Why do we give benefits?

Arecent report by a healthcare provider found that one in five workers in the construction industry would go to work even if they had diarrhoea. That shocking and unhygienic finding shows how much the balance of power has shifted from employee to employer in the year since our last guide was published.

That does not mean that being a good employer is not as important; it’s just that the rules of the game are different. Staff still have to be retained, retrained and motivated if firms are to pick up what work there is. They also need the agility to change market sectors and the resources in place to make the most of the upturn when it comes.

Alastair Woods, a reward consultant at Pricewaterhouse Coopers (PwC), points out that benefits are still an important part of the employers’ arsenal. Jane Saynor, HR manager at engineer Clancy Consulting, agrees: “Pay soon gets swallowed up and people end up taking it for granted, but benefits have a longer-term effect.”

But how do you go about determining a benefits strategy? Woods says there are two questions a company has to ask itself when assessing its benefits package. First, what do its staff want? Second, what does the company want?

To answer the first question you must first analyse the age and sex of your workforce. “People over the age of 40 may value a pension, but those in their twenties may prefer extra holidays or social events,” says Doug Crawford, managing director at HR consultant Cerus. “For employees with young families, the most valuable perk may be flexitime or the chance to work from home.”

Another factor to consider is that people look for different things when joining a company and when thinking of leaving. Woods says something like a final salary pension (a rare thing in the modern industry) can be effective in retaining staff. On the other hand, potential recruits may be enticed by the chance to work abroad or a hefty bonus.

A company also needs to ask itself what kind of people it is looking to attract and retain. “Many companies offer senior staff bigger bonuses and company cars as they are harder to replace,” says Woods. On the other hand, if a company is looking to recruit a lot of fresh graduates – a group that has a particularly high churn rate – it may place more emphasis on social events and training.

Clancy offers all staff career breaks, flexible hours, home working, private health insurance and two weeks paternity leave on full pay. Saynor says these benefits are not conditional on seniority or length of service because the company wants to keep its fresh graduates. “If we want them to stay we have to offer the same benefits as more senior members of staff,” she says. “We like to compete with bigger companies, but find it harder to attract and retain staff. We can’t necessarily match their salaries and we can’t always offer projects of the vast scale they do so we rely on our benefits to keep them happy.”

The second aim is to allow staff to maintain a balance between work, social and family life. “We have an early finish on Friday to give greater flexibility,” says Saynor. “We also pay for overtime, because it takes away from someone’s social and family life. If we can possibly manage it, all members of staff, even junior can do some of their work from home.”

“We want people to work to their best capacity and believe they do that more if they are happy and relaxed. They will be willing to put more hours in voluntarily if you are flexible.”

Consultant Ingleton Wood offers fewer concrete benefits than many companies in our table but Shelagh Faccini, its HR manager, says this is compensated for by less tangible factors, such as the kinds of projects staff get to work on, social events such as the office Christmas party and the emphasis it places on training.

We want people to work to their best capacity and believe they do that more if they are happy. They will be willing to put more hours in voluntarily if you are flexible

Jane Saynor, Clancy Consulting

And although tangible perks may be easier to advertise, it is often those less concrete ones that affect employees’ day to day life. PwC’s Woods says: “The way employees feel treated by their managers and colleagues, career opportunities, morale and ethos can be just as important as tangible benefits,”

Lifestyle benefits are particularly effective at keeping staff satisfied. These include flexitime, the chance to work from home, paid overtime, social events and activities.

“We are also very flexible and family friendly,” says Faccini. “We are accommodating about people who want to start the working day later, end earlier or work part time. We had one architect, for example, who was working only one day a week because she wanted to spend more time with her family. If you are flexible, you retain people. For instance, people who go on maternity leave won’t mind coming back because they know you’ll make it easy for them.”

A more productive workforce who are absent less are all important to employers, which brings us to the second consideration for companies when devising a benefits package – its business strategy.

PwC’s Woods says, for instance, if a company is trying to expand abroad, it may offer performance-based bonuses for success in this area. Some construction companies reward employees according to the size of the PFI contracts they win for the company.

“Instead, if a company wants to expand in size, it may offer stock options or shares to their staff, which would help them do so,” says Woods. This also helps with employee engagement – to make them feel they have some investment in the company and its success.

The main goal for many smaller companies may be to maximise profit by saving cash, so they may be less inclined, or able, to offer large bonuses and salaries. Instead, they have to make the most of their smallness with relatively inexpensive perks such as awaydays, lunches with the chief executive and social events. They should also consider lower cost benefits, such as salary sacrifice mechanisms that deliver benefits such as pensions and bicycles. At Clancy staff can buy extra holiday. “This costs us very little to implement but is greatly valued,” says Saynor.

Of course, there’s no point in offering perks at all if your staff don’t know they exist or don’t understand them. “Benefits can cost a lot,” says Woods, “and if staff don’t get their full value, companies lose out. Health insurance, life assurance and pension schemes are particularly misunderstood and undervalued.”

Making sure they are understood and taken up relies on effective communication, through company intranets and direct contact. “It’s important to articulate these things, and emphasis how these benefits reflect the company’s brand identity and what it values,” says Crawford. “In this respect is it more of a management challenge – getting the best out of your employees and value for money through your benefits package.”

An increasingly popular way of doing this are total reward statements. These yearly breakdowns spell out not only what you have been paid over the year but what all the other perks you have received add up to. “Someone’s basic salary may be £35,000 but in total it may add up to £55,000. Spelling this out on a statement drums home what the employee may have otherwise taken for granted,” says Woods.