The Evolution of Employee Benefit Strategies

In the space of a few months, the impact of the COVID-19 pandemic on people, their actions, thinking and attitudes has been seismic.  Concerns over their own and their loved one’s health and care, their job security, financial pressures, massive adjustments to ways of working and equally sizable changes in the way society is being required to operate and live, has changed everyone in ways no one could have imagined. 

As we move forward into a new year, and as science begins to more effectively tackle the health crisis, businesses are evaluating what operating conditions in a post pandemic world will look like.  Undoubtedly there are significant and permanent changes to both the business environment and society as a whole compared to what was viewed as the norm less than 12 months ago.  Employers are looking to understand how these changes will impact their people strategies moving forward.

Earlier in the year Willis Towers Watson conducted a survey of employers to ascertain views on the impact of the pandemic on benefit strategies and activities:

• 53% of UK employers believe that the pandemic will have a moderate or large impact on employee wellbeing (physical, mental, financial) and a further 35% believe there will be a small negative impact.
• 43% of UK employers believe that the pandemic will have a moderate or large impact on employee productivity and a further 34% believe there will be a small negative impact.

Employee Wellbeing

The impact on employees has been and will continue to be far greater than just the adjustments to where and how they work – although this is of course significant.  The pressures and strains that people are experiencing will undoubtedly affect how they operate and perform and what they can achieve in the workplace – for example:

• Physical Wellbeing – The pandemic has seen a renewed focus on personal physical health and the benefits of maintaining a level of fitness in reducing the risks associated with COVID-19 as well as other ailments.  This has been coupled with extreme and fluctuating pressure on the availability of NHS resources.
• Mental Wellbeing – The mental health effects of restrictions and possibly isolation, the potential distress of seeing loved ones sick, or worse dying, radically altered working arrangements, financial pressure and so on have been well documented and highlighted by professional organisations, politicians and the media.  Even though there is optimism that physical health outcomes will improve as we move into 2021, the impact of the last few months on mental health may, unfortunately, have long lasting effects.
• Financial Wellbeing – The economic impact of lockdown restrictions will inevitably have impacted the finances of most people, be it through loss of employment, a reduced salary, falls in the value of pension assets or the knock on impact of changes in the financial situation of a dependent.

In response employers have adapted their approach.  It is no longer sufficient to simply offer Wellbeing benefits and support as a moral obligation, or just to be seen as a best in class employer of choice, but instead they are becoming essential tools to ensure employees are fit and well and able to productively contribute to the business. 

Other focus areas:

As well as Employee Wellbeing, employers are considering a number of other factors when designing their benefit offerings – such as:

• Financial considerations:
  • The need to potentially cut costs as a result of financial pressures brought about due to the economic decline is forcing organisations to prioritise employee benefits, based on their value to the organisation.  There is increasing anecdotal evidence of benefits being cut and certainly reductions in the provision of non contractual ‘nice to have’ perks. 
  • Increasing benefit costs have resulted in employers evaluating the effectiveness of their offerings.  The Willis Towers Watson COVID-19 Benefits survey found that 44% of employers are expecting sick leave costs to increase, 34% that Group Life Assurance will rise and 25% are expecting an increase in Private Healthcare and PHI costs.  
  • As a result 37% of employers are planning to review the way their medical benefit plans are designed.
• Flexible working as a benefit – many employers and employees have realised the advantages of increased flexibility in the location and patterns of working that were in many cases been forced upon them.  There is a real and growing appetite for enhanced flexible working to continue and there is a definite awareness amongst employers that offering and communicating flexible working options, as a benefit, is an increasingly valuable element of the EVP.  However, whilst there is little desire from most office workers to return to pre COVID-19 working patterns, there is increasing evidence that employees would favour a more blended working approach, to include occasional office based days.
  
• Workplace benefits – in recent years many organisations looked to enhance the physical working space and environment for employees with perks such as high quality barista coffee, games rooms, free or subsidised meals, free fruit and drinks etc.  Clearly, with more and more employers opting to allow / encourage (and benefit from) remote working, these types of perks become less attractive.  But at the same time employees are asking, what will they be replaced with?  Companies are looking to assess whether the reduction in commuting time and cost, together with increased flexibility, is enough to compensate or whether alternative, more appropriate benefits will need to be offered.
• Social benefits and perks – traditional social perks typically rate very highly with employees.  In time, such events should be able to resume on a physical basis, but in the meantime employers are looking to virtual solutions, and at the same time events companies have pivoted to provide a whole host of creative online social activities.
• Cycle to Work schemes – saw a significant increase in popularity during 2020 as employees looked to avoid public transport.  Whilst the scheme was originally designed to promote greener journeys to work – and required the bike to be used for at least part of a participants commute – sales through the scheme rose even during the time most people weren’t allowed to travel – presumably for leisure and exercise purposes.  The Cycle to Work scheme commute conditions have never been closely policed and it is unclear as to whether the government will want to discourage utilisation in the current climate.
• More for less –  including discounts and deals on retail, entertainment, travel, technology etc, and / or facilitating salary sacrifice, tax efficient benefits, which are paid monthly through payroll, can be advantageous to both employer and employee in cost constrained times.  For the employer it enables a visible, low cost enhancement to the overall offering (unless used to replace more intrinsically valuable benefits) and for the employee it provides cost effective access to a wide range of products and services that may have not been available through other routes.