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10 Apr 2024
by Matt Russell

Why one-off bonuses are not the answer to the cost-of-living crisis

Research shows employees would rather have year-round financial support

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Every employee likes to get an annual bonus, especially just after the expensive Christmas period when household finances are stretched and the January blues have kicked in.

Bonuses are an excellent way to reward employees and recognise outstanding effort throughout the year. In some sectors, bonuses are also vital for talent attraction and retention – particularly in financial services where recent ONS figures revealed workers received an average of £18,000 in bonuses.

During a cost-of-living crisis an additional lump sum in your monthly pay packet is undoubtedly welcome. Recent research by Zest indicated that half of all employees admitted that bonuses would keep them financially afloat this year. For younger employees, this jumped to around six in 10 (58%).

However, bonuses may not be the most effective way to financially support employees.

Employees need help

The research also revealed that while employees are reliant on bonuses, they would prefer ongoing, year-round financial support.

Six in ten (61%) younger employees who receive a Christmas bonus say they’d prefer workplace savings schemes or discount vouchers instead a one-off payment.

More than six in 10 of all employees would rather have a pay rise over a bonus – but given that one-third (29%) of businesses are unable to raise salaries due to financial challenges they need a more cost-effective and financially sustainable approach.

Benefits packages offer a solution.

Employers need to look at how they can build year-round financial support into their remuneration packages.

Personalisation is key

Personalised benefits packages can help differentiate employers in a competitive market, while providing enhanced financial support.

For example, offering retail vouchers can help employees manage rising food costs while financial education workshops can be effective at empowering employees to manage their finances and build savings.

A flexible package that includes these types of benefits and is tailored to a workforce’s needs is essential. This should include modern, progressive benefits, both financial and otherwise, whether that’s budgeting tools, a work-from-home allowance or menopause support.

Employees increasingly understand the value of their benefits – more than four in 10 say a good package is the most important thing they look for in employment.

Not only are benefits packages essential in providing financial support, they are increasingly important for motivating a workforce.

More than half of all employees say they are more motivated by benefits than a bonus: clearly, employers must allocate resources to ensure that benefits packages are effective and offer enhanced value for money for all sides.

Show the value

The next challenge for employers is ensuring employees understand the full value of their benefits packages. The value of a one-off bonus is easy to comprehend, but a package that includes a range of perks can be harder to calculate.

For example, how many employees with access to a diverse package including private medical insurance, energy bill support, financial education workshops, mental health leave and fertility support could accurately place a monetary amount on the value of these benefits?

This has led to an increase in the number of businesses introducing total reward statements to employees. This simple and effective tool highlights exactly what an employee is worth and the total value of their benefits package.

Though a business may have a great benefits package to support in areas like wellbeing, it can often sit underused, offering poor value for money to both employer and employee. 

A total reward statement can be a great way to present employees with their benefits in a clear and simple form.

Previously, building employee benefit platforms to showcase total reward statements has been resource intensive – with many options becoming expensive, time consuming and difficult to implement.

Communicate and track

The key to offering personalised benefits packages is the ability to effectively communicate with employees to understand their needs and accurately track benefit take-up.

Employers need to ensure that they have access to the most accurate tools which can offer improved segmentation and greater insights ensuring they are more informed of employee needs and better placed to engage with their workforce on their specific requirements.

This can be the difference in boosting take-up, value for money and employer experience simultaneously.

In partnership with Zest

Zest is the next generation platform that’s reinventing the world of employee benefits.

Contact us today