Benefits take-up – the why of getting it right

Benefits take-up at work
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The employee benefits market in the UK is highly developed. Employees have been getting support with living and welfare costs from their employers since the 1950s and I don't see it changing. Increasingly, benefits are supplementing or replacing State support which is the most significant macro change in the landscape in recent years.

Employee engagement, employee wellness, recruitment, retention and the ageing workforce, pension provision and the actual cost, value and ROI all highly influence a solid benefits strategy – and whether a scheme gets the funding, support and ultimately, the engagement it needs.

The basics of benefit take-up

Before we start talking about benefits take-up and their likely successes or failures, we need to define differences between benefits used by employers.

Core benefits are typically provided to an employee as part of a contract, and potentially include life insurance and private medical insurance. The employer wants the employee to have these as they serve some sort of wider objective, and typically the employee has little choice in getting them or not.

This model may have been replaced by flexible benefits in some companies, giving employees more choice, but many benefits are still core. Not surprisingly, measurement-wise, core benefits get 100% take-up every single time (!).

Then there are voluntary benefits, where employees choose what’s right for them from an employer-created menu. Lifestyle, financial, protection and so forth make up some choices. Employers make the decision whether employees pay for these products themselves or whether there is a pot of employer cash to pay for their choices.

Not surprisingly, if there is a flex fund, then benefits tend to get a higher take-up rate - by 10-15% based on our portfolio of clients. Without a fund, employees are harder pressed to spend their money, especially if benefits compete with what they can buy on the high street.

If an employee chooses a benefit, it counts as positive take-up: they are opting into receiving a benefit, typically in lieu of salary.

But there are other factors that impact take-up such as whether the benefit has a major advantage to the employee. For instance, tax efficient benefits usually get higher take-up than non-tax efficient benefits - childcare vouchers or holiday-buy (respectively) are the top performers in these.

The next top performers are benefits that have a big discount, achieved through corporate buying power. It’s completely understandable if an employee can get a cheaper PC through an employer than on the high street.

Financial products can be cheaper through an employer – will writing, financial advice, ISAs to name a few.

2018 2016
1. Childcare vouchers 1. Childcare vouchers
2. Pension schemes 2. Cycle-to-work
3. Privare medical insurance 3. Pension schemes

In the Aon Benefits & Trends Survey 2018, cycle to work and holiday buy/sell come in joint fourth place.

What is good take-up?

It’s a good question - and even without core benefits, flex funds or tax efficiencies, there will be differences. Generally there needs to be good-enough take-up to justify the cost of offering the benefits in the first place.

Consider it like a vote: voting yes shows popularity. And getting a yes requires good communications and talking points about issues impacting employees.

Indeed, in the Aon Benefits & Trends Survey 2018, just 1.01% said that it wasn’t important to increase employee understanding and engagement with their benefits and/or retirement savings. The rest said it was important (14%), very important (32%) or extremely important (53%).

‘Good’ by industry standards says that there is a degree to which take-up of certain benefits hit a certain figure, irrespective of sector and demographics. For instance, bikes to work will generally be low single digits, will-writing tends to be same, holiday buying evens out at 15%. There are going to be differences, of course, if a population of employees do or don’t spend a lot of time online.

Segmentation has an impact too. Many organisations segment and target benefits at people better suited to certain ones. This has value and sees good results.

However, the risk here is that employees are people, and when planning for employees, rather than people, it’s not always remembered their individual likely needs.

It’s far better for take-up rates to design a package with the average person in mind, targeted at real needs they have. It’s even better to ask them what they want.

Is take-up the best measure?

Many organisations understand that benefits are important; what’s missing is an understanding of why they are vital to employee wellbeing, the business’ bottom line, and how to communicate them effectively.

Because of this, it’s common for engagement levels to be low and for benefits to be chopped and changed without strategic consideration.  Yet, according to the Aon Benefits & Trends Survey 2018, employee engagement remains the top objective for an online/flex scheme, with retention the second highest objective up to 71% from 67% in the previous year.

It does have to be asked whether take-up is a good measure. Take-up tells you a lot, but many organisations have removed benefit options because they get a "low" take-up.

We know that 66% of companies consider an employee clicking in the benefits portal enough, while many others consider it ‘engagement’ if a single login or benefits selection has been made. Yet this is superficial and inaccurately mapping the real impact on people’s lives.

Something like health screening can get low take-up, but the very important fact is that through this benefit lives have been saved. Early diagnosis may avert someone developing a life threatening condition.

It’s incredibly important to define what good looks like for your organisation, setting realistic targets, as good for one is likely to be very different to good for another. It’s impossible to measure without understanding and setting your objectives first.

The most important effect, then, is how a benefit scheme influences your people long-term. It’s better to understand whether individuals login frequently, or make multiple selections, whether they re-enrol year after year and, especially, how it affects their attitude to employment.

The right combination of benefits will support employee engagement, retention and recruitment and will encourage employees to act as an advocate for the package and employer brand.

About Jeff Fox

Jeff Fox, principal, Aon Employee Benefits

I'm an experienced benefits professional with over 15+ years experience, involved in over 100 implementations often at FTSE 100/250 organisations. I am CIPD and DipPFS qualified.

I specialise in flexible benefits, voluntary benefits, total reward strategic design, salary sacrifice (OPRA) and international benefits. With the broader reward spectrum, I can advise on company car policy, pensions and share scheme design.

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