Average business losing £470,000 a year in increased staff turnover and absence.

Failing to tell staff about the benefits on offer, such as private health insurance and income protection, is costing UK companies £2.7bn every year, through increased staff turnover and sickness absence, according to new research from Cass Business School, part of City University London. And companies who’ve invested in good employee benefits, but haven’t told staff what they are entitled to, are no better off than if they hadn’t provided the benefits in the first place.

Employees who are unaware of the benefits on offer are less loyal and productive, and as a result are more likely to call in sick or leave the company altogether. The cost of replacing a member of staff equates to a year’s salary due to recruitment and training costs, combined with lost productivity. For companies that fail to communicate about benefits, this costs almost £1.5bn a year. And, this rises to around £2.7bn when higher workplace absence costs for this group are included.

The research: Money Talks: Communicating Employee Benefits was commissioned by income protection specialist, Unum. It reveals that 64 Percent of businesses have invested in good employee benefits, but don’t tell staff what they are entitled to. As a result, they are no better off than companies that don’t provide the benefits at all. A typical organisation with 1,000 employees that offers good benefits but fails to communicate them (Silent Types) spends £470,000[iii] a year more on staff turnover and sickness absence than those companies that have comparable benefits packages, but have good communications practices (Communications Champions).

The research uses data from the UK Government’s 2011 Workplace Employment Relations Survey (WERS), the most authoritative source of information on employment relations in Britain, and includes data collected from both employers and employees from 2,680 workplaces. It demonstrates a gap in understanding between what employee benefits an employer provides, and what their employee thinks is available.

This ‘communications chasm’ exists for managers, as well as non-managers. Strikingly, people that need employee benefits the most, such as working mums, remain equally unaware of what they are entitled to. However, amongst Communications Champions who communicate regularly about benefits, sickness absence rates and the level of staff turnover is lower. Employees are more likely to remain with a company where they know they will receive financial protection, and this has become ever more important since the recession began. Peter O’Donnell, CEO of Unum UK, said: “Money Talks shows that simply offering a great employee benefits package isn’t enough to promote wellbeing and financial security amongst employees. “Our experience shows that contrary to employers’ beliefs, communicating with staff about financial protection and well-being initiatives such as Income Protection and Private Medical Insurance, leads to lower absence rates and reduced time off sick. Having an open dialogue between employers and employees about benefits builds a more productive and loyal workforce, and the bottom line benefits are evident.”

Professor Nick Bacon who conducted the research, commented: “With the cost of living rising more quickly than many peoples’ income, and employers struggling for growth, staff retention is a vital issue. When organisations can’t easily increase salaries, they need to identify other ways to build staff loyalty – and a good benefits package does this. However, our research shows that even if companies are offering good benefits, if they fail to tell staff what’s available, it’s no better than not offering these benefits at all.”

Who are the Silent Types?
The following types of workplaces are more likely to fall into the Silent Types category – offering a wide range of benefits, but ranking low in terms of communications: UK or EU-owned organisations. US-owned workplaces tend to be far better at communicating with staff about benefits. Smaller organisations (with fewer than 50 employees)

Non-union workplaces
Companies in the manufacturing; electricity, gas, steam and air conditioning supply; water supply, sewerage and waste management and remediation services; construction; wholesale and retail trade, repair of motorcycles and motor vehicles; transportation and storage; information and communication; and financial and insurance activities.