Many would agree that employee benefits have a pivotal role to play in helping employees feel valued and appreciated by their employer, as well as adding to their overall financial package. “Employee benefits are a very tangible way for employers to demonstrate to employees that they care and caring employers will become employers of choice,” says Tim Jackson, head of marketing strategy at income protection specialist Unum.
The problem is that while many, although not all, employers now offer a range of employee benefits, most are failing to communicate the value of these to their staff, and are therefore missing out on the engagement and appreciation that should follow.
According to research carried out in 2013 by Cass Business School for Unum in its Money Talks: Communicating Employee Benefits study, organisations lose a staggering £2.7 billion a year, as a result of failing to communicate the employee benefits they offer to their staff, through labour turnover and workplace absence costs. This works out at £470,000 annually for a business with 1,000 employees, even when they have made the financial investment in rolling out benefits in the first place.
The research found that 64 per cent of employers have invested in good employee benefits, but are poor communicators and that failing to tell their staff what they’re entitled to has had a clear impact on employee attitudes. The study found staff in workplaces that offered benefits, but were not aware of their availability, were unsurprisingly less likely to feel loyalty or have pride in who they worked for than those working in companies that did communicate effectively. This suggests that, from an engagement perspective, there is little benefit in offering them at all, unless there is a clear communication strategy to go with them.
Some financial benefits, such as income protection, are particularly likely to be unknown and unappreciated, although this type of product is likely to be valued when employees do understand it
Furthermore, the “communications chasm” exists for management staff as much as non-management staff and also for women with dependent children, despite the expectation that such benefits, particularly those relating to flexible working, would be specifically targeted at this employee group.
Some financial benefits, such as income protection, are particularly likely to be unknown and unappreciated by employees, says Mr Jackson, although with 77 per cent of the UK workforce admitting to feeling financially insecure, according to earlier research by Unum, this type of product is likely to be valued when employees do understand it.
“Products such as life insurance, private medical insurance and pensions are reasonably well understood, but other research we’ve done found that for financial benefits, such as income protection, around two thirds of employers with HR departments would communicate about those less than once a year or never,” he says. “That gives you an understanding of why there is such a lack of engagement.”
Addressing the issue for those employers which have such products in place is relatively simple. “Just putting the basics across in really simple language is a good start, so what it is, when you need it and what benefit there is in the employer providing it for you,” says Mr Jackson. “We’ve created a very simple video of what income protection is, explaining in very straightforward terms that it pays a set proportion of your salary if you’re unable to work through illness or injury for six months or more. Monthly payments will continue to be made until you return to work or retire, whichever happens first.
“Then you explain that it’s really powerful to get this through the workplace. If you were to try and get income protection for yourself as an individual, first to be confident that you’re getting the right cover to suit your needs, it’s preferable to go through an independent financial adviser and not many people have one already, and second if you’ve had any previous medical conditions, it gets very expensive or you can’t get cover. But, most importantly, it can be as much as three times as expensive. If you add together those three components, it’s a very compelling message.”
Helping employees understand the potential of them needing to use income protection at some point during their career can also make them value it. “People get and understand life insurance, but actually you’re three times more likely to need income protection during your working life,” he adds. “Not a lot of people know that.”
Income protection also offers financial benefits to employers, in addition to its value as an employee benefit. The Centre for Economics and Business Research found that for every £100 it costs, employers could expect about £48 back in the form of reduced occupational sick pay and a quicker return to work through support provided to HR managers around wellness.
Those businesses, which can effectively communicate the benefits they offer staff, can make a demonstrable improvement to both labour retention and workplace absence rates, according to the Unum research. Such “communications champions”, those who provide high levels of employee benefits and communicate well with their workforce, have an annual staff turnover rate of 7.7 per cent, compared to 8.7 per cent for the “silent types”, who fail to explain the benefits they provide, saving £250,000 a year for a business with 1,000 employees. Extrapolated across the whole of the UK, this could reduce costs associated with labour turnover by £1.4 billion a year.
It’s a similar tale with staff absence. The communications champions report an average absence of 4.2 days a year, compared to 5 days for less vocal firms, who find themselves with additional costs to the tune of £222,600 for a 1,000-employee business. These savings stem from either greater levels of engagement and motivation among staff, making them less likely to throw “sickies”, and/or a genuine reduction in illness as a result of the impact of wider wellness programmes. UK-wide, high benefit provider-low communicator workplaces could save a total of more than £1.3 billion each year, simply by communicating more effectively with their workforce.
The message for employers is clear: offering a strong range of employee benefits can have a huge impact on both employee morale and engagement, and also workplace absence and labour turnover, but only if the advantage they are getting is explained to staff.
“There’s a huge amount of potential value to the employer of a comprehensive suite of employee benefits through recruitment and retention, and it offers a very tangible proof-point that you are trying to look after and care for your employees in difficult financial times,” says Mr Jackson. “But realising that, needs you to communicate well – clearly, simply and in plain English.”