Is it time to review your employee benefits?

You created your employee benefits package to include legally required and additional benefits to support your team. Whilst you'll ideally have consulted with employees to discover their preferred employee benefits and considered your business goals, things will likely have changed in the intervening period.

A regular employee benefits package review is a good idea, but you may wonder how to decide when that review should take place and how it benefits your business.

Employee benefits reviews ensure you comply with changes in the law, such as the introduction of auto-enrolment company pension schemes. However, reviews can also ensure you spend money wisely and retain the advantages associated with staff productivity and morale.

Let's consider a few of the benefits in detail.

Using your budget wisely

The recent increases in employers' national insurance contributions mean that more businesses are examining the financial impact and considering ways to save money. The last thing you want is to spend money on employee benefits that your team isn't interested in or won't use. A review lets you consider how your benefits package aligns with your business strategy and employees' needs. It also gives you a high-level overview that will help you use your budget strategically.

Attracting and retaining skilled staff

High-quality employee benefits help your business attract and retain employees. Good employee retention means you'll spend less on recruitment and training. Employee benefits that support staff well-being also result in lower absenteeism and higher productivity. When your team feels valued and morale is high, employees take better care of their colleagues and customers, which is great news for business growth and your company's reputation.

Adjusting to shifting staff priorities

Your employees' needs and priorities will change due to life events or societal shifts. For example, most employees prioritise meaningful work, a good work-life balance and career development opportunities. Still, younger Gen Z employees are more likely to seek employers offering benefits with good mental health support and well-being resources, including health insurance.

As employees reach different stages of life, their needs will also change. New parents will likely value childcare vouchers and other support, while those planning for retirement will consider how the company pension scheme supports their goals.

Meeting your business goals

Your business development goals are relevant when designing or reviewing an employee benefits package. You may need to attract younger employees or seek team members with particular skills. Your business may also have faced challenges, and your benefits package is part of the adjustments you make to adapt.

Your employee benefits can also help you prepare for the future. For example, if your business or industry is facing uncertainty, putting appropriate support in place can help you retain employees and show you care for their well-being.

We've discussed some of the reasons why reviewing employee benefits is a good idea. However, it's also worth considering when your review should take place. You can review employee benefits at defined intervals. Some benefits, such as health insurance, require an annual renewal, which is an ideal time to review the cost and coverage your policy provides.

While a regular review at set intervals can help, it's also worth looking for other triggers that could prompt a review. Here are a few suggestions.

Organisational change

A financial review will likely have formed part of your due diligence if you've recently acquired an existing business. However, suppose you're restructuring your company or introducing a new leadership team. In that case, it's worth taking a fresh look at your company values and reviewing employee benefits to see whether they're still aligned.

Change management can be challenging for managers and staff, and ensuring valued employee benefits remain in place can help reassure your team.

Changing employee demographics

We've mentioned that the employee benefits your team values will likely change over time. While you must still provide employees with statutory benefits, the other benefits they value may change.

Your employee demographics can change in various ways. One of the most obvious is that you'll recruit younger staff as older team members retire. You may also have introduced initiatives to diversify your workforce, for example, by encouraging parents to return to the workplace or recruiting workers with disabilities. Your benefits package can assist recruitment and provide employees with support tailored to their needs.

Changes in employees' behaviour

The company data you collect can help you identify changes in employee behaviour. For example, you might notice an increase in sickness absence generally or related to particular physical or mental health conditions. In that case, your review could prompt a health insurance coverage adjustment to provide enhanced mental health support.

You might also notice cultural changes where employees seek a better work-life balance with flexible working arrangements. Alternatively, increased environmental awareness could mean reduced demand for company cars and a shift towards cycle-to-work schemes, as well as support for accessing public transport cost savings.

Legal changes

Changes in the law rarely impact employee benefits, but they can happen. All UK employers must now provide a workplace pension scheme to eligible employees, with minimum employee and employer pension contributions. While changes to national insurance contributions don't directly impact employee benefits, they can mean businesses must seek cost savings elsewhere.

Failing to adjust your employee benefits to legal changes can result in compliance issues, fines, and additional time spent on administrative tasks.

Economic changes

Economic changes can significantly impact the budget you have available to spend on employee benefits. They can also quickly change your employees' priorities. The cost of living crisis has left UK households feeling stretched, so offering benefits that help them save money can make a real difference.

It's also worth considering whether your benefits package provides increased financial security. The effects of financial stress can result from difficulties in making ends meet or from worry about the future. In those circumstances, investing in income protection insurance, critical illness, and life insurance can give employees peace of mind, knowing that their family has a financial safety net.

You might wonder how to proceed if you've decided it's time for an employee benefits review. Here are our tips, but remember that you may need to add more to the list based on your findings and any advice you receive.

Get professional advice

Good quality professional advice from various sources will help guide you through the process and help you make an informed choice. Making changes to employee benefits or withdrawing them altogether may breach employment law and your contractual obligations to your staff, represent unlawful discrimination or have far-reaching implications for some employees. Consulting your HR team and seeking legal advice can help prevent this.

Your accountants and financial advisers can help you understand any changes' financial and tax implications. Your review will likely be an ongoing process, so regular discussions will help you consider your options.

Consider your current benefits

A full review of the employee benefits you offer is essential to the process. This may seem obvious, but it's vital you gather comprehensive information from multiple sources to give you the whole picture.

A financial assessment and a review of employment contracts will help you identify paid and contractual benefits. Many employee benefits will appear in employment contracts, while others are documented separately as part of an employee's personnel file. You can learn more about these by speaking to HR, managers and supervisors to understand individual adjustments such as flexible working arrangements and how they operate. This helps you to understand any difficulties arising from current benefits and whether any adjustments are needed.

Benchmark your benefits against your competitors

Assessing the employee benefits your competitors provide can give you an edge when recruiting new staff. It's also worth considering third-party research into the most highly valued employee benefits, given that there's no guarantee your competitors' employee benefits are any more desirable than your own. However, this process can help you assess the industry standard and identify ways to offer an enhanced benefits package that may be more attractive to potential recruits.

You won't have access to your competitors' company documents or employee files, but you can examine their job adverts and recruitment documents to see what they mention.

Decide which benefits are essential

When designing an employee benefits package, you'll likely include elements that support employee well-being, provide financial support and help your team feel valued. As a starting point, deciding which benefits you consider essential is wise. You could examine whether they represent good value for money in terms of the business benefits and overall cost. For example, if you invest in group life insurance to provide death-in-service benefits, the likelihood of a claim may be relatively low. However, it remains a valuable benefit because it demonstrates your commitment to supporting employees' families should the worst happen.

Other benefits, like flexible working arrangements, are likely low cost but are invaluable in helping your team create a positive work-life balance, which can improve employees' mental health, morale and productivity.

Of course, some employee benefits are statutory. We've mentioned the requirement for a company pension, but other statutory benefits include a minimum wage, sick pay, maternity pay, redundancy pay and paid annual leave. Each benefit includes a minimum payment. However, you can choose to enhance these and pay more.

Statutory sick pay

Statutory sick pay (SSP) provides employees with a minimum wage of £118.75 per week for up to 28 weeks if they can't work due to illness or injury. However, if you invest in income protection insurance, they'll receive a percentage of their usual salary for a specified period. Your business only pays the premium rather than the full cost of the absent employee's wages. It also means reduced stress for the employee, so they can recover without worrying about paying the bills.

Statutory maternity pay and parental leave

Statutory maternity pay and maternity leave are linked but have different entitlement periods. Employees must meet minimum wage and length of service requirements and may take up to 52 weeks' leave. They're also entitled to up to 39 weeks of statutory maternity pay (SMP), which the government pays. SMP pays 90% of an employee's average weekly earnings for six weeks, followed by another 33 weeks at either 90% of their average weekly earnings or £184.03 per week, depending on which figure is lower.

There are also minimum legal requirements for paternity leave and pay, or parents can choose shared parental leave.

You can provide enhanced maternity pay by paying full wages initially before decreasing to half pay and then SMP in stages. This approach can help retain employees and reduce financial stress during maternity leave. You can claim the SMP element from the government. Unfortunately, no insurance exists to cover additional maternity pay. Still, you can include a contract provision requiring employees to repay maternity pay if they resign during maternity leave or for a specified period after they return.

Annual leave

All workers must receive at least 28 days of annual leave if they work five days a week or the pro rata equivalent if they work part-time. You can offer more as standard or increase their entitlement as a reward for long service. Some employers offer unlimited annual leave, although there are drawbacks to this approach.

Increasing the number of paid holidays your team can take is great for their mental health and overall well-being, as it lets them switch off from work and enjoy quality time with their loved ones.

Workplace pension

A workplace pension has statutory minimum payments of 3% from you as an employer and 5% from the employee. These have tax implications depending on how employees pay their pension contributions. You can offer a salary sacrifice scheme, which reduces an employee's gross salary and the income tax they pay. Employees can also receive tax relief on other pension contributions.

Your employees can pay higher contributions to boost their retirement savings. Offering pension contribution matching means you match their payments (usually up to a defined percentage). This increases their pension fund, and you can offset the increased costs against corporation tax.

Match benefits to different employee life stages

As we've mentioned, employees' needs and priorities will change as they reach different life stages, and your employee benefits should reflect this. Even if you have a relatively young workforce, their requirements will shift with time. Those who start families and look for childcare vouchers to help with costs. Some employees may plan for retirement well in advance, while others will examine pension benefits more closely nearer the time.

Offering benefits with several elements lets employees access the ones they need. For example, employee health insurance lets staff access medical treatment and mental health support or use their benefits to improve their well-being and access discounts.

Review the usage of paid schemes

You don't want to waste money on underused benefits, even if the tax implications are in your favour. For example, if you paid additional premiums to offer enhanced health checks or Employee Assistance Programmes (EAPs), your insurer can often provide anonymised usage data.

If offering these benefits is an essential part of your company culture, you may be reluctant to remove them. In that case, consider whether there could be a lack of participation because employees don't know what their benefits provide.

Take a fresh look at your communication strategy

As mentioned, the uptake of benefits can depend on whether employees know what's available. Reviewing your communications strategy can help you find new ways to remind your employees about their EAP, discounted gym memberships or cycle-to-work schemes. These could include regular emails about benefits or workplace initiatives to boost engagement.

Effective communication can provide better value for money by increasing intangible business benefits like increased employee morale.

Talk to your employees

One of the easiest ways to understand what your employees want from their benefits is to ask them. Although you'll still need to take a strategic view, consulting employees can provide ideas for new benefits and tell you which existing benefits are valued most highly.

Staff surveys, forums and individual conversations help you understand what's important to your team.

Consider your company's values

Your employee benefits package should reflect your core values. For example, you might invest in comprehensive health insurance and offer flexible working if you prioritise employee well-being. If you consider yourself a family-friendly organisation, include help with childcare costs and a generous annual leave allowance.

Review employee data

What challenges do your employees face? Consider ways to provide support with economic changes, such as the cost of living crisis. Data on employee retention and sickness absences can help you identify patterns, such as absences due to mental or physical health issues. Suppose your employees participate in health checks through their health insurance. In that case, your insurer can provide anonymised data to help you spot trends and future challenges and ensure your benefits offer the proper support.

Introduce voluntary benefits

Voluntary benefits let your employees tailor their benefits package to their needs. If you don't already provide medical insurance, consider introducing a voluntary scheme. Premiums for group health insurance policies are typically lower than those for individual policies, which can offer more affordable coverage. Alternatively, invite employees to add their families to their health insurance and pay the premiums themselves.

Other voluntary benefits can include cycle-to-work schemes and childcare vouchers, which you can offer via a salary sacrifice scheme.

Consider low-cost ways to boost employee well-being

Adding new employee benefits doesn't have to involve spending more money. If you identify areas for improvement, think about low-cost ways to achieve that. For example, education and workplace activity sessions can be highly beneficial if you aim to improve employee well-being. Consider inviting local business owners to run free sessions to promote their business. These could include activity providers offering taster sessions or a financial adviser discussing avoiding financial stress. Some may be willing to run these free of charge or at reduced cost.

It's likely unwise to withdraw benefits altogether. It can represent a breach of contract and lead to employees leaving for other opportunities. However, consider changing existing benefits to suit your team's needs better.

Legal and financial advice is essential throughout the process. Here are a few other steps to consider when changing existing benefits.

Consult with employees

Changes to employee benefits directly affect employees. Running focus groups and holding one-to-one conversations lets them give their views before finalising changes. It's best to take this step when you have a plan for the likely changes so you can get clear feedback.

The changes may impact some employees more than others, and they may need additional support during discussions. Let them bring a colleague or their union representative to meetings if necessary.

Discuss changes with other relevant stakeholders

Before making changes, consulting with several stakeholders is a good idea to get a rounded view of the potential impact. Consider talking with your investors to discuss any resulting change in company culture and reputation and how that may impact their investment. If changes will affect suppliers or customers, it's a good idea to consult them too.

Employee representatives, such as trade unions, will also be interested in how changes affect employees' working conditions, and they can also be a source of support during the change management process.

Changing suppliers

Changing your benefits suppliers can get you a better deal if you want to reduce costs, but always get professional advice. There may be break clauses in your contract. Switching suppliers can mean you lose some of the advantages of your previous arrangement. For example, switching health insurance providers for a lower premium may mean reduced coverage or additional exclusions on your policy. Speaking with an insurance broker can help you understand the pros and cons of switching and help you navigate the process.

Enhancing existing benefits

Enhancing your existing benefits can put more money in your employees' pockets, boost their retirement fund or offer financial security during an absence from work.

However, it also has tax implications for your business and team. Your accountants can provide advice on your tax position, but it's a good idea to ensure your employees can access professional advice. They'll pay additional income tax on benefits in kind, such as medical insurance. Investing in a voluntary benefit via a salary sacrifice scheme also has tax implications. If your EAP provides financial guidance, signpost staff towards this or other sources of advice.

Reviewing your health insurance coverage

Changing your medical insurance requires professional advice. You may decide to change your coverage to reflect changing priorities, such as providing more mental well-being support. If you're tempted to change your policy's financial limits to reflect usage, proceed cautiously. There may not have been any recent claims for cancer treatment, but your employees will still value comprehensive coverage should the need arise. Professional advice from a broker will help you ensure you still have adequate coverage.

It's also worth asking your insurance company what services they offer to help you reduce costs, boost membership benefits, and increase employee engagement, as these are often available at no extra cost.

Communicate changes

As we've mentioned, effective communication can increase engagement with benefits, and the same applies when making changes. Consider refreshing your communications strategy, for example, by sending regular well-being or benefits-focused emails or ensuring you display information where employees will see it frequently.

Communication is a two-way street, so always ensure employees can ask questions if they need clarification.

Seeking professional advice on your employee benefits lets you make an informed choice about the benefits you offer. At Globacare, we provide tailored advice to help you choose the best insurance products to support high-quality employee benefits. Contact us today to find out more.