Significant expansion of employee benefits and flexible working, as employers respond to staff demands, Gallagher study finds

• Balance of power still sits firmly with employees as employers expand private medical insurance and life assurance to hold onto employees
• 84% of organisations have implemented hybrid working policies and 60% allow homeworking as standard, signalling flexible working is here to stay
• 43% of firms are offering compressed hours (same hours in fewer days), and 15% of firms make use of a four-day working week (less hours, same pay) in a sign that employers are starting to call time on a standard five-day week

A new study by Gallagher, the HR and employee benefits consulting services firm, has revealed that the majority of UK employers are responding to changing worker preferences and demands with enhanced benefits packages, reviewing pay and expanding flexible and hybrid working, despite pressure on budgets.

The Gallagher survey titled ‘Organisational and Career Wellbeing Strategy’, polled professionals across various industries on key trends and sentiments toward employee benefits and engagement. Results indicate that culture and environment are taking on a larger role in organisational wellbeing, and companies must focus on creating accommodating workplaces and understanding their employees' evolving needs.

Steve Threader, Managing Director, Reward & Benefits Consulting at Gallagher said, “What employees expect from the workplace has changed, and benefits are becoming increasingly critical to attracting and retaining talent. It is clear from this year’s ‘Organisational and Career Wellbeing Strategy Report’ that UK organisations are taking this on board and are dedicated to creating a culture where employees feel valued, in turn creating a productive working environment, but there is more progress to be made.”

“We know that an engaged workforce is happier and more productive, so maintaining strong communication with employees is critical for organisational success. Despite this, communication remains a significant challenge for many firms (36.6%). And while there is some improvement on last year’s data, there remains scope for firms to improve the clarity and accessibility of their benefit information.”

Doing more with less

Despite economic headwinds and tighter budgets, the data indicates most businesses are responding to broader employee concerns about access to healthcare and mental and physical wellbeing.

The study found that flexible benefits have increased sharply compared to 2022. The popularity of private medical insurance (PMI) has increased by 15% compared to 2022 data, with 52% of firms now offering employees the chance to opt into private health cover. This is followed by life assurance (40%), which has seen a 5% growth.

Physical fitness is also top of mind for employers: Cycle-to-work schemes remain consistently popular as a voluntary benefit, increasing slightly to 75% from 73% in 2022. The offer of gym memberships has also risen to 45% from 34% in 2022.

While most employers have enhanced their benefits packages, those who haven’t face the very real risk of being left behind and seeing declines in employee morale and retention as the UK labour market remains extremely competitive.

Moreover, the majority of organisations (85%) said they plan to enhance benefits packages further – signalling that the battle to attract and retain the best talent via competitive benefits packages will intensify.

The new (and permanent) normal

Despite predictions that employers will roll back on flexible working policies, hybrid working has remained a welcome layover from the pandemic, with almost all (84%) of companies implementing respective policies.

What’s more, the study suggests employers are taking flexible working even further, with 43% of firms offering compressed hours (same hours in fewer days), and 15% of firms making use of a four-day working week (less hours, same pay) in a sign that employers are starting to call time on a standard five-day week.

In a growing trend, 41% of organisations also allow their employees to work remotely abroad. However, this is not without risk, with data highlighting that just 36% of these firms have a formal policy for working abroad, which could have implications for tax, immigration and social security. From a benefits perspective, most benefits such as health care are designed to be received in the country of contract and therefore could be irrelevant in the remote work location.

Flexible working has been found to help employees balance their work and home life, including other commitments and responsibilities such as caring for children or vulnerable people, whilst also providing financial benefits such as reducing childcare costs. For Gen Z employees, work/life balance is very important – they want to understand how work is going to fit into their life, rather than the other way around. There is also a clear business case for companies considering more flexible ways of working: Flexible working can reduce vacancy costs, increase skill retention, enhance business performance and reduce employee absenteeism.

Cost of living concerns prompting reviews of pay structures

Front of mind for many employees is the increasing cost of living – and this year’s data indicates some employers are responding. In the last 12-18 months, 42% of employers have provided specific cost of living support through additional salary increases or one-off lump sum payments. 49% have reviewed pay systems and structures.

While employees look at a variety of factors when making career choices, cost of living pressures make pay and getting the basics right more important than ever for employers. Benchmarking is also crucial for businesses to fully understand their market position.

For businesses that aren’t able to increase salaries or make one-off payments, providing enhanced benefits packages, as many have done, can provide a lower-cost alternative to keeping employees happy.

Pressure to attract and retain employees trumps budget constraints

Employers highlighted that the cost of increasing benefits, with pressure on budgets, is their number one challenge (60%). This is compared to the previous year’s survey; there has been an increase of 5.2% in the number of organisations facing this challenge. This underlines the pressure businesses are under to manage benefit costs while working with more limited financial resources.

Among other challenges highlighted by employers, over half (57%) of organisations said they’re concerned about appealing to a diverse workforce through their benefits packages, such as catering to factors like age, gender and lifestyle choices. This was listed as the top challenge among employers in 2022, indicating a positive shift towards greater inclusivity. 43% of businesses have also said they’ve increased their focus on DE&I to create a fairer and more equitable workplace.