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23 May 2023
by Andrew Simpson

Aligning employee benefits with corporate ESG strategy

An organisation’s stance on environmental, social and governance (ESG) can be the make or break for attracting and retaining talent

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Businesses are repositioning themselves in the market by adjusting their operations and service offering to better reflect society’s rapidly evolving expectations regarding environmental, social and governance (ESG) standards.

Employee benefits should not only reflect these values, but amplify them to improve the company’s image and reputation and attract and retain the right talent.

In today’s competitive labour market, the decision to join or stay with an employer is increasingly influenced by the organisation’s stance on ESG, making employee benefits a core area to explore.

Depending on the business’ ambitions, there is a wide range of options to select from to address all three ESG components.

E for environment

The increased concern about the consequences of climate change means employees and applicants expect an employer to prioritise workforce sustainability. Millennials and Generation Z workers are more mindful of the world and their impact on it. Promoting benefits in this area can have a positive impact on a company’s image and reputation.

Cycle to work
Perhaps the most obvious tool in the environmental component. It can save an employee more than 25% on a bike and accessories. The employee doesn’t need to pay anything up front and the payments are taken tax efficiently from the salary by the employer. While the emphasis lies on the environmental, employees taking advantage of this offer may also benefit from a health and wellbeing perspective.

Electric cars
Electric vehicles can be offered on a salary sacrifice basis, helping to reduce carbon footprint, improve air quality and reduce noise pollution. The salary sacrifice scheme allows employees to pay for an electric car each month from their gross salary, creating a tax efficient way to fund greener vehicles.

Many employers are looking to help employees with their financial wellbeing and education on their pension fund investments can be an opportunity to align both financial and environmental strategies.

Offering a green or ESG-focused investment option for the pensions scheme can be a great opportunity for businesses to show their commitment to these goals. Excluding investments in sectors and industries that harm the environment may also offer better returns in the future as economies worldwide shift towards sustainability.

Other options to explore the E in ESG may include travel loans, car-pooling, carbon offsetting and ‘source local’ suppliers.

S for sustainability

This is arguably the most innovative of area in employee benefits. A variety of new solutions are addressing society’s rapidly changing needs and expectations.

Couples have been postponing having children, in many cases to allow women to focus on their careers. In England and Wales, the average age of women giving birth to their first child is 29.1 years, up from 23.7 years in the early 1970s.

This has created a growing number of couples struggling to bear a child when they feel ready for it, creating significant stress not only in the couple’s relationship but also potentially affecting their wider social and professional relationships.

Businesses are therefore increasingly exploring support opportunities to offer clinical advice, financing and benefits for fertility, family forming, sexual and hormonal health, menopause, and reproductive health. Insurers have responded by developing fertility-specific benefits and support for employees.

Gender reassignment
Issues around transgender rights and gender reassignment have risen on the corporate agenda. There were 262,000 people living in England and Wales in March 2021 who identified with a gender different from their sex registered at birth, according to the Census 2021 figures.

The number of gender identity clinics available on the NHS is limited and there is a long waiting list for support. Furthermore, procedures such as facial surgery aren’t usually available through the NHS.

To address the needs of this group and show the company’s commitment to diversity, equity, and inclusion (DE&I) values, businesses can consider offering specialist mental health support and benefits that align with the support offered through NHS.

Furthermore, there may be options to extend medical cover to include surgical interventions and support not readily available from the NHS such as surgeries to masculinise or feminise the face and hair transplants.

It’s now widely understood that people experience and interact with the world around them in many different ways, that there is no one ‘right' way of thinking, learning, and behaving, and that differences are not deficits.

The word neurodiversity refers to the diversity of thought of all people, but it is often used in the context of autism spectrum disorder and attention-deficit/hyperactivity disorder or learning disabilities.

Businesses can support these employees as part of their DE&I initiatives by adjusting their group income protection set-up, by promoting financial support and education around basic budgeting and savings or by extending workplace benefits to dependants, particularly as the neurodiverse diagnosis waiting lists on the NHS can be long.

Other options to enhance support within the ‘social’ pillar may include considering gender specific healthcare, wellbeing initiatives, introducing both flexible and trading annual leave, initiatives around corporate social responsibility, activities with charitable associations and fund raising and engaging with internal and external networks.

G for governance

A higher level of transparency required by regulators through corporate disclosures has increased public interest in governance issues particularly at medium and larger companies. This has driven companies to pay more attention to their diversity and inclusion policies and their ambitions here.

Gender pay gap
Any UK employer with 250 or more employees must report gender pay gap data. A large or even increasing gender pay gap may cause unease among staff and potentially trigger uncomfortable questions from job applicants or investors. Goals and a robust strategy are necessary to address the issue and convince stakeholders that the business is heading in the right direction.

Board diversity
Some companies are having to comply with regulators’ minimum requirements for board diversity while others are designing and implementing such policies on a voluntary basis.

The benefits of a diverse board include improved decision-making, access to a wider pool of talent, enhanced investor relations and stronger corporate reputation.

A strategy to create a diverse board should consider factors like age, race, gender, educational background and professional qualifications of the directors to make the board less homogenous.

DE&I initiatives
Employers use DE&I initiatives for both compliance obligations and to make the company culture more attractive to a wider talent pool. Developing a DE&I initiative should include:

  • Data collection and analysis to determine the need for change
  • Strategy design to match business objectives
  • Implementation of the initiative
  • Evaluation and continuing audit of the plan

Other initiatives to strengthen governance may include considering remuneration policy, identifying young or rising stars and policy management.

Lockton People Solutions help businesses of all sizes define their benefits strategy and design their programmes to reflect their business needs. For more details on our products and services, visit our Global People Solutions page.

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