· 2 min read · Features

How to make your workforce aware how much you spend on their benefits

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What occupies HR minds? Clearly, you can answer this better than me, but I would put money on the fact that employee benefit spend is fairly high up the list. Constant pressure from finance to cut budgets does not sit well with the need to maintain a talented employee pool by offering a competitive benefits package.

Tell the embattled HR director that a whopping 96% of employees underestimate the amount their employer spends on their benefits, and they will probably want to give up and go home. But this is the finding of a survey carried out recently by Aon Consulting.

The survey of over 1400 employees found that 1 in 4 has ‘no idea' what their company spends on them - scant thanks for a benefits package that, in most organisations, is the result of significant work and spend.

When asked how much they think their company spends on their benefits as a percentage of their individual salary, almost two thirds (60%) said they thought it was no more than 10%. Just under half (42%) believed that a paltry 5% or less of their equivalent pay was put towards their benefits.

In reality, British companies are much more generous than their employees give them credit for. Businesses typically contribute between 20% and 40% of salary in additional benefits - the box below shows the difference benefits make to the overall remuneration package: very clear when spelled out. But this is obviously not a message that is getting through: only 2% of those surveyed by Aon believed their employer spent at least 20% of their salary on benefits.

Examples of real company spend on benefits

 

  • Where an employee is earning £26,000 per year, 21% of their annual salary is typically spent on benefits - so their total package is typically £31,460
  • Where an employee is earning £60,000 per year, 39% of their annual salary is typically spent on benefits - taking their total package to £83,400

As the person responsible for benefits, what can you do? ‘Employee education' is the stock answer, and no less true for being over-stated. Given that clear employee communications can make the difference between an employer appreciating and valuing their benefits, and being underwhelmed by them, investing in a decent benefits communications campaign would seem to be an obvious first step. 

Advances in printing make personalised benefits information cost-effective and quick to produce. The impact of a benefits statement that puts a figure on the benefits package can be immense; our example of a £60,000-salaried employee (above) might well find it a pleasant eye-opener to discover that they actually earn the equivalent of £83,400.  Total reward statements take this idea a step further by detailing all of the benefits on offer and their financial value, giving employees a definitive breakdown of their benefits' worth.

Similarly, flex - by giving the employee the power to ‘spend' their benefits budget themselves - provides a clear indication of the value of benefits, and, further, allows those who value cash over life cover, or holiday over healthcare, to tailor their own package, spending their benefits ‘allowance' in areas they really value.  Being able to put a figure on their benefit costs helps to focus employee minds on the amount their employer is spending - all of which should be music to the ears of finance directors looking to identify ROI for every business budget.

The economy is allegedly starting to pick up, but it's a fair bet that the pressure on HR budgets will remain. As employers work harder than ever to retain their talent in an improving market, the battle between budgets and benefits is unlikely to die down any time soon - but there may just be ways for both parties to achieve their aims.

Gareth Ashley-Jones is senior consultant, Benefits Solutions at Aon Consulting