to unlock benefit take-up: by providing them with benefits training they can signpost employees to relevant support and services.

And it is worth getting it right. Research by MetLife, conducted in January 2024, found that 40% of UK employees would be happy to move for a lower salary if it came with more generous benefits.

Giving employees what they want, rather than what the employer thinks they want, is a powerful tool when it comes to attracting, motivating and retaining talent.

 

 

 

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