Changing cost dynamics

The pricing philosophy of the risk and healthcare markets has has continued to diverge over the last two years. Pricing has reduced in the former, in response to post-pandemic adjustments, but risen sharply in the latter with pressures on the NHS driving up private sector costs.

In the risk market, it has been traditional to wait until a two or three year rate guarantee has expired before the market is tested. However, there is no lock in here and with falling prices it can pay significant dividends to bring forward market testing and most certainly not forgo the opportunity if you are due a rate expiry this year or early next year.

Savings generated here can help offset increased healthcare or other employment costs. For example, we recently achieved a six-figure saving for a client simply by strategically testing the market.  

It is therefore more vital than ever to regularly review the market for these benefits to ensure your spend is optimised, especially now with increased employer NI costs.

Perception versus reality

Traditionally, group risk and healthcare benefits may have been a tick box exercise for some businesses: stick with auto risk renewal and move on. The prospect of overhauling a long-established plan may just have felt too overwhelming – or time-consuming – to tackle right at that moment.  But the reality is quite different. Indeed, engaging a consultancy firm can turn this into a really simple process – with clients only required to sign a letter of authority and leaving the specialist team to assess the best possible way forward.

It comes down to taking a holistic view. A consultative approach, that asks the right questions around business and people strategies, benchmarking, governance and really understanding the demographic and health data of the workforce, will ultimately ensure that risk is presented to the market in the best possible light. On top of the demonstrable advantages of healthy and empowered employees, the best possible price is obtained without compromising cover – maximising value for money and ROI too.

Thinking differently

To achieve long-term success, a strategic healthcare benefits plan is not just important, it’s indispensable. Our approach at Isio is to transcend traditional broking by thoroughly understanding our clients’ current and future objectives. Additionally, by leveraging Isio’s Life Master Trust and Synergy Wellbeing solutions, clients can benefit from a streamlined, flexible, cost-effective approach to managing employee benefit insurances.

It’s a win-win: these strategies not only support employees’ physical and mental health but also contribute to a more motivated and productive workforce, driving an enduring employee value proposition and overall business success.

To find out how Isio’s fresh approach to risk cover can benefit your business, contact allyson.gayle@isio.com

Making an impact  

Given these challenges, employers could be forgiven for feeling that there are simply no feasible options to enhance a benefits programme or to support employees in a compelling and valued way. 

But the good news is that by recognising there’s an issue, and then taking steps to fix it, organisations can do so much more with their existing employee benefits budget. A scheme that’s inclusive and focused on employee wellbeing can help achieve core strategic objectives, including retaining, attracting and maintaining a motivated and healthy workforce. 

If a benefits package is truly understood and valued by employees then it may well be seen as equal to – or even more important than – a pay rise. 

So how to get there. Savvy companies regularly ask themselves which benefits are delivering the most value to their employees. But getting the relevant data and constructive feedback to validate hunches with stats isn’t easy. The top priority, therefore, is getting to the heart of what a benefits programme needs to achieve. There needs to be clarity and consensus on what a relevant scheme would look like: i.e. what exactly the programme needs to achieve for an organisation and its employees – whether that’s talent retention or improvements in overall employee wellbeing for example. 

Knowing your workforce and what they value is fundamental. This can be achieved using a range of tools from interactive workshops and interviews to strategic data gathering. Employers can then confidently analyse what is valued across each employee group and, most importantly, highlight what’s missing. It’s a helpful prompt to ensure third party providers are delivering an optimal service and maximising any potential value-adds. 

And robust communication underpins the entire strategy. A recent graduate can only take advantage of financial support to save for a property deposit if they know it’s available to them, for example. A benefits scheme can only perform – and provide true value – with consistent and efficient engagement with all employees and stakeholders.  

That’s why Isio has developed the 3D Benefits Review. It’s a transparent, targeted and cost-effective way to assess how your benefits package is structured and pinpoint how it can be improved. What’s more it’s quick to implement, with minimal requirements for client time.  

Our experienced consultants will get to the heart of your benefits scheme, clarifying its purpose and setting out practical options for change backed by data and our own industry-leading analysis. We’re fully independent too which ensures our advice is entirely focused on supporting employers to create future-proofed and flexible schemes that are inclusive, centred on employee wellbeing and value for money.  

HR and benefits teams have an ever-growing list of competing priorities. Let our 3D Benefits Review cut through the noise by flagging the areas that will deliver the biggest returns. 

To find out how the Isio 3D Benefits Review can help you maximise value from employee benefits, please contact Kelly Gajjar.

Mitigating impact

Given these significant changes, employer attention has turned to what actions they can take to help manage their cost exposure and how that might impact their payroll implementation.

A first step in this exercise requires a holistic view to employee reward – rebalancing away from pay and into other benefits that do not attract employer NI. Directing more reward into pensions is one obvious way of reducing the impact of higher NI rates. Indeed, alongside core pension contributions, employers may also consider bonus sacrifice and/or a shared cost Additional Voluntary Contribution (AVC) as ways of reducing NI contributions for both employer and employee.

Equally, those businesses already using existing salary sacrifice arrangements (and sharing some of the NI savings in the form of employee contributions), will need to consider whether these need to be revisited in light of the higher savings.

Also worth considering are approved non-financial salary sacrifice arrangements such as electric vehicles, cycle to work and technology schemes.

Employer considerations

Employers should remember that salary sacrifice arrangements cannot generally be used by those earning at (or close to) the National Minimum Wage, and so there are limitations to the effectiveness of salary sacrifice for some organisations.

Furthermore, it is a well-known fact that younger workers do not place £1 of value on a £1 pension contribution for example. So any business looking to place a greater emphasis on benefits as part of their reward package will need to carefully communicate the value delivered by these benefits.

Irrespective of the nature of the benefit, employers will want to ensure that employees understand and engage with the benefits provided, as well as appreciating the value. Our recent research showed that providing an easy-to-understand Total Reward Statement can increase employee appreciation of the value of benefits by 48%. This can also be extended out to cover non-financial benefits, such as flexible working and family-friendly policies.

A changing landscape

Responding to the Budget isn’t the full extent of the changes that employers will be looking to address over the coming year. There is also the Employment Rights Bill – one of the most significant single items of employment legislation to be published – to consider.

Among the changes to employment law stemming from the Government’s ‘New Deal for Working People’ are enhanced rights for workers around flexible working, and the extension of existing employment rights – including rights to sick pay, and to protection against unfair dismissal – so that they apply from ‘Day One’ of employment contracts.

Not only does this directly impact employee reward and benefits, and how they are implemented in payroll, there’s also the possibility of penalties from regulators for non-compliance – with corresponding financial and reputational implications for those who fall short. All resulting in a set of powerful incentives to take a proactive approach.

Reporting environment

Organisations of over 250 employees will have well-established Gender Pay Gap reporting processes but the proposed extension to ethnicity and disability reporting will bring new challenges for many. Not least how to persuade employees to provide this information, how to categorise ethnicity and disability and how to explain apparent pay gaps which may be driven by a lack of available information or a very small cohort of the workforce.

Although there are many areas of uncertainty including timing, transition periods, enforcement, benchmarking and penalties for non-compliance, HR teams can – and should – start preparing themselves for these new reporting requirements.

Preparations should include a review of existing employee data as well as an initial analysis of the scale of any pay gaps and an understanding of what is driving the gaps. Employers may also want to consider whether the existing HR team is equipped to deal with the enhanced obligations or whether to investigate outsourcing of the analysis.

Ensuring that your people are paid the right amount and at the right time might seem a simple enough task, but rules around pay and pensions are complex and nuanced. At a time of significant change in the requirements around employee reward, it is essential that businesses don’t find themselves inadvertently falling foul of these rules. All in all, there’s never been a more important time to make payroll a priority.

To ensure that your payroll model is aligned, compliant and prepared for new disclosures, please contact Mark Jones using the details below.

What else is there to consider when appraising the market? It might be tempting to roll out the tech and think the job is done. But there are other important considerations, and this is where the value point comes in. To maximise that value – for both organisations and employee experience – the technology needs to be flexible and dynamic. It needs to grow as a live component within an ever-evolving reward and benefits strategy.

Adaptability is therefore key. Restrictive or cumbersome technology platforms that are not easily able to change to new circumstances may end up as more of an obstacle than a solution. All too often, software is assumed to be future-proofed. Instead, the focus should be on that continuous development concept, embedding technology as a vital component in employee journey.

Not only does this mean the front end will feel unique, fit for purpose and fresh – customisation means organisations can put their own stamp on the technology for example – but in terms of the back end, HR teams are supported as the landscape continually shifts. Whether that’s around analysing management information, pre-empting upcoming regulatory change or enhancing reporting.

There’s flexibility in the scale of the deployment too. At one end that would involve simply bringing benefit information into one place, highlighting to the employee what’s on offer and what’s relevant to them and communicating that effectively. Individuals can be given a clear picture of what’s being provided and that can be a powerful factor when making decisions about leaving or staying in their role. At the other end, a fully flexible solution would allow employees to tailor and customise their package to make it unique for them.

For CPO’s, the trigger for investing in a benefits technology platform can vary. For some organisations, it’s a compliment to introducing flexibility in their benefit package, for other it’s driven by a desire to put in place a more flexible, reactive system.

And that experience draws out the bottom line here: making reward and benefits work for all. Given it’s one of the biggest areas of spend for many organisations, getting the tech right has never been more important. After all, a poorly designed employee benefits approach can cost money, time and talent – and the keys to unlocking value for a modern workforce.

Isio.beam is Isio’s newly enhanced, highly customisable employee benefits, reward and engagement platform that reflects your unique requirements, gives your employees control over their benefits and evolves with the needs of your business. Ready to put your employees in full control of their benefits? Watch our demo video here and get in touch to request a demo today.