Employee benefits are creeping up the agenda – recent figures show that SMEs account for a significant proportion of the job market, accounting for 99.9% of all private sector businesses and employing approximately 60% of all private sector employment. SMEs refer to companies with up to 250 employees. Employee retention strategies and the competition for talent has intensified as there has been a particularly rapid expansion of interest from SMEs about the availability of benefit providers. For companies not following this trend, Stuart Gray, founder of Pure Benefits, warns of a small business ‘brain drain’, suggesting that talented people may choose to leave in order to join organisations with a stronger benefits package.
Until recently, the cost of benefit schemes were not always financially practical for SMEs, whereas larger firms with fewer budget restraints were able to offer stronger reward packages. This is changing due to technological advancements, reduced costs, simpler web-based administration systems and the efficiency of employee self-service options that can take away some of the administration burden from HR. Additionally, SMEs often have stronger communication mechanisms to better identify what employees want, supporting smarter benefit offerings and ultimately employee engagement. The competitive advantage is potentially significant here against larger companies, who may not be engaging with employees in this way.
The growing availability of flexible benefits products for small and medium sized employers means they can better tailor to suit their workforce. One way of maximising on the benefits of a tailored approach is by conducting staff surveys to discover which benefits would be most valued by the workforce. This can allow for greater efficiency and cost effective solutions for businesses. The Chartered Institute of Personnel and Development (CIPD) endorse the availability of employee benefits to the workforce and importantly establishing the right benefit choices.
To provide some insight on valued benefits, a recent study found that 63% of SME employees polled said they felt workplace benefits were a valuable or extremely valuable part of their employment package. Other findings showed that the benefits SME employees value or would value the most are private health insurance, life insurance and critical illness insurance.
Implications of legislative changes to salary sacrifice
One of the key considerations to employers is the implications of changes to HRMC regulation around available benefits that can be administered via salary sacrifice arrangement. Since 6th April 2017, HRMC has introduced new measures to limit the income tax and employer national insurance contributions advantages when benefits in kind are offered under salary sacrifice arrangements or under circumstances where an employee can choose between cash allowances.
However, there are no changes to the tax and national insurance contributions advantages of salary sacrifice arrangements for pension saving into a registered pension scheme, employer provided pensions advice, childcare vouchers, workplace nurseries, directly contracted childcare, cycle to work schemes and ultra-low Emission Vehicles (ULEVs). Although the salary sacrifice offerings are reduced, there is still scope for competitive arrangements to be achieved via, for example, salary sacrifice pension scheme arrangements. Childcare voucher schemes are not costly and can be administered successfully by a third-party provider, however some employees may opt to use the tax-free childcare scheme introduced by the government in April 2017.
For further information please contact CBW’s HR Consultants. CBW also offers specialist pension auto-enrolment advice, practical solutions and support. Please get in touch.