Benefits to boost morale and keep staff

With workplaces now home to up to four generations, a spread of perks gives firms scope to react to changing needs. In 2012, for example, at the peak of austerity, it was cheaper to provide training and career development that topped a Benefex/CIPD poll of perks most firms (62.5 per cent) offered.

Now family-friendly perks matter more. PMI Health Group's Employee Benefits Index 2015 finds childcare vouchers registered the biggest rise in popularity, with 11 per cent of staff ranking them their most valued benefit, up from 8 per cent in 2014 and 6 per cent in 2013. Emergency eldercare grew by 142 per cent in the last year, according to Employee Benefits magazine.

The range of benefits is vast, everything from sabbaticals to discounted gym-membership, health and wellbeing perks such as at-desk massages, group risk life insurance or income protection, cash plans with reimbursements for dental and eyecare costs up to specific annual limits, employee assistance programmes offering things such as rehab and counselling services, through to travel loans and lifestyle perks, home or flexible-working such as nine-day weeks.

The mix of benefits chosen can be for strategic reasons. Wellbeing and health perks can specifically tackle absenteeism costs. Meanwhile, benefits provider Edenred reports that 51 per cent of organisations say they plan to alter their benefits mix in 2015 specifically for staff attraction and retention.

How happy employees are with their benefits

"Although the mix is important, it's how they are offered that also matters," says Alistair Denton Edenred's managing director. "Benefits typically come as flexible benefits, where staff choose from a list the things they pick; voluntary benefits, those bought or part-bought by staff at a discount, or simply as a take-it-or-leave-it list of fixed perks.

"The strength of flexibility and voluntary perks is the element of choice they offer. One of the biggest problems in benefits is that staff don't value them. When staff pick their own, this changes."

Although voluntary benefits involve employees spending their own wages, they have grown massively since the recession, because staff are able to buy what they might not otherwise have been able to afford on the open market, such as health insurance, as well as things they would have bought anyway, typically saving £1,000 a year without changing their shopping habits, according to P&MM Employee Benefits.

Offered through providers or retailers, they are low-cost to employers, but have high staff impact. "Many use vouchers or discounts for their weekly food shop," says James Malia, managing director of P&MM Employee Benefits. "But they can also be used for white goods and by helping staff handle unexpected costs, such as a broken fridge, the benefit is much more meaningful than a blanket pay rise."

"37 per cent of employers now structure flexible benefits around salary sacrifice, up from 30 per cent in 2011"

Salary sacrifice, where staff reduce their official salary by the cost of the benefit, has seen particular growth, because when used to buy iPads, smartphones, bicycles (through Cycle2Work schemes) and even company cars, staff can save huge amounts - up to 42 per cent off the price of a new bike. In 2013, 164,000 employees bought a Cycle2Work bike this way, up 16.4 per cent on 2012.

Thanks to a new car only being subject to benefit-in-kind tax, which is just 5 per cent for vehicles emitting 50g/km or less of CO2, salary sacrifice for cars has seen particular growth. In 2013, 150,000 cars - 11.5 per cent of all company cars - were bought via salary sacrifice. According to fleet provider Fleet Evolution, salary sacrifice is now the key tool enabling staff to afford to a brand new car. It found 80 per cent of the salary sacrifice cars it sells are to workers who have never had a new car before. Not surprisingly, more firms want to offer this ability. OC&C Strategy Consultants predict salary sacrifice could account for up to 10 per cent of all new UK car sales by 2025.

Such is the growth of salary sacrifice for all perks, Towers Watson's Flexible Benefits Research 2014 report finds 37 per cent of employers now structure flexible benefits around salary sacrifice, up from 30 per cent in 2011, not least because employers also save through also paying lower National Insurance contributions.

At the other end of the scale though, a benefits mix overly focused on bonus income can also create undesirable behaviour, such as aggressive selling to consumers. That's why firms such as address management software company Postcode Anywhere offer more than just performance rewards. "We're based on the River Severn, so decided to offer kayaks and even a company barge that staff can use to relax for a weekend in, regardless of their targets," says Alison Garvey, its HR business partner. "We tailor our benefits, which also include a free breakfast, so people are aligned to the sort of pleasant culture we want to create."

At children's cancer charity, CLIC Sargent, head of reward Louise Smethurst says one of its most popular benefits is offering holiday buying and selling. Staff can buy up to five days and sell up to two every year. "Flexibility is what staff really want," she says. "Although managers need to make sure there's enough people in to do what we need to do, it really supports our flexible approach."

Flexibility is relatively cheap and supports just-published research from recruitment company Hays that the top benefit priority, favoured by 36 per cent of respondents in a survey of 10,000 UK employers, is more than 25 days' holiday a year. It found the second-most important benefit, valued by 23 per cent, is an above-statutory pension.

For those who really want to boost engagement, a government favourite is employee share ownership, where staff buy equity in their company; so hard work and reward are much clearly linked.

The message is clear. There is so much out there to choose from, and when tied to company values, the benefits mix can be a really powerful engagement tool.