Employee benefits - increasing the effectiveness of benefit spend

The current economic environment has forced many employers to look for areas in which they can reduce costs, and benefit spend is no exception. Yet, in a tight financial climate, benefits can be a relatively straightforward way of offering employees a service or product with a high-perceived value at low cost to the employer.

Also, with the cost of replacing staff being so high, employers are becoming increasingly aware of the value of benefits as a way of keeping workers happy and loyal at a time when significant pay increases are rare.

James Malia, head of employee benefits at P&MM Employee Benefits, explained: "If employees are being told they are going to get a 2% pay rise as opposed to a 5% increase, employers want to be able to offer additional benefits."

However, many employers are also looking at how to improve the overall cost-effectiveness of their benefits offering. This is being driven by a desire to improve value for money and also by the arrival of auto-enrolment legislation, which will start to come into force from September this year.

While this is likely to be a cost for firms - with many employees currently not part of a workplace pension scheme signing up for the first time - it is also an opportunity for firms to have a review of the benefits they are offering and to consider ways in which they can improve them.

"Auto-enrolment is driving everyone to look at what they're doing," explained Iain Chadwick, a senior corporate consultant at Johnson Fleming. "It has prompted a really big stocktake."

One of the key ways in which the efficiency of benefit spend can be improved is through the use of technology. Flexible benefit schemes are one area employers are using to help increase the value-for-money of benefits. This is a segment of the market that has been transformed by technology.

Mercer UK health & benefits business leader John Anderson noted: "If we consider what happened ten years ago, technology is clearly part of the solution."
A survey by the Chartered Institute of Payroll Professionals (CIPP) in January found 79% of its 213 respondents were offered access to a flexible benefits package by their employer.

CIPP senior policy liaison officer Diana Bruce explained the use of such schemes was helping staff appreciate benefits more. She said: "[Employers] are looking for the best value from their spending. The requirement to source the most cost-effective benefits, while ensuring the provision of optimum reward for staff, is vital."

Aon Hewitt reward principal Martha How agreed: "The reason why flex has grown is because of its efficiency. Flex is the best way to engage employees and their benefits."