Pay alone is not enough: employee benefits essential to retain staff

Benefits essential to retentionEmployers need to see benefits as an essential feature of remuneration, rather than an optional extra.  The recession has led many companies to introduce employee benefits for the first time to mitigate the actual and psychological effects of pay cuts and freezes.

Employee benefits of being looked at much more, purely because they are lower cost than pay. Some benefits, like a health cash plan, cost around £35.00 per annum. On average that’s only 0.2 per cent of the annual bill, so offering this to employees rather than a played rise is very comprehensive.  Giving just half a per cent pay increase is measly.

Where it is becoming harder to attract and retain staff because salaries have been forced down, benefits provide a negotiation tool.  Small differences in wages can have a big effect on decisions. The minute someone gets a whiff of another job that’s a little more appealing, which can be as simple as getting a childcare voucher, they’re going to go. Employee benefits are a vital component of hiring.  People expect childcare and cycle schemes, they are no longer be nice-to-have, they are a need-to-have.

Financial value

One of the ongoing challenges providers have faced with employee benefits has been to communicate their value to employers and employees. Providing a financial saving to the employer is possible with tax efficient benefits such as childcare vouchers or cycle schemes via salary sacrifice. If you get the model right, each month the employer can save more in company National Insurance than it’s costing them to run the schemes – potentially thousands of pounds per annum.  Some financial arguments are convincing, but it is harder to enumerate the cost savings of the benefits that claim to reduce staff turnover and hiring expenses. For example, we offer holiday purchase schemes, and have evidence to show these reduced absenteeism, but it’s difficult to quantify.


More than one in 10 parents have left a job just because of childcare costs. 

*Source mumsnet website

The impact of benefits largely depends on employees’ engagement with the programme, which is where many employers can struggle. This year’s CIPD Reward Management Survey found that of 455 organisations surveyed, only 18% provided total reward statements.  Employers are spending a lot of money and they are not getting the return on investment they could if their employees fully understood the value of their benefits.

Before embarking upon any new benefits scheme, be sure to have considered how you will communicate this to staff, and how often you will reiterate the financial value, particularly as bonuses and pay increases may not be possible at present.

Source: PayrollWorld



John Sylvester

John is responsible for the motivation division of p&mm ltd and a Director on the board of the IPM. Specialising in developing, implementing and directing many large scale staff motivation, recognition and employee communications programmes.

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