Last month we learned that employment is up, but growth is down. In a post on this website, Angus Campbell of financial services firm Capital Spreads, responded to the latest official figures by asking, 'how could this possibly be?' Campbell suggested that increased wages are needed to stimulate UK growth, yet while statistics may imply that the labour force has become less productive, I'd argue that it's not necessarily higher incomes, but greater income security, that we need to get employees motoring again.
Company employee benefits packages are an effective but often underused tool for motivating staff. By offering the right support - for example, financial protection in the event of long-term sickness absence - employers can go a long way to ensuring a happy, productive workforce, not to mention making their firms a more attractive prospect to new staff.
The latest economic data puts the issue in sharp focus. 77% of UK employees now feel less financially secure according to recent Unum / Populus research. The same percentage worry about the impact on their family, while 74% see no end in sight to the slowdown. These employees have become far more risk-averse as the UK's economic challenges have continued and as a consequence employees are looking much more closely not just at their pay, but at broader questions of financial security.
From an employer perspective, it is unsurprising in the current climate that few firms feel confident enough to raise wages. This also tends to be quite a short-term approach - a quick fix to solve immediate worker grievances rather than a long-term strategy for cultivating greater business loyalty. Yet at the same time they cannot afford to ignore employees' concerns about financial security. This is critical both to retaining the best staff and to attracting new ones, and consequently, to building strong, profitable businesses. While in the past, a company's pension plan could have been a non-wage-related differentiator, the recent changes to pensions legislation have levelled the playing field and created a clear incentive for employers to undertake a broader, holistic review of their entire benefits package.
For many companies, the employee benefits budget is equivalent to 20% of salaries, yet research from the Economist Intelligence Unit shows that just 29% of employers currently claim to offer a fully comprehensive benefits package to attract and retain staff. If a company wants to retain staff and raise productivity without raising wages, making better use of the benefits budget could be a very good place to start.
It's not about spending more, but spending more smartly. The truth is that many packages are woefully outdated, offering poor value for money to the employer without meeting the needs of the employee. 'Soft' provisions such as gym membership are common, despite little evidence to suggest that these are still valued by employees. Life insurance is much more common than Income Protection (IP) in the workplace, despite the fact that employees are three times more likely to have a lengthy period of sickness absence than to die in work. In fact, the Department for Work and Pensions states that 300,000 people leave work each year due to illness or injury, yet we've found that just 1 in 10 have a back-up plan.
So what should a well-balanced benefits package look like? Well, it isn't necessarily true that simply offering a higher number of benefits is likely to make a noticeable difference to staff. In fact, it's much more a question of the type of benefits that firms are able to offer. From our conversations with businesses, we know that employees are much more likely to value benefits that deliver long-term financial protection - rather than soft perks. Products like life insurance, private medical insurance, and Income Protection, which pays out up to 80% of an employee's salary if they are unable to work due to injury or illness, are valued by employees as they offer genuine financial security in the current climate.
This also makes business sense for the firms themselves. The right approach should drive staff loyalty, morale and productivity, and help attract new talent. The correct insurance policies also mean they have complete cost certainty around long-term sickness issues which, according to the Centre for Economics and Business Research, cost UK businesses £3.1 billion per year. Protection policies help employees fulfil their moral obligations to staff when dealing with these challenges and can also include rehabilitation programmes to help the employee back into work when they're ready.
At a time when growth is proving hard to come by, it is the cumulative effect of small changes that will have the biggest impact in getting the economy back on its feet. Improving productivity and supporting staff has to be a key focus for companies across the board that are looking to do more with the resources they have. It sounds simple, but in business the most effective solutions often are.