Improving retention and recruitment: The power of employee benefit schemes

Employee benefit schemes play a growing role in today’s workplace. As salaries remain stagnant and inflation continues to rise, workers are examining every benefit  a role offers, not just cash value.

Effective employee benefits programs have a dramatic impact on recruitment and retention—and with the unstable UK job market, there’s no better time to go beyond the basics.

Here’s what HR leaders should know about the different types of employee benefit programs and how their growing significance will impact your business.

The modern landscape of employee retention and recruitment 

The pandemic, economic uncertainty, and a volatile job market have severely impacted employee loyalty. Turnover rates in the UK have increased by almost 9% since 2019 and are expected to rise 41% in the next year.

These numbers are even more stark for younger generations, with over half of Gen Z and millennials likely to change roles compared to one in three of their older counterparts. But this can all change when employee benefits are considered.

Why employee benefits matter more than ever

Employee benefits schemes significantly influence an employee’s decision to stay in their role. The cost of living is increasing at an upward spike, yet the average paycheck falls short, with UK workers experiencing wage stagnation for the last 15 years. Because of this stagnation, many employees are looking at incentives outside of salaries and pay rises. 

Expectations are changing, particularly for younger generations who make up a growing percentage of the UK workforce. Gen Z—the latest to join—are expected to represent 27% of the workforce by 2025 and their entry into employment has altered how they view the working world. The majority are looking for hybrid or remote work, with flexibility being a top consideration. And 42% see physical and mental wellbeing benefits as a workplace priority. 

These benefits impact not only those in employment but also those looking to move on. One study found that 69% of all employees would choose one job over another due to better employee benefits, and Glassdoor reports that 79% would prefer additional employee benefits over a salary increase.

This has caused a change in workplace dynamics, with repercussions of the ‘Great Resignation’ impacting what is still a competitive job market. 45% of UK employers are struggling to fill vacancies, with only 27% planning to raise wages in response to difficulties.

With this in mind, employee benefits have never been more of a priority for businesses, but only if they get them right. 

Exploring different types of employee benefits

Family and reproductive health benefits 

With an all-time high number of parents in the workforce, family and reproductive health benefits are now an integral element of employee benefit schemes. These include:

• Fertility and family building benefits: Helping employees on the path to parenthood through clinical, emotional, and financial support
• Maternity benefits: Supporting new parents during pregnancy and after birth with clinical and emotional care
• Parenting: On-demand access to parenting specialists and paediatric care 
• Menopause support: Flexibility, education, and access to healthcare services for employees navigating perimenopause and menopause

Health and wellbeing packages

Health and wellness perks are one of the most popular types of employee benefits, and remain one of the most important. This includes any area that supports the physical health of an employee—namely medical insurance, dental coverage, and eye care—as well as overall physical and mental wellbeing such as smoking cessation programmes and a subsidised gym membership.

Mental health support is quickly becoming an expected employee benefit, with 80% of organisations reporting an increase in demand since the pandemic. Common areas of support include providing resources and educational programmes, stress management, and access to therapists and counsellors. Some organisations offer employee assistance programmes that provide this support, while others offer more comprehensive care through a third-party partner.

Employee discount schemes and perks

Many businesses offer employee benefits that financially benefit the employee in day-to-day life. These employee discount schemes include discounts and vouchers for childcare, restaurants, supermarkets, events and attractions, local businesses, and online shopping.

Whilst a simple benefit, this style of employee benefits scheme can be incredibly helpful for employees' financial wellbeing whilst demonstrating an appreciation for hard work.

Life insurance and workplace pensions

All employers are legally obliged to provide a workplace pension scheme, paying a minimum of 3%. However, some organisations offer to increase this amount, allowing the employee to pay less into their pension, or by matching what the employee contributes.

This is not a legal requirement, but employee life insurance is a recommended benefit that provides money to employees’ family members in the event of their death. This tax-free lump sum supports an individual’s dependents such as their partner or children, and is an effective way to provide financial aid through employee benefits. 

Paid time off

UK employees are entitled to a set amount of paid time off work (depending on whether they work full-time, part-time or irregular hours). But many companies provide more than the minimum, as doing so supports a better work-life balance whilst having a direct correlation on increased employee productivity. 

The most recent advancement is seen in the UK’s four-day work week trial, where 56 out of 61 partaking companies have continued to adopt a 32-hour week as a result of better productivity and employee wellbeing.

Other forms of extended paid time include sabbaticals, unlimited annual leave, extended parental leave beyond the legal minimum, and paid bereavement leave.

Salary sacrifice

Salary sacrifice, or salary exchange, is a voluntary arrangement where an employee’s salary is reduced in exchange for a benefit. This could be a pension contribution, cycle to work scheme, childcare support, or new car scheme. It is often a helpful way for employees to save money and spread the cost of expensive purchases.

The benefits of salary sacrifice are tenfold. Employees pay less National Insurance and income tax, increasing their take-home pay and driving financial wellbeing, whilst employers also make tax savings which can be reinvested back into the business.