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Employers waste money through miscommunication of the value of employee benefits, finds CIPD/Benefex survey

The majority of employers in the UK could be wasting the money they spend on salaries and benefits by leaving employees in the dark about the true value of the total package. That’s according to new research published today the CIPD at its annual Reward Conference.

The CIPD/Benefex Reward Management Survey 2012 found more than a third of companies plan to increase their spend on employee benefits this year, but few (18% provide "total reward statements" and eight in 10 offer no financial education to help employees understand the value of their pensions and other financial benefits. What's more, the survey revealed that the majority of organisations have not adopted a transparent approach to communicating information about pay scales, the provision of benefits and allowances, grading systems, job evaluation, performance-related pay schemes and how pay decisions are made for different individuals or groups of employees.

Nine in 10 organisations contribute to an employee pension scheme and four in 10 organisations plan to make changes to their pension schemes this year, but nearly eight in ten offer no financial education to their employees and only 3.8% plan to introduce it this year.

Financial education is most common in the public sector.

Charles Cotton, rewards adviser at the CIPD, said: "In order to attract and retain the brightest and greatest talent, the best employers offer attractive benefits packages to enhance base salaries. However, if employees don't understand or value what they are getting, these employers are not likely to reap the competitive advantage they are seeking and other organisations will have no incentive to match them.

"If rewards are used to motivate employees, or to encourage higher performance, then being reticent about reward communication does not make sense. Employers shouldn't take it for granted that potential candidates and existing staff appreciate or understand the value of the pension scheme or perks such as subsidised meals, life assurance and critical illness insurance. Many employees will not look beyond their base salary and how far they can make it stretch from month to month. As we embark upon the biggest shake up to pensions since the state pension was created, employers will have a duty to communicate with employees about these changes and how they could benefit from saving for their retirement. What's more, if employers apply that duty of care to their entire reward strategy, by improving employee understanding and awareness around the value of the entire breadth of benefits they offer, employers are likely to reap the benefits in terms of recruitment, retention, engagement and productivity."

Sandra Parsons, director of HR at The Institution of Civil Engineers (ICE), added: "We have experienced the value of a properly thought through education and communications approach to what can be a difficult subject for some people - pensions and benefits. Uptake of our pension scheme is now 25% higher than that of the previous schemes, employees' perceptions of benefits value has increased dramatically and we have reduced costs of our benefits provision substantially. Hence a win-win situation for the organisation and our employees."

Matt Waller, CEO at Benefex, sais: "In the current economic climate employers will need to think outside of the box to create effective opportunities for engaging and communicating with their employees. With more businesses than ever looking at the implementation of retention and attraction strategies, it is key for employers to re-enforce the value that they place on their employees. It is therefore paramount to regularly communicate the full range of rewards and benefits available over and above basic pay and holiday entitlement. Total reward statements can be used as a simple, but cost effective engagement tool in support of these strategies.

"With auto-enrolment looming ever closer it can provide employers with an opportunity to create a significant level of increased engagement maximise the tools available and turn the complex into the compelling."

The most common universally provided benefits are:

  • Paid leave in excess of statutory entitlement (25 days, excluding public holidays) - 65.2%
  • Training and career development - 65.2%
  • Child care vouchers - 62.7%

The most common benefits restricted to certain grades or levels of seniority include:

  • Car allowance - 61.8%
  • Company car - 53.8%
  • Private medical insurance - 40.2%.

The most common benefits offered as part of a flexible benefits package include:

  • Dental insurance - 45.5%
  • Cycle to work scheme loan - 43.6%
  • Childcare vouchers - 41.8%
  • Health screening - 38.2%