More than two thirds of UK companies rank the cost of employee benefits as their biggest financial challenges according to research from Gallagher.
This is a sharp increase on last year, when this was cited as the biggest challenge by just half of the companies surveyed in Gallagher’s annual Workforce Trends Report.
As a result, Gallagher says that some employers are scaling back on areas of support, with almost half (44 per cent) of organisations now offering no financial education to employees – compared to 37 per cent a year ago. Gallagher says that this comes at a time when employees are increasingly facing rising living costs and financial uncertainty.
Gallagher says that many employers are missing opportunities to ensure their benefits packages offer value to employees. For example it says that four in five (81 per cent) employers still offer only limited salary sacrifice options, which can streamline costs for both employees and employers alike.
However, the picture is complex. The research also suggests that many companies are now exploring alternative avenues to ensure their benefits can still offer value to employees in a more targeted and streamlined way.
In the race to win and keep talent while managing costs, employers are increasingly rethinking how benefits support their broader employee value proposition.
The employee benefits consultancy said half of organisations surveyed said they are grappling with how to appeal to a more diverse workforce, while 38 per cent highlight challenges around improving benefits communication.
Meanwhile, improving company culture (30 per cent) and aligning benefits with the employee value proposition (19 per cent) are now seen as higher priorities than traditional measures such as retention or productivity. Gallagher says this is a change in mindset for many organisations, with benefits being seen as a tool to incentivise and motivate high-performers, and as a key driver of employee experience.
As workforces become more diverse, employers are moving away from one-size-fits-all benefits and introducing more targeted support across different life stages. Flexibility is becoming central to attracting and retaining talent, with 70 per cent of organisations now offering some level of flexibility in their benefits, up from 43 per cent two years ago.
The vast majority (91 per cent) of organisations now offer support for working parents. Other targeted benefits are also becoming more common, including menopause support (67 per cent) and fertility support (41 per cent).
Access to bereavement support is also widening, with paid leave for dependants increasing from 30 per cent to over 50 per cent. Nearly half (49 per cent) of employers now offer health screenings, which suggests businesses are moving toward more holistic and inclusive benefits in response to ongoing cost-of-living pressures.
In addition, the amount of companies offering flexible holiday and annual leave policies has increased significantly, rising from 31.7 per cent to 46 per cent reflecting growing employee demand for greater control over time off.
Meanwhile, the inclusion of pension schemes within flexible benefits has increased dramatically to 86 per cent, up from 55 per cent.
Although companies are making efforts to make their employee benefits packages more bespoke and valuable, low employee engagement with benefits is still a key challenge – which can be partially attributed to a lack of investment in benefits technology.
Many organisations still lack centralised platforms to effectively manage and communicate their offerings. As a result, 42 per cent report low engagement with benefits platforms, with almost one in 10 employees hardly using them at all.
In addition, only 18 per cent of organisations offer advanced platforms that allow employees to trade or purchase additional benefits, while just 1.8 per cent provide full ‘total compensation’ models, giving employees complete control over how benefits are allocated.
Gallagher’s CEO of its UK benefits and HR consulting division, David Piltz, says: “As employees continue to navigate cost-of-living pressures, some employers are making difficult trade-offs between managing costs and retaining talent.
“Now is the time for organisations to modernise their benefits strategies to meet the needs of today’s workforce. By using online benefits platforms, employers can improve access, personalise offerings and save money by prioritising only the offerings that employees value the most.
“However, we must not overlook the positives. Today’s workforce is more diverse than ever, spanning people across all different ages, backgrounds, and life stages. A one-size-fits-all approach simply no longer works, and UK organisations understand this. Benefits are becoming more flexible and bespoke, and there’s a greater emphasis on ensuring that the right offerings are communicated to the right people.
“There are some areas, like financial education, that may warrant a rethink. A strong EVP, supported by effective benefits platforms, will be critical to attracting, retaining and supporting talent in the years ahead.”