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23 Oct 2019

Three ways to make sure your reward and benefits strategy is designed around your employees

If you were starting at your company with a clean slate to create an effective reward and benefits strategy, would you end up with your current offering? It’s possible you wouldn’t.

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Your reward and benefits offering might be like your wardrobe at home. A few items are loved and used a lot. Several items are liked and used occasionally. And the rest sit languishing and unloved, taking up space.

The benefits and rewards which your employees’ value, use and have the highest impact on their wellbeing will change over time, so it’s important to continually listen to your people.

The following three steps focus on financial wellbeing, but the same principles can be applied to an overarching reward and benefits strategy.

1. Benchmark the current situation for your employees

Before you can critically review your existing reward and benefits strategy, you need to know how financially fit your workforce is. We developed our Financial Fitness Score system to enable employers to do just this.

By answering ten behavioural questions about their money, employees are assessed as being at one of five levels of financial wellbeing. The proportion of the UK workforce in each group, based on our latest research in The Employers Guide to Financial Wellbeing 2019-2020, is shown in brackets.

  • Strugglers (8%): Often run out of money before payday and are the most stressed and vulnerable group.
  • Copers (28%): Have virtually no savings and don’t have enough to spend on life’s little luxuries (eg pair of trainers or eating out) without feeling guilty.
  • Builders (16%): Have modest savings of less than three months outgoings, so don’t have enough resilience to deal with life’s unexpected expenses (eg boiler repair or vets bill).
  • Planners (40%): Have savings of more than three months’ outgoings to cope with unexpected expenses and a plan in place to achieve long-term financial goals.
  • Prospers (8%): Finances are not a constraint to living the life they want.

2. Find out what they will value

In our latest research we also asked employees what they would value most to help them improve their financial fitness score.

The priorities for most strugglers and copers, in order of importance, are:

  1. Getting out of debt.
  2. Getting better at saving.
  3. Long-term financial planning.
  4. Not feeling ashamed about finances.
  5. Setting goals and the ability to act on them.

Opt-out rates and contribution levels to your workplace pension scheme will be affected by your employees’ monthly cashflow and their ability to control their spending. High levels of expensive unsecured debt can not only crowd out one’s ability to save, but it can also create stress, worry, anxiety and an inability to make wise money-related decisions.

In our research we have found that most employees (82–96%) at all financial fitness levels understand the importance of saving, but most are unhappy with their current level of savings.

Most employees either don’t bother to budget for various reasons, or they do budget but don’t follow it. Sticking to a budget seems to be hard for many employees. This is a behavioural, not an educational problem.

3. Make it easy for them to engage (and give them what they asked for)

There is lots of research that shows that most employees trust their employer. Combining this trust with the ability to facilitate deductions from payroll, offers a no-cost way for the employer to have a high impact on their employees’ financial wellbeing.        

The adage of what you haven’t had you don’t miss can be applied to help employees save for their future self. Enabling staff to elect to have loan, saving or insurance payments deducted from net pay, before they receive their wages, makes it easy for them to develop good spending habits. This is because they save (or repay debt) first and spend what’s left, rather than spend first and save what’s left.

Because the cost of marketing and distributing financial products is so much lower, this translates into either lower borrowing costs, higher savings interest, or lower insurance premiums.

Making it easy for employees to get out of debt, build savings or get the right level of insurance, is probably the highest impact improvement you can make to your benefits package.

This article is provided by Salary Finance.

Salary Finance is sponsoring REBA’s Innovation Day 2019. Join us on 28 November in central London to future-proof your reward and benefits strategy.

In partnership with Salary Finance Inc

We understand the impact finances have on our health, our happiness, our home life & our work life.

Contact us today