02 May 2017

Why the living wage increase isn’t enough for Gen Z

In the Autumn Statement last November, Chancellor Phillip Hammond increased the National Living Wage from £7.20 to £7.50 from April 2017, with the aim of increasing it to £9 an hour by 2020.

The new rate will apply to workers aged 25 and over and is the first rise in the new statutory minimum rate since it was introduced in April 2016, at £7.20.

The National Living Wage has a number of benefits for businesses, in fact there are clear business, societal and economic benefits as well as being the responsible thing to do according to the Living Wage Foundation:

It demonstrates your core values to your employees
It provides an opportunity to achieve efficiency gains and introduce new policies
It empowers employees and contributes to them developing new skills and training
It improves employee productivity and the quality of work by employees
It helps reduce employee sickness and absence due to stress caused by financial worries
It increases employee job satisfaction
It increases consumer awareness of your organisation’s commitment to be an ethical employer
It improves employee engagement and welfare through employee impact

Ikea, one of the first retailers to commit to raising the minimum hourly rate it pays its UK staff, are making this move because as Gillian Drakeford, country manager for Ikea UK and Ireland, said: “Introducing the living wage is not only the right thing to do for our co-workers, but it also makes good business sense. This is a long-term investment in our people based on our values and our belief that a team with good compensation and working conditions is in a position to provide a great experience to our customers.”

Unfortunately, the economic climate and competition doesn’t always allow for organisations to award their employees a pay rise. This is why it is important for HR professionals and employee benefits specialists to use employee benefits to engage their employees and help employees bridge the gap to a living wage.

The challenge of Generation Z

One demographic of the workforce that is particularly affected by the Chancellor's announcement in the Autumn Statement is Generation Z.

Generation Z were born from 1996 onwards which means that they are only just coming of age and entering the workplace. This generation of employees are the true digital natives, born after the birth of the Internet and raised in an age of social media and always-on mobile communication.

But this means that the young people in Generation Z who are under the age of 25 are not legally entitled to the National Living Wage. Those aged between 21 and 24 can get the minimum wage but these rates take into account affordability for employers and are, therefore, not as high as the National Living Wage.

This means that if HR professionals and employee benefits specialists want to engage and motivate the young people in their workforce then they need to consider the types of benefits that will motivate them and help them bridge the gap between their salary and the living wage.

Which employee benefits engage Generation Z?

When it comes to benefits that engage Generation Z think about which benefits a 23 year would want. Our knowledge of the marketplace and workforce demographics highlights that Generation Z prefer benefits that provide them with financial security and stability, such as budgeting tools or financial education, as well as benefits that are geared towards self-improvement, such as gym memberships. They also want flexibility so flexible working policies that allow them to work at any time and from any location are an excellent benefit to offer them.

And remember, Generation Z are the digital generation and your employee benefits scheme should reflect that, so give them the ability to sign up or change their benefits options either online or via their smartphone.

Stretching your employees’ salary further

There are a range of benefits that an employer can offer its employees and prospective employees which will add value to its employment proposition, these include pensions and medical insurance, along with special offers and discounts.

Despite the Chancellor's announcement that the Government are to remove the financial benefits of salary sacrifice schemes childcare vouchers, cycle-to-work schemes and ultra-low emission cars will continue to offer tax breaks too. Even without tax efficiencies, many employee benefits will still be of great value to employees, and this should not be overlooked.

Of course, childcare vouchers may not be of interest to Generation Z due to their age or lifestyle factor but there are still plenty of employee benefits that HR professionals and employee benefits specialists can use to motivate and engage their Generation Z employees.

1) Cashback cards

Cashback cards give your employees the ability to earn money every time they use them at well known high street brands, which means they don’t even have to change their shopping habits. The amount of cashback that can be earned by your employees is completely unlimited and they can use it on anything they like.

Using Office for National Statistics figures we found that the average family could earn up to £500 a year in cashback, simply by using a cashback card to pay for things they would have purchased anyway.

2) Staff discount schemes

These can help your employees make savings on their every day shopping. By simply purchasing vouchers/gift cards through a discount scheme they will receive a higher value of vouchers/gift cards than they actually paid for. This means that employees can save hundreds of pounds every year on shopping they would have done anyway and it helps them budget for their monthly outgoings.

3) Lump sum payments

Many employees struggle to make lump sum payments for things like annual car parking passes or train season tickets. You can help your employees manage the costs of these purchases by purchasing the annual ticket upfront and passing on smaller monthly repayments over the course of the year. In the future these will be subject to salary sacrifice changes but they do help your employees budget better and manage their finances.

4) Corporate deals

In times of financial hardship, health and lifestyle benefits can help your employees access services they may otherwise be unaware of, or are unable to afford, such as Employee Assistance Programmes, thanks to corporate deals.

In the future…

In addition, due to the changing nature of salary sacrifice arrangements there will be a number of innovative and exciting salary deduction programmes developed in the future, to support the UK’s employers – and their staff.

Employee benefits are investments in the health, wellbeing, loyalty, happiness and motivation of your employees and can provide your employees with support with a net value far in excess of the costs. They help employees bridge the gap between what they are paid and the living wage and help employers provide a simple and cost effective way to recruit, retain, motivate and engage employees.

This article was provided by Sodexo.