Busting the Employee Benefits Myth
Despite not always being a one-size-fits-all solution, employee benefits don't have to cost the earth and can reward the employer too
You might expect benefits packages to be something that employees have come to want and demand from their employers, but recent statistics have shown that employers are the ones that reap the real rewards.
In a survey, we recently undertook with over 4,000 of our customers and their employers we found that 80% of HR and benefits managers think that it’s important to offer staff a wide range of benefits, and three-quarters believe that offering varied benefits helps them to recruit and retain staff.
But thoughts of a benefits package may trigger concerns over additional expense and a burdensome responsibility that some businesses, particularly smaller enterprises, simply don’t have the resources to support. So, how can small businesses gain from employee benefits without it costing the earth?
Low cost employee-benefits
Benefits packages don’t always need to be costly as many salary sacrifice schemes are free to sign up to. Offering a salary sacrifice scheme means that your employees can give up part of their salary to pay for all kinds of items e.g. Phonescheme, which gives employees discounted access to the latest smartphones.
A regular, monthly payment is taken out of their wage packet before it reaches their bank account, so it’s free of tax and National Insurance Contributions (NIC). Not only will your employees save money – between 22% and 42% through NIC and income tax savings – but as an employer, you will make NIC savings of up to 13.8%. And if the cost-saving element doesn’t win you over, let me tell you that the company behind the benefits offering takes care of the time-consuming admin that comes with implementing a salary sacrifice scheme. Instead of the employer having to manage employee sign-ups and all of the subsequent paperwork, you can often leave it almost completely in the hands of the provider.
Using reward schemes to recruit and retain staff
Recruiting staff is an expensive affair, and Oxford Economics found that it costs over £30,000 to take somebody new on. And it’s even more detrimental to the small business owner who has a shallower pot of money to use for recruitment purposes. But entrepreneurs can prevent this by taking different approaches to how they treat staff and introducing compelling employee benefits. The Institute of Leadership & Management (ILM) found that 17% of employees who left their job last year did so due to the lack of appreciation from bosses.
Offering staff the chance to pay for life’s necessities and luxuries free of tax and NIC is one way to make your workforce feel valued, and increase the likelihood of them staying put. As a small business, retaining staff can be difficult when you’re up against bigger competitors who have deeper pockets to offer higher salaries to staff. But implementing a salary sacrifice scheme is a cost-effective approach to offering several attractive perks that can stop your workforce moving across to competitors, and help their salaries stretch further.
Choosing a benefits package that suits all
With several providers to choose from, it can prove difficult to know what salary sacrifice schemes are right for your organisation. But the answer mainly lies in the demographics of your workforce. Your younger members of staff who are straight from education may be ridden with debt, and so a scheme that gives discount to smartphone contracts may appeal to them. And those reaching retirement age are more likely to have a family around them and may be thinking about schemes like life insurance. Ensure that you take the requirements of all generations into account when building a benefits package so that they can pick and choose benefits that best suit their lifestyle.
Promoting your incentive scheme
Once you’ve selected a provider, the challenge now lies in promoting the scheme internally to staff. It may be difficult to spark initial interest, particularly if staff aren’t fully educated on salary sacrifice, but demonstrating potential cost-savings can be what draws attention. Put the savings into context. Don’t just say that the scheme can save X%; make it easy for employees to calculate how much they can save by buying items through the system. And when you’ve had a significant number of staff signing up for schemes, showcase them as great examples in content like company newsletters. Employees may not take your word for it, but getting their colleagues to vouch for you is one way of supporting your case.
It’s difficult to be ‘jack of all trades’ when running a small business, and taking care of several departments single-handedly is a demanding job. But using a salary sacrifice scheme takes away some of the pressure in managing employee wellbeing, and advantages can emerge in other areas like recruitment and retention too. The costly and time-consuming perception of employee benefits isn’t much more than a myth in the age of salary sacrifice, so there’s little standing in your way.
Stephen Holt is the commercial director at Grass Roots.