Are employee benefits strategic HR?

Given their link to wellbeing, retention and engagement is it time they were a strategic priority?

The issue of how pivotal benefits are to a business, and whether they can really be seen as ‘strategic’, is one that has long been debated in HR circles. With benefits playing an important role in talent management it’s not far-fetched to suggest that they should be seen as central to the success of the organisation, but the reality is that often they are viewed as part of the furniture rather than a core pillar of success.

And yet with next-generation benefits platforms that offer HR professionals ever-greater ability to drill down into their data this could be on the verge of changing.

Certainly there are many who would make a strong case for why benefits could be viewed much more strategically, and why they can help support other critical, value-add HR activities. Benefits should be seen as strategic given the impact they can have on retention and employee experience, points out Jackie Buttery, director of Jackie Buttery Insights and former global head of reward and benefits at Herbert Smith Freehills.

“If you look at benefits holistically you would include things like flexible working, support for parental leave, maternity and other family-related policies, and support practices and packages,” she says. “When all that is in the mix it can be very powerful.”

Benefits generally account for between 12% and 18% of a company’s payroll and have stood the test of time, which suggests they are more than a hygiene factor, argues Matthew Gregson, senior vice president of data and analytics at Thomsons Online Benefits. While historically some organisations have failed to give much thought to what they offer, newer firms do see them as strategic, he says.

“Some large technology businesses have taken on the mantle of redefining what benefits are,” he says. “There’s a significant focus on supporting employees’ life goals, their wellbeing and giving them a great experience in the workplace, and those things are manifest in the culture.” He reports much stronger interest in benefits now from CEOs and CFOs as well as HR.

However, many would point out that we’re far from there yet. Jeff Fox, principal at Aon Employee Benefits, believes benefits have the potential to be strategic but are a long way off being so today. “There are always examples of organisations who use them at a strategic level but generally my experience is that organisations don’t really have a benefits strategy,” he says.

“By that I mean something that is written down, codified and agreed with senior people in the business, and that covers objectives, return on investment, the business case, and what you’re looking to achieve over a certain period. That doesn’t exist for the vast majority of organisations.”

Anne Payne, co-founder of employee assistance consultancy Validium, also believes benefits tend to remain separate from any broader business objectives or boardroom agenda, which can prevent the development of a genuine benefits strategy to help address wider business goals, such as improving the health and productivity of employees. This not only limits their impact, but also detracts from the seriousness with which other HR activities are treated by the wider business, she says.

“The problem with such an unstrategic approach is that it encourages business leaders to view wellbeing and engagement as something that can be outsourced to HR, or one of the many external benefits suppliers providing these services,” she says.

A key factor holding many back currently is data. While data may have huge potential here, the reality is most businesses do not make use of it. According to the latest Benefits Trends Survey from Willis Towers Watson, only 12% of UK businesses currently use organisational analytics to test the effectiveness of programmes, and 40% do not know their current total benefits spend. A recent survey by Aon also suggests just 20% of businesses currently measure the return they get on their benefits schemes.

Mark Ramsook, head of sales and marketing at Willis Towers Watson Health and Benefits, highlights how critical embracing data and analytics will be to allowing benefits strategies to come of age.

“It is vital for businesses to audit and benchmark the schemes that are already in place, using available data to understand how they align with the needs of the business and the workforce,” he says. “It is then possible to demonstrate strategic value and ensure programmes evolve to meet changing needs over time.”

But again, many are confident we’re at the cusp of something of a sea change. Graham Meinke, head of product management at Zest, explains that platforms such as his now allow employees to view all their benefits from a range of providers through one portal. “It also gives employers the ability to have all that benefit information in a central place, which means we can do far more strategic analysis of that information,” he says. “In future it’s also going to be possible for employers to benchmark themselves within industries and sectors in ways that wouldn’t have been possible historically because of the way that technology has been architected.”

Not only would it allow employers to gauge themselves against rivals, it could help them to identify what matters to particular groups of employees and devise benefit offerings accordingly. “It means we can do some far cleverer analysis than we have been able to previously and that will allow benefits to play a far more strategic role within broader discussions around talent management,” says Meinke.

So how to make sure your HR team is capitalising on such new technological opportunity?

Debra Corey, group reward director at Reward Gateway, points out that any benefits programme needs to be linked to broader business objectives to be successful. “As HR professionals we need to start with the ‘why’, and move quickly onto the ‘how’, so how does it fit in with other HR programmes and our overall HR and business objectives,” she says.

“If we don’t do this then we’re wasting the company’s valuable money and the HR team’s time and energy; like throwing darts without having a target to aim for.”

“We need to be clear what the business is trying to do, what people we need to do that, and what sort of reward and benefits policies are going to deliver that,” says Duncan Brown, head of HR consultancy at the Institute for Employment Studies. “That, for me, is a strategic approach.”

A good place to start might be tracking the impact of benefits on wellbeing and employee health. “The biggest shift has been in aligning an employee’s wellbeing and quality of life with benefits, to ultimately encourage employee engagement,” says James Malia, director of employee benefits at Sodexo Engage. “This is where savvy HRDs have had the opportunity to prove benefits’ ROI and include them in business strategies. By quantifying the cost of losing staff, replacing them and going through that hefty hiring process, HR can accurately give the cost of having high staff turnover.”

The challenge for HR professionals is to make sense of the data that is already available through employee engagement and other benefit surveys, and use this to ensure the broader business understands the impact benefits can have on productivity, engagement and retention, says Buttery. “The big data is there; the next milestone is making sense of it and using it with purpose,” she says. “If the importance of benefits is not recognised by the broader business the fault lies at HR’s door – for not giving them the right metrics.”