Two in five UK companies change employee benefit programmes due to COVID-19

Two-fifths (42%) of companies have made or are planning to make changes to their employee benefit programmes as a result of the COVID-19 pandemic and the impact it has had on working life.

This is according to a Willis Towers Watson study which found many firms are expecting significant cost increases in the benefits they provide to their employees.

Nearly half (44%) are expecting sick leave costs to increase, 25% believe healthcare and group income protection costs will rise and 34% think group life assurance and dependent pension costs will go up.

More than a third (37%) are planning to review their medical benefit plans.

Alastair Woods, partner at PwC, told HR magazine: “It’s unsurprising that employers are reviewing benefits programmes. Companies are revisiting many aspects of HR policy and rethinking areas like learning, incentives and benefits to reflect the deep changes we will continue to experience in working life.

“The cost pressures that many organisations face also bring a sharp focus onto spending and they will need to find ways to extract the best value from all aspects of employee spend. That will mean greater customisation and tailoring to individual needs.”

Referring to the trend for upskilling at home during the pandemic, he added: “Our research finds that an increasing number of people think about training and obtaining skills to stay relevant as a critical part of the deal - and consider ‘skills as part of the new pension’.”

Overall, the Willis Towers Watson study found that more companies are looking to enhance certain benefits than reduce them following other activity in the sector which has already seen employers increase spend on employee assistance programmes (EAPs) as a result of COVID-19.

In particular, 60% of the companies expecting to alter their programmes plan to enhance their wellbeing initiatives, 58% plan to ramp up mental health and stress management services, 26% will enhance their annual leave policies, and 23% will improve their voluntary benefits.

Benefits most likely to be reduced include annual leave allowances (with 8% planning this), retirement benefits (5%) and sick leave (4%).

Dipti Shah, group people director at TLC Marketing Worldwide, said that the crisis is a prime opportunity to rethink benefits programmes for the better.

Speaking to HR magazine, she said: “Any change process will naturally lead to a business review. In this case, it’s about meeting the needs of the perceived ‘new normal’.

“COVID-19 has created both a health and financial crisis which will mean that benefits around wellbeing and financial planning will now become a standing feature for companies that don’t offer benefits and the need to review and adapt in others.”

Over a quarter (28%) of employers responding to the survey have taken action to measure employee anxiety during the current period, with a further 47% planning or considering doing so.

Two in five (39%) employers have provided or expanded access to telemedicine and 7% will even be providing access to COVID-19 testing.

Almost all employers who have furloughed staff, between 87% and 98% depending on the specific benefit, are maintaining existing benefits for furloughed employees.

Kevin Newman, managing director of Willis Towers Watson’s UK Health and Benefits business, said: “Reshaping and replanning benefits will be important, but most elements of a company’s employee benefits programme will continue to serve their employees well if the relevance is communicated effectively.

“In times of stress and uncertainty, employee assistance programmes and mental health services become even more important and employees that haven’t used these services in the past may need reminding that companies often have a network of valuable support services available to employees.”

For this research Willis Towers Watson surveyed 177 UK employers between 20 April and 1 May 2020.