How non-cash benefits can be as effective as cash in driving engagement
Businesses are likely to face increasing challenges to retain top talent in the year ahead.
A new report from EY highlights that 38% of employees plan to leave their jobs and so the importance of a well-designed, competitive rewards offering cannot be overstated.
The question is whether, in seeking to retain (and recruit) talent, “cash is king” or investment in benefits offerings can drive better results.
Going beyond cash to support employees’ needs
Both cash and non-cash benefits play key roles in rewarding and retaining talent.
However, the focus should not be on choosing one over the other but on finding the right mix.
A little like Maslow’s hierarchy of needs, there is no doubt that employers must meet the minimum salary expectations for any given role.
Once these levels are met, the question becomes how to effectively allocate additional budget to maximise their impact.
Research from Zest highlights that a third (30%) of employees would like to see higher pension contributions from their employer, rising to 41% among those aged 55 and older.
Private medical insurance (PMI) ranks second on employees’ wish lists for 2025, with 29% of respondents citing it as their priority, increasing to 39% among those over 55.
This demonstrates that healthcare and retirement security are top priorities for many employees, making these benefits a crucial investment beyond the legal minimums.
Accepting that this is the case, only leads to the question as to how to determine the right level of investment for your people, which creates equal or higher engagement than providing employees with additional salary.
After all, salary increases are said to only have the desired impact on employee engagement for a short period of time.
The answer likely lies in integrating cash and non-cash benefits into a comprehensive total reward strategy, which drives long-term engagement and satisfaction.
Satisfaction in the sense of feeling well-rewarded for the role they perform and satisfaction in the sense of feeling like their employer is going above and beyond in supporting some of their most important financial and health needs.
Understanding the diverse needs of the workforce
To maximise the value of any total reward programme, employers must understand the demographics within their workforce.
Employees across different age groups - from their twenties to their sixties - have varying needs when it comes to health, wellbeing, and financial planning.
The same is true according to the earnings profile of employees.
Typically, lower-earning, younger employees place less importance on health and retirement (as the two most expensive benefits) than older, higher-earning colleagues.
As such, a “one-size-fits-all” approach to total reward rarely delivers the desired results.
But, give everyone more salary and tell them they can put it in their pension or pay for healthcare rarely achieves the desired results too, as inertia results in too few employees paying in enough money for a good retirement outcome and only employees in desperate need put the additional salary towards healthcare.
The point being, there is huge value in understanding your demographics and making collective decisions on their behalf.
Having a headline competitive offer regarding (amongst other things) your level of pension contributions and healthcare provision supports that goal of improving attraction, retention and engagement for the right people.
Naturally, this would lead to differentiating your offer for different employees, which can be very hard to achieve, unless there is some consistency between age and seniority.
If you are catering for all combinations of earnings and age profiles (i.e. high earning younger employees and low earning older employees), then the task gets much harder.
Maximising the impact of cash and non-cash benefits
Once basic salary expectations are met, employers should focus on strategically allocating additional resources to boost the perception of reward.
While cash benefits are valued for their immediate impact, it is non-cash benefits that bring deeper, long-term connections with employees.
This is especially true when delivered through compelling communications.
Employers must ensure employees not only have access to these benefits but also fully understand their value and how to take advantage of them.
Clear and consistent messaging, reinforcing the value to the individual, is essential to achieving this.
Additionally, both current employees and potential recruits should be made aware of the full spectrum of benefits on offer, emphasising how these align with personal and professional goals.
With thoughtful, targeted communication, employers can transform their investment in non-cash benefits into tangible outcomes - greater employee satisfaction, meaningful engagement, and the ability to attract top talent.
Conclusion
So, what are we really advocating for?
First, for some businesses, there can be an over-emphasis on cash and an under-investment in benefits, perhaps driven by the belief that employees always value cash more.
But that simply isn’t the case.
That said, nor is it as easy as simply improving benefits for all and hoping that appreciation and satisfaction ensues.
The challenge for employers is not choosing between cash and non-cash benefits but balancing them effectively for different cohorts of employees.
When designed thoughtfully and communicated clearly, non-cash benefits can be just as valuable - if not more so - than cash in driving long-term engagement.
For example, when people see the investment the business is making in their long-term financial future (i.e. retirement), they think long-term about their relationship with the business.
The bottom line is, know your people, learn their drivers and allocate spend accordingly.
For more information, visit www.howdengroup.co.uk.
Supplied by REBA Associate Member, Howden Employee Benefits
Howden provides insurance broking, risk management and claims consulting services, globally. We work with clients of all sizes to provide dedicated employee benefits & wellbeing consultancy.
