Offering employees a range of benefits beyond salary can help small firms attract and retain talent. Such initiatives do not have to be complicated or costly, as Peter Crush explains.
Any small employer unconvinced about the impact a strong benefits package can have in attracting and retaining scarce talent only needs to read recent research by Glassdoor.com – the website where existing and ex-employees anonymously review companies. A significant 34 per cent say it’s benefits specifically that attract them to a new job, while 57 per cent say perks and benefits are one of the top factors they consider when deciding whether to accept a job offer.
Thanks to pay having largely remained static in recent years, there’s ample evidence to suggest the crude measure of money has lost the lustre it once had, especially to new cohorts of ‘employee-experience’ driven staff. Last year HSBC found offering flexible and remote working was more likely to motivate staff and increase workplace productivity than financial incentives.
It validates earlier research by Investors in People, which found 34 per cent of staff would rather have flexibility in their working hours than a 3 per cent pay rise.
The good news is that while progressive small firms do recognise this (57 per cent of SME owners want to increase the benefits they offer staff, while 34 per cent plan to boost staff benefits, according to 2019 research by MetLife UK), there is often a perception that because of their size, small businesses can be priced out of the sort of perks they think they need to offer to keep up with larger rivals.
“SMEs needing to poach from corporations to fill skill gaps often feel under pressure to provide the expensive perks their prospects will be used to – private medical insurance; company cars; gym memberships etc,” says Debi O’Donovan, CEO of The Reward and Benefits Association (REBA).
“But what they often forget is that people tend to join SMEs for their perceived nimbleness and ability to be different. SMEs have an opportunity to really make a virtue of the things they can more easily accommodate – and which really matter to staff – like letting them work at home to juggle their child or eldercare commitments, having Friday afternoons off, or just nice things like having a weekly meal together, or inviting in a coach once a month.”
It’s certainly the case that what employees want needn’t cost the earth – in fact, according to research by employee experience platform provider Perkbox, the top four employee-desired perks are all linked to social events. Extracurricular clubs (arts and crafts and book clubs) rank first, followed by pool tables, ping-pong tables and office sports teams (e.g. football and netball).
Meanwhile, job-search company CV Library reports more than half (56 per cent) of employees would be more likely to apply for a job that had a unique or cool workplace. However, as Ms O’Donovan argues: “While SMEs have greater flexibility to be different; there is also the inescapable fact that while you don’t need to offer the earth, staff will soon notice the benefits you don’t offer.”
To this extent, the pressure to keep up and offer the sorts of ‘proper’ benefits that larger firms offer is real. However, small business owners are not exactly under-served. With the corporate market largely sewn up, there’s a growing mini-industry aimed at giving SME employers the sorts of benefits platforms that were previously the domain of larger firms.
Many exist in the voluntary benefit space (where staff spend their own money to access perks at a discount), and include companies like EdenRed’s ‘MyWorkOffers’ platform – which gives staff access to more than 200 offers and discounts – as well as PES (discounts on brands from 5,700 retailers like Sainsbury’s, John Lewis, Next and Boots, and up to 50 per cent off cinema tickets). This is particularly attractive to younger employees; according to Hibob, 45 per cent of employees aged between 18 and 34 want to be part of a discount club, compared to 22 per cent of those above 55. Sodexo, meanwhile, offers SMEs discounts, but also discounted gym membership and employee assistance programmes. Many providers are also able to administer childcare vouchers for free.
These more mainstream service providers obviously incur fees, so SMEs need to judge whether a basic hygiene-factor benefits offering is worth it. Most platform providers will admit their technology is aimed at the 50-staff+ market, as bosses in much smaller firms could just as easily negotiate discounts personally with local shops, restaurants or gyms.
As Ms O’Donovan also notes, insurance providers also regularly add other services – such as health cash plans and virtual doctor services – for free.
The key is coming up with a package that actually makes a difference to staff, rather than just offering it for the sake of it. “It’s often the case that employers aren’t on the same wavelength as their staff when it comes to perks,” says Chieu Cao, co-founder of Perkbox. “We recently found a big difference between what employees value most and what employers provide. Training and private healthcare are the top two things employers promote, but they don’t even feature in the top 10 things staff want.”
Paying for perks staff don’t want isn’t just a waste of money – it implies that bosses don’t know their staff. For Karen Barley, head of sales operations at Hattons, the specialist in rare and exclusive coins, this is a no-no. “The rewards and incentives some people want are completely different from others,” she says of her staff, which include everyone from former midwives to ex-care assistants and hairdressers. “Meals out work for some; for others
it’s weekends away or vouchers. When a new employee joins, we specifically ask what engages them. Typically it’s anything experiential, rather than money.”
Bosses who do listen to their staff might realise that knowledge and support about how to manage their finances has leapt up the agenda during the past 12 months. So-called ‘financial wellbeing’ is now its own offshoot from the general wellbeing agenda (traditionally focused on physical health), as overall mental wellbeing has also entered common parlance. Research by Willis Towers Watson finds financial worries are now the biggest cause of stress (cited by 38 per cent of employees), which is, in turn, the biggest cause of sickness absence.
It’s in this area that some of the most SME-friendly (and cost-effective) solutions are appearing. Steve Watson is head of proposition at Smarterly, a company that provides a workforce savings platform for employers, which enables staff to invest in ISAs direct through payroll (with better-than-high street charges).
“SMEs can offer employees more resistant savings opportunities,” he says, “because when done through payroll, contributions get forgotten about, and are less likely to be halted. What millennials in particular seem to want is not so much a pension scheme, but a workplace savings scheme. If they want to, employees can move extra contributions they would have paid to a pension to an ISA, so that they can save for a house deposit. Being able to offer staff the ability to help them save for their first home is a great selling point.”
Other providers, such as Wagestream, are spotting other opportunities, including allowing staff to access part of their already earned wages earlier in the month rather than wait until the end of the month. It addresses the fact that 16 million UK people have savings of less than £100, according to a study by the Money Advice Service, and could go into the red with a single unexpected bill.
Added to this are those offering debt consolidation, again through payroll. David Walker, Chief Commercial Officer of Neyber, claims his firm’s offering allows employees to consolidate debt with rates of between 3.9 and 18 per cent, rather than a typical unsecured rate of up to 30 per cent.
“Instead of a debt of £18,000 taking 20 years to pay off just by paying the minimum payment, an employee can make monthly payments of £80 less, and get rid of it in just five years,” he says. “As an employer, being able to offer staff the ability to be debt-free is fantastic.” That’s a pretty compelling proposition to be able to offer potential new recruits.
Until a few years ago, employers could offer a range of perks (from new computers to company cars, work mobile phones, childcare vouchers and bicycles) via a mechanism called salary sacrifice (SS).
This is where staff officially give up part of their salary and use it to buy a benefit. Employees’ reduced official salary sees them pay less tax and national insurance (NI), while the employer also pays less NI, making it win-win for all.
But with tales of the scheme being abused, since 2017 employees have had to pay tax and NI on ‘benefits in kind’ on the salary they give up. Now, car parking, mobile phones, health assessments and gym memberships are no longer exempt.
Practically, this now means the scheme is more or less restricted to cycle to work schemes, childcare, pension contributions and ultra-low emission vehicles, where no NI or tax is paid.
For Claire Crompton, director of boutique search agency, The Audit Lab, allowing staff to choose the benefits they want makes sense. “We find out during initial interviews what motivates them – whether it’s salary increases or perks such as flexitime,” she says. “We want employees to decide what their perks are, not the other way around.”
One benefit which has proved popular is offering staff unlimited holiday. “We allow people to book a week off here and there, and long weekends throughout the year, and there are only a couple of caveats that go with it,” she explains.
“We need at least a week’s notice, where possible, just because we also have responsibilities to our clients, while we also ask that people check their emails, just for a few minutes each evening or morning, in case a rare urgent matter only they can deal with comes up.”
Ms Crompton says the policy has worked amazingly well since being introduced last year. “We’ve reducedsick days significantly, by 34 per cent,” she says. “Meanwhile happiness – a key sentiment we try to create – has improved. Our workforce has reacted really well to this way of planning holidays and we trust them to make good decisions when it comes to annual leave.”