A new research report, ‘Benefits Design Research 2024’* reveals that cost is the number one factor driving decisions around employee benefits and wellbeing strategies in UK businesses.

Yet, despite escalating concerns regarding costs, employers still place significant importance on employee benefits, with a majority vowing to maintain their existing benefits structures.

The research, conducted amongst REBA members and subscribers representing 1.5 million employees*, explores the impact of internal and external pressures on benefits and wellbeing strategies and design over the past year and key trends emerged:

• Despite half of employers worrying about rising costs, a substantial 70% intend to maintain their current benefits offering.
• Notably, among the confident third (31%) who anticipate absorbing cost increases, 32% intend to increase their investment in benefits.
• One key challenge will be securing budget approval. 8 in 10 employers say it is a barrier to investment, highlighting the need for them to show investment ROI and measure benefits to demonstrate value.
• Two major trends also emerged. 38% planning to allocate resources to financial wellbeing in 2024/25, witnessing a striking 217% surge from 2023 figures.
• Investment in pension spend is also set to soar.  30% intending to increase their investment in 2024/25, a notable 233% increase from 9% in 2023.
• Looking ahead, companies will focus on technology and financial wellbeing projects over the next two years.

Matthew Gregson, Executive Director at Howden Employee Benefits & Wellbeing said: “Despite increasing costs, employers continue to invest in employee benefits, reinforcing their value both to the business and employees.  Employers recognise prioritising benefits supports business and HR goals such as improving diversity, equity, and inclusion, attracting talent and retaining employees with key skills.

“However, a pressing business concern is risk mitigation. People risk is a growing issue, particularly when it comes to employee health. Annual insurance cost increases can be considerable and are unlikely to significantly reduce in the years ahead. Therefore, ensuring the workforce remains healthy and productive has never been more important.”

Top spending areas

Benefit strategies are evolving with adjustments to spending seen in 2023 continuing in 2024/25, as employers adapt to cost pressures from medical inflation and insurance price rises, through to rises in national minimum wage and pension burdens.

To control costs nearly half (49%) plan to review current suppliers to remove duplication and streamline spend in 2024/25; whilst 40% plan to increase spend on benefits technology and 38% on financial wellbeing.

Around a third of employers will increase investment in healthcare benefits, as well as spending on mental wellbeing and enhancing the pension offering.

Of note are the projects and strategic transformations employers are planning for 2024/25 with technology and financial wellbeing projects being the major focus, followed by pensions and retirement adequacy. These are often complex and costly areas, highlighting the seriousness with which employers are taking benefits, despite the tough economic environment.

Where improvement is most needed

The top three areas earmarked by employers for improvement this year include communication of benefits (54%); financial wellbeing (47%) and benefits technology (45%).

With more than eight in ten stating that budget approval will be a barrier to change, the ability for companies to demonstrate value and return on investment will be key to future investments.

Gregson says, “Companies must prioritise measuring the impact of benefits to demonstrate value and secure budget. Currently, significant numbers are failing to measure the impact of their benefits on key strategic business objectives, such as employee absenteeism; Diversity, Equity, and Inclusion initiatives; employee wellbeing; retaining and recruiting employees, and employee engagement.”

Pensions must be a priority.

Almost one in three (30%) employers plan to enhance their pension offering in the next two years, highlighting that employers increasingly recognise that pensions must be given priority to prevent their employees sleepwalking into a retirement nightmare.

Gregson concludes: “Despite increasing costs, employers continue to invest in employee benefits, reinforcing their value both to the business and employees.  However, moving forwards companies will need to run their programmes more effectively, benchmarking their existing benefits, using data-driven insights to inform their strategies, and ensure they measure the value of their benefits, and manage their stakeholders well.

“Strategic priorities will involve ensuring pension are better funded and performing well, financial wellbeing support is provided for employees and that healthcare and protection benefits are universally available and more effective. Businesses will also need to make better use technology and improve benefits communications to drive value and to measure and demonstrate the value of their benefits programmes to secure support and ensure their aspirations become a reality.”

Howden recommends employers take these actions to improve their future benefits strategies and programme design:

• Baseline their current benefits programme.
• Understand what to measure and start measuring it.
• Get a better handle of spending and forecasting of costs.
• Keep pace with the scale of transformation happening in reward.
• Don’t forget about the workplace pension.
• Next steps – create an actionable plan.

*Howden Employee Benefits & Wellbeing and the Reward & Employee Benefits Association (REBA)

*The research was carried out by the Reward & Employee Benefits Association among its approximately 4,400 professional members and 20,000 subscribers during January and February 2024. The survey had 230 responses from employers representing an estimated total of approximately 1.5 million employees.

www.howdengroup.co.uk