With employees ranging in age from 18 to 68, how can employers find the best fit in employee benefits? Helen Swire investigates what can appeal to a wide demographic
At one end of the spectrum, £9,000 of annual tuition fees have acted as a deterrent to many 18 year olds considering university as the next natural step after school. At the other end, the abolition of the default retirement age and new pension freedoms have given older workers the option to remain in employment for longer.
The result? A workforce that could have upwards of 50 years’ age gap between employees, and all the age groups – and life stages – in between.
Employers incorporating Gen Y through to those over the retirement age must therefore create a benefits strategy that suits all their demographics: from gym membership through childcare to a pension.
Pensions and retirement
The pensions changes, on the surface, most immediately affect those about to retire – employees whose choices about their retirement income is imminent as they decide whether to buy a traditional annuity, go into income drawdown, or take a cash lump sum.
However, the choice does not simply affect those who are about to benefit from their retirement funds, but also employees making their key decisions about their future in their 50s – and employees in their 20s and 30s, for whom retirement seems a distant goal, but who must contribute now to benefit later.
Employers have to be sure, then, that they have picked a scheme which offers options that will suit the whole spectrum of age groups, and meeting all needs.
“Employers must have a really intelligent default option which appropriately looks after people at different stages in their life,” says Ellie McKinnon, CEO of the Cheviot Trust. “They have to look at meeting different needs differently, because then they’ll get a better level of engagement. A default fund that takes employees from 18 to 68 must look at those people throughout their entire working life, and not just sit them in one default where one size fits all.”
It’s not just the default fund where one option cannot cover the whole workforce – in the wider pensions picture, financial education, an increasing necessity, must be tailored to suit different age groups.
The importance of saving for a retirement income and making the right choices will mean two very different things to an employee just starting out in the workforce – perhaps paying off a student loan or looking to get a mortgage – and an employee who is facing retirement imminently and working out what they will live off each week.
Financial education and communications, tailored appropriately, can successful engage all the different demographics with their savings.
Jonathan Watts-Lay, director, WEALTH at Work, talks through the relevant information to each life stage: “It’s important to help younger people to understand the benefit provision that the company offers, and get them to understand the key messages about their savings.”
“For the middle-aged group, the notion of taking a rain-check mid-career is growing, encouraging scheme and savings decision-making earlier in their career. And at the other extreme, it’s about making sure the older demographic understands those all-important options they have at retirement.”
The abolition of the default retirement age has had a wider impact for areas other than the pensions industry. Last year the Office for National Statistics (ONS) reported that over a quarter of adults between the ages of 20 and 34 were living with their parents in 2013 – but the squeeze is also being felt at the other end.
Recent survey results from LV= estimated over a million people in the UK are looking after both children and elderly parents, as life expectancy grows. This change in care responsibilities is having a natural impact on not only the financial desires of the workforce, but also the demand for benefits such as flexible working and employer eldercare support.
The growing need for paternalistic employer support, both for eldercare and childcare, is swinging in the employees’ favour, as the growing economy enables the fight for talent to recommence. To attract the best, employers need to start empathising with their staff needs.
Iain McMath, CEO of Sodexo Benefits and Rewards Services, describes a “desert storm approaching for companies” as the battle to attract and retain grows.
“Once companies sort out the ‘housekeeping’ things like salary, it is about the environment we work in – is there flexibility? How family friendly is it? These will become key leaders for companies to use to attract people and retain them.”
Flexibility is increasingly key when catering for working parents, as parental responsibility could now extend from new parents in their 20s to parents supporting their children through education in their 50s.
“It’s about parents having what’s appropriate to them, at their age and their position in life –do you need more flexibility, to work from home, to be empowered more?” comments McMath. “This could come through the flexibility to pick your child up from school, or a reward scheme to put money away for their education – those things start to become key drivers for getting people engaged, and that’s where we going to see a move with the demographics.”
And flexibility is not just about families. Companies are slowly becoming more open to the idea of allowing employees to take sabbaticals for further training or education, or allowing a switch to part-time contracts to accommodate this. The benefits of being flexible for employer and employee alike are clear. While the employee has the ability to take more personal control of their working life, employers can benefit from a more engaged, higher educated employee, without having to re-recruit or retrain.
In the uncertainty surrounding the election, employers have increasing concerns that changes to childcare will prevent them from providing good support to their employees. Whether or not they choose to buy into childcare vouchers while they still can, it is now the ideal time for employers to open the conversation with their whole workforce about the support they need – whether it’s advice, financial support, or flexibility.
A lifestyle for all
Retirement planning, childcare and working patterns are the major forces in demographic benefit planning for many employers, however other employee benefits allow for workplaces to cater relatively simple to the majority in an individual way.
Looking at employees’ individual circumstances allows for an overall examination of a workplace benefits structure, and tying this together with the company’s business objectives will allow employers to build in people’s needs into, for example, a comprehensive voluntary or flexible benefits package.
“You’ve got look at your company objectives first and foremost, then look at what benefits are available to you in the market, and then look at the demographics that sit within your organisation” argues Terry Gostelow, account director at Staffcare. “If you look at all those issues then you can work out what benefits are going to suit what people and what benefits are going to reinforce the corporate values that you have in place.”
By putting together a package of benefits that suits both company and employee, companies have the building blocks in place for a successful voluntary or flexible benefits package that can be reviewed year-on-year according to new benefits on the market, or any changes in staff demographic.
The benefits trends that have been showing over the past two years are emblematic of the growing need to suit different workplace age groups. Salary sacrifice car schemes, for example, are increasingly popular benefit options among employees with families, while discount vouchers and taste cards are popular among Generation Y workers who are looking to go out but also save money.
“There’s a lot of reform and innovation within the benefits market which is appealing to supporting people at different stages in their working lives”, comments Gostelow.
Surveys around voluntary and flexible benefits have indicated that employers have concerns around implementation and administration costs. However the platforms that many providers now use to distribute the benefits remove these burdens from the employer – and further, add a backdrop of data analytics which provide supporting return on investment, to inform decisions and make schemes relevant to employees of all age and life stages.
Making the case
“Companies are getting to the stage where they understand there’s got to be a different approach to benefits apart from just a tick-box exercise”, says McMath, Sodexo.
It is not enough for the benefits to be personalised to different elements of the workforce – employers need to engage their employees personally too.
“Benefits programmes need to be communicated in a personal way”, McMath adds. “It’s great to have a range of benefits that everyone has access to, but how you communicate them is key as to the take-up and the understanding about what it really means – both for them and the business.”
Gostelow agrees: “Isolating workforce segments, keeping it simple, and basic targeted messages can make all the difference in educating people about what’s available.”
And in return, having a personalised conversation with employees about their benefits, alongside any data gathered from benefits technology, can only help an employer progress in finding the best fit for their workforce.
As the war over talent starts again, employees will be able to pick and choose where they want to work – to attract the best, employers will have to start picking and choosing their benefits accordingly.