Does employee well-being have a place in your ESG strategy?

ESG stands for environmental, social, and governance, meaning your ESG strategy takes an overview of how your business operations impact the world around you. It should consider your systems and processes, as well as those of your suppliers.

There are three main pillars:

• Environmental
• Social
• Governance

The environmental pillar examines your ecological impact, including carbon emissions, energy use and waste disposal in your premises and supply chain. The governance pillar considers the effect of changes resulting from your ESG strategy to ensure you have the necessary buy-in from your management team and other stakeholders to help changes succeed.

Finally, the social pillar looks at how you treat people, and it'll be the focus of this guide. We'll consider how the social element of your ESG strategy impacts employee well-being.

ESG takes a holistic approach to business strategy and can work in partnership with corporate social responsibility strategies you've adopted in the past. It demonstrates your company's commitment to ethical practices, which is great news for your business reputation.

Developing a robust ESG strategy has various business benefits. It can improve employee engagement, productivity, and staff retention, while also helping you attract prospective employees. Your plan can also help you save money by focusing on environmental sustainability, which can reduce your energy bills.

Finally, your environmental, social and governance strategy can build your reputation as a responsible business and help you attract outside investment.

The social pillar of your environmental, social, and governance strategy focuses on treating people fairly and should encompass your staff, customers, and suppliers. It looks at equality and human rights, and can also include your corporate social responsibility policy and contributions to charities and other social initiatives.

You can probably see that this pillar has a natural link with strategies that support employees' health and well-being. Here are some factors to consider when developing your ESG strategy.

Assess your current data

When developing your ESG policy and assessing its impact on employee health and well-being, it's a good idea to review the data to see where you're starting from. Then you can choose appropriate metrics to ensure future ESG reporting will accurately represent the impact of any changes.

Review your existing policies that impact employee well-being and consider relevant data such as sickness absence, pay scales and employee retention. It's also a good idea to review your employee benefits as these can have a direct influence on your team's health and well-being.

Equal pay

Aiming to provide your team with equal pay for equal work helps employees feel valued and improves employee morale. It can also have a direct impact on employee well-being, particularly as many workers still feel the effects of the cost-of-living crisis.

A transparent pay grading structure is a good starting point for ensuring staff are paid fairly and understand what they need to do to secure pay increases. Gender pay gap statistics measure the average hourly earnings of workers across the UK and report on the gap between men's and women's average earnings. Statistics show that the gap has reduced gradually but is still a significant issue, particularly for older employees.

It's wise to consider what your business can do to close the gap, including analysing any obstacles that may affect employees' ability to take on higher-paying roles.

Diversity, equity and inclusion

A robust ESG strategy should include a diversity, equity and inclusion (DEI) policy to help your business benefit from increased diversity in the workforce. Differing perspectives can increase employee productivity, create new approaches to problem solving and help you better understand your customers.

Review your hiring practices and consider what procedures you can put in place to make your business more accessible to employees with disabilities, caring responsibilities and other mental and physical health needs.

Also, consider whether there may be other barriers preventing job seekers from applying to your company. Simple steps can encourage a broader range of applicants. These could include sharing an accessibility statement or indicating that you're open to flexible work arrangements. In some circumstances, workers from marginalised groups may be more likely to apply if they see themselves represented in the company literature or the existing workforce.

Examine opportunities for career progression

You can often improve employee engagement and retention by offering employees a clear path to career development and progression. Research found that in 2024, 27% of UK employees planned to change jobs, up from 19% in 2021. The two main reasons for the change were a desire for a better work-life balance and a lack of career opportunities in their current role.

It's worth reviewing the opportunities you currently offer to support career development and identifying areas for improvement. Workplace training, mentoring, and work shadowing can all increase awareness of roles that may provide greater job satisfaction and improve employees' mental health. You can also consider providing paid external training and reimbursement for university and college tuition fees.

Physical and mental health support

Health insurance and mental health support are highly valued employee benefits and can go to the heart of employee health and well-being. We'll examine benefits in detail shortly, but start by assessing how employee health currently impacts productivity and engagement. Sickness absence data provides a clear indication of the types of physical health issues and mental health challenges that employees face. However, presenteeism, where staff come to work even when they're struggling, can lead to reduced productivity and burnout.

Consider whether your workplace culture enables team members to speak about health issues, and what support they can access from managers, colleagues and via their employee benefits.

We've suggested ways to determine whether your existing strategy supports employee well-being and how to develop an ESG policy that furthers these goals. Your employee benefits package can provide valuable health and well-being support, alongside workplace initiatives. Benefits should vary to reflect employees' needs. Some may only be relevant to a section of your workforce, and can be optional. If you want to introduce changes to benefits when developing your ESG policy, always seek legal and financial advice to understand your contractual obligations and the impact of changes on your financial performance. Consulting with your HR and occupational health departments can also help you understand the human factors involved in any changes.

Let's look at some specific benefits that provide various types of support.

Employee health insurance

Employee health insurance provides a range of medical treatments and services so your team members can access care and support as needed. It lets employees access treatment quickly, without spending time on an NHS waiting list. Faster treatment often means an increased chance of success and less time off work. That's good news for your business, but it also has positive benefits for employees' physical and mental health. Depending on your chosen policy, health coverage can provide treatment for physical health issues and mental health support.

Medical insurance also provides services that help employees improve their well-being and prevent health issues from developing. These include health assessments, with goal setting and support to meet their well-being goals, discounted gym memberships and access to other wellness tools and resources.

The data your insurance company provides can also help you develop wellness programs and initiatives to tackle common workforce health issues.

Flexible working arrangements

Flexible working arrangements enable your team to adjust their working hours or location to suit their needs better. It can be a great way to support working parents or employees with other caring responsibilities, but you can offer flexible working for any reason. For example, employees experiencing stress or needing mental health support may benefit from spending time away from a busy office environment or from moving their working hours to avoid peak travel times.

Before introducing flexible working, consider what arrangements will work best for your business. For example, you may need to ensure minimum staffing levels on the premises during peak hours or want to ensure that key team members are available at specific times. Remote working can impact collaboration or result in loneliness and isolation, so it's vital you develop strategies to prevent this.

Once you've considered these factors, you can offer flexible working in multiple ways. Staff can work from home, adjust their working hours to start earlier or later, opt for part-time work, or choose compressed hours. A hybrid approach can work well, for example, where an employee works at home for part of the week and in the office the rest of the time. You can consider flexible working requests on a case-by-case basis to tailor your approach to individual employees.

Annual leave allowance

Annual leave is great for workforce health as it lets staff switch off and spend time doing the things they enjoy. Taking annual leave helps staff create a positive work-life balance, which benefits their mental and physical health. It also benefits your business by giving you a more resilient workforce with improved focus and productivity, and fewer sickness absences.

Full-time workers in the UK are entitled to 28 days of paid annual leave, or the pro rata equivalent if they work part-time. Offering more demonstrates your commitment to their well-being, so it's well worth considering.

However, research suggests that UK employees are taking less annual leave overall, with rates dropping by 7.67% between 2022 and 2023. Employees who don't use the annual leave they're entitled to can develop health issues, take more time off sick or experience burnout due to chronic stress. Even if they continue to work, they can struggle with lower motivation, engagement and reduced performance.

Offering enhanced annual leave is a great idea, but your team won't see the benefits unless they book the leave they're entitled to. When developing your ESG policy, consider including measures to monitor annual leave and encourage staff to book time off.

Sick pay

Statutory sick pay (SSP) provides £118.75 per week for up to 28 weeks if an employee can't work because of illness or injury. That could represent a dramatic drop in pay for many employees, causing financial stress if they struggle to pay the bills or maintain their usual lifestyle as a result. Increased stress can worsen physical symptoms or exacerbate mental health issues and lead to a more prolonged absence in some cases.

Your business can provide enhanced sick pay by investing in group income protection insurance, which pays a percentage of an employee's usual salary for up to two years during an absence. You can set the percentage that the policy pays and how long an employee must be absent before payments begin. It's also worth considering group critical illness insurance, which pays a lump sum to an employee diagnosed with a serious illness.

Both policies support employee well-being by offering peace of mind, knowing the income will pay their bills and their loved ones will be supported while they recover.

Financial support

We've mentioned the financial support you can offer while employees are off sick. Still, other benefits help your team members secure their financial future or save money on their daily living costs. Financial stress can profoundly impact an employee's well-being, meaning practical financial support must play a vital role in your approach to ESG.

Group life insurance provides death-in-service benefits, where an employee's loved ones receive a lump sum payment if they die during their employment with you. Pension contribution matching boosts retirement funds, helping staff plan for later life. The funds you choose can also support your environmental strategy by investing in sustainability.

Workplace pension payments typically use salary sacrifice, meaning payments come out of an employee's salary before tax and reduce their income tax bill. You can also use salary sacrifice schemes to help with childcare costs, travel expenses, or to offer health insurance as a voluntary scheme. However, using salary sacrifice requires careful consideration to ensure fairness in line with your broader ESG aims.

Your company's ESG strategy can play a key role in supporting employees' well-being by helping you develop a positive company culture and offer benefits that meet their needs. At Globacare, we help our customers find the right insurance products to support a high-quality employee benefits package. Contact us for advice tailored to your needs.