Employers in the dark about the value of benefits

HRDs don't know the time and money ROI of benefits, and may make poor choices about offerings without the correct data

From the traditional (such as workplace pensions and Christmas parties) to the relatively new (unlimited leave and fitness trackers), employers offer a wide range of benefits to employees. Some of these involve a direct financial cost for the organisation. Others incur indirect costs through administration and communication.

Given this often significant financial outlay, one would assume that HR professionals would be able to demonstrate the value of this investment in time and money. However, our latest Reward Management report in association with LCP finds this to be the exception rather than the norm; with just one in four (26%) carrying out such an analysis.

One implication of this is that most employers are left in the dark about the advantages their benefits package brings. Because of this a decision can be made to withdraw a certain benefit, which may negatively affect employee relations and organisational performance. A further risk is that money may be wasted on continuing to provide benefits that aren’t being used by the workforce.

By collecting and analysing data, HR can examine which benefits are failing to deliver value for money and why this is the case. It might turn out not to be a problem with the benefit itself but how it is being delivered and communicated.

Analysis is important as most employers predict that over the next two years they will either maintain their current level of investment in employee benefits or increase it. However, this expenditure won’t benefit the organisation or its employees if it is being misdirected.

Beyond the financial hit, lack of awareness can have significant consequences for the business. The most common corporate drivers of the benefits package, according to our report, are to attract, recruit and retain the people needed to support current and future business needs. Furthermore, the CIPD’s recent Labour Market Outlook finds that more employers are reporting difficulties in attracting and retaining workers. This issue will only get worse for employers that are not able to direct investment into their benefits package where it matters most.

Our report found that among those who carry out a benefits appraisal, most do so annually. Take-up of benefits (76%), employee feedback (74%), leaver feedback (64%), retention data (58%), and employee survey data (57%) are the most common measures used to assess impact.

The report also finds few employers evaluate the return on their benefit spend by asking for the views of line managers (29%), or checking line management understanding of why the organisation provides the benefits that it does (8%).

But these views should not be overlooked, particularly as line managers have the potential to make the communication of benefits much more personal. For example, they could pull out the benefits they think are most relevant to their line reports for further discussion with them. This will help ensure employees don’t miss out on benefits that are most relevant to them.

For line managers to do this effectively they must be given the skills, tools and support from their HR team. People professionals must also ensure their organisation’s benefits are promoted on a regular basis across a range of channels, and not leave employees to find this information themselves.

The people profession can show its value by proving that the time and money being invested in employee benefits is having a positive impact, both on the organisation and its people. In addition, this proof will be of interest to such stakeholders as investors, taxpayers or donors who need to see the organisation is managing the money they are giving it wisely. The CIPD has a range of resources in HR analytics to help people professionals make a start.

Charles Cotton is senior pay and reward adviser at the CIPD