Trends and themes in employee benefits for 2023

Employee benefits are a key part of any organisation’s offer to its people: improving wellbeing, genuinely valuing achievement, and retaining top talent.We’ve reviewed every key survey on the latest trends in benefits. What we found was a high degree of agreement about the key themes.

Selling point: the most impactful benefit areas

Top 5 areas employers can emphasise

  • Health & wellbeing
  • Mental health
  • Agile/flexible working
  • Work life balance
  • Diversity, equity & inclusion

Top 5 areas of employee expectation

  • More flexible working hours
  • Agile/home working
  • Better awareness & handling of mental health issues
  • Better approach to diversity, equity & inclusion
  • Environmental & sustainability policies/benefits

What’s striking here is that (apart from health and wellbeing), most of these areas are not in the traditional benefits space. Indeed, one of the themes that emerged during our research is that it appears that employers are no longer competing solely over how many days’ holiday they offer or their pension provision (although these are still important), but whether they are the type of organisation that a potential recruit wants to be part of. For example, whether an organisation has a commitment to ESG, as well as whether the pension/holiday entitlement is to an expected standard.

Below we look at each of these areas in turn to consider the key trends in each:

    Health & wellbeing (including mental health)

    An increased emphasis on employee health & wellbeing has been the dominant theme of the last ten years. This has started with a focus on physical health (e.g., free fruit and gym discounts), through to stress reduction (e.g., workplace massages) and has now broadened out to encompass both mental health and financial wellbeing.

    Mental health, in particular, is a current focus on employee benefits provision. Typically, this takes one or more of the following forms:

    • Increasing mental health awareness at work, which may include training managers (and/or mental first aiders)
    • Giving employees access to mental health tools through a digital app
    • Ensuring employees have access to counselling, typically through an EAP

     

      We have also come across several organisations who offer staff ‘Wellbeing days’ in addition to their annual leave entitlement. These are days that can be taken at short notice when an employee is not physically ill but needs time to recharge.

      The other area worth highlighting is financial wellbeing, which is a relatively new area of provision. Common initiatives here include:

      • Financial education sessions
      • Access to debt counsellors (again, typically through the EAP provider)
      • Access to retail discounts
      • Pension seminars
      • Access to Independent Financial Advisers
      • Earned Pay Access (payroll schemes in which an employee can take their pay before pay day)
      • A greater emphasis on making sure that employees understand all the benefits that are available to support them

      We also notice a current theme that the Health & Wellbeing sphere should not just be a series of initiatives/policies, but pulled together into a holistic strategy, and have included an example of one at the end of the accompanying document, Breakdown of Benefits Provision.

        Agile/Flexible Working

        The second big theme has been that of flexibility. This takes a number of forms:

        • Flexibility over the benefits an employee receives
        • Flexibility of working hours
        • Flexibility of working location

        However, it appears to us here that the common underlying theme is really that of control. Employees have an expectation of greater control over aspects of their working life than previously and a useful question for an organisation to ask might be: To what extent does an employee have control over aspects of their working experience and what balance is needed between employee control and organisational needs?

        Below we look at each type of flexibility in turn.

        Flexible benefits:

        This is an umbrella term and encompasses everything from allowing flex over a single benefit (typically annual leave), to offering discounts where employees buy voluntary benefits (e.g., retail discounts or discounted insurance), to full flexible benefits platform where employees have a flex pot (typically around 3-5% of salary) to use on a range of benefits.

        Our experience is that limited benefit flexibility (e.g., buying and/or selling holiday and allowing some access to voluntary benefits) is very common in the not-for-profit sector, but that full flexible benefits platforms tend to predominate in larger private sector businesses. This view was supported by all the survey data we consulted.

          Flexibility over working hours:

          By this we mean non-standard working hours, such as part-time, compressed hours or job share. This sort of flexibility has long been a key selling point of the third sector relative to the private sector. However, the private sector is making inroads into this area and our review of larger private sector company careers pages showed almost all of them highlighting flexible working practices as a key company benefit.

          Flexibility of working location:

          Homeworking and hybrid working have both shot to the top of the employee/employer agenda since the Covid pandemic, with survey data over the past year consistently reporting that a flexible working location is one of the most important differentiators in choosing a role.

          We have been tracking employer strategies and responses to hybrid working for the past 18 months. What’s interesting thing is that despite its importance to employees, only around 14% of job adverts we’ve recorded over the past 18 months explicitly mention being either home-based or hybrid. This may be a result of employers’ hesitation to bake hybrid/homeworking permanently in as a contractual arrangement.

          On the other hand, flexible work location is frequently mentioned in careers websites as an option for at least some roles. The most common arrangement described was the ability to work at least part of the week at home – and there did not appear to be any discernible difference in the frequency with which this was mentioned by sector (in other words, flexible working location did not appear to be sector specific for professional roles).

          Our experience with clients mirrors this, with many still pondering their long-term hybrid/homeworking policy but allowing employees to work from home at least some of the time. Practice is mixed between setting a policy for the whole organisation versus allowing individual teams/managers discretion to decide for themselves.

            DEI and ESG Benefits

            In some ways, this is the most interesting theme, as (with the exception of pension investment) has relatively little to do with traditional benefits and more to do with organisational culture and ethos. (We searched hard to see if we could find specific benefits in these areas, but could find few real specifics, apart from paid volunteering days, which are a common feature in many organisations.)

            However, it does appear to be clear that, certainly for younger employees, working for an organisation that reflects their own values is a key driver for recruitment/retention. One would think that this is an area in which the third sector (mission driven work) has a clear advantage; however, we observed that the careers pages of big corporates were more likely to make explicit reference to these areas.

            DEI/ESG benefits activities we identified included:

            • Making clear statements as to the importance of these areas to the organisation (ideally with specific actions/goals)
            • Ethical pension fund investment
            • Electric car charging points and electric car leasing
            • Discounts on energy efficient appliances.

            Differences and similarities between sectors

            Overall, benefits packages (as opposed to pay) are better relative to organisation size in both the Foundation and Third Sectors than the private sector. That is to say that you get a better benefits package in a medium sized not-for-profit than in the private sector. This changes when you get to large corporates, which, perhaps not surprisingly, have the best benefits packages.

            The main areas in which we noticed a market difference where the not-for-profit sector was better are as follows:

            • Holiday entitlement – although 25 days is a very common starting entitlement across all sectors (although the Foundation sector was slightly above), the not-for-profit sector had more use of both service-related increases and additional days off (e.g., for Xmas closure).
            • Pension – employer contribution was higher for medium-sized not-for-profit organisations than for the private sector. Again, Foundations were slightly better than the rest of the sector.
            • Flexible working – for medium sized organisations, the not-for-profit sector was better, although larger private sector firms appeared to be very strong in this.
            • Compassionate leave – 5 days as standard in the not-for-profit sector as opposed to 3 days in the private sector.
            • Health cash plans – there was a greater use of these in the not-for-profit sector, although less use of private medical insurance.

             

            Areas in which the private sector had a better provision are as follows:

            • More use of private medical insurance – this was a much more common benefit in the private sector.
            • Share save schemes – encouraging employees to use Save as You Earn is a vehicle not available to the not-for-profit sector but is a common benefit in large private sector organisations.
            • Permanent health insurance – although there is mixed practice in the private sector, this is a more common benefit than in the not-for-profit sector.
            • Health screening – this is more commonly offered in the private sector as it is often attached to private medical insurance plans.

            Overall, however, we were struck by the high degree of commonality between sectors. Although there were elements that were different as shown above, it was not the case that the private sector (for example) had Gold Standard benefits packages and with the not-for-profit sector trailing behind. If anything, those in the third sector have worked hard to invest resources in benefits packages, perhaps in recognition of the fact that pay is typically lower in that sector.