Why Innovative Employee Benefits Are Your Competitive Advantage

Why Innovative Employee Benefits Are Your Competitive Advantage

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Samantha Jagdessi
Samantha Jagdessi, Head of Benefits Consulting at Old Mutual Corporate Consultants

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The 2017 Old Mutual Corporate SME Employee Benefits Monitor revealed that the provision of employee benefit solutions can be a significant source of competitive advantage. However, the research also found that SMEs perceive employee benefits as another cost or administrative burden to ‘comply’ with.

This isn’t the case

Retaining a talented workforce is crucial for business success. Frequent staff turnover can have a negative impact on employee morale, productivity and company revenue. Studies predict that every time a business replaces a salaried employee, it can cost between six to 24 months of the salary — depending on the role.

While well-resourced corporates tend to hold the advantage over SMEs in offering better benefits, SMEs can tailor their benefits package to suit their means, giving them a competitive advantage. But, while the Monitor shows that SMEs acknowledge the value and role that employee benefits can play, this isn’t translating into action, as only 32% have retirement funding on their agenda.

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There is a perception that the costs and administration outweigh the benefits — this is despite the various affordable solutions available that support businesses of all sizes, ranging from a five-man executive team business to a 100+ strong employee base.

A new generation of retirement fund models, such as Umbrella Funds (multi-employer retirement funds), have dramatically lowered the ‘burden’ to employers and decreased costs thanks to the economy of scale created by group participation.

To further support SMEs in delivering tangible benefits of retirement provision, professional employee benefit consultants are also available at a minimal fee to provide support, appropriate advice, education and communication tools.

When implementing an employee benefit structure, there are three aspects to consider:

1How the retirement provision will be funded

SME decision-makers need to consider whether the business will contribute toward employees’ savings fully, partially or only manage the administration thereof.

While the introduction of enabling retirement saving will ensure positive outcomes for staff, debt-burdened staff may struggle financially should they experience a dramatic decrease in take-home pay in favour of contributing to long-term retirement savings.

To avoid such an instance, decision-makers could consider using a percentage of their staff’s annual increase to fund retirement provision before they grow accustomed to an increase in salary. Other options that have often worked for a mixed workforce (blue- and white-collar workers), is a ‘like-for-like’ funding model where the employer matches the contribution made by the employee.

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2Levels of flexibility required by staff and associated costs

By limiting choices available to low-income employees (who tend to rely on their employer to make responsible financial decisions on their behalf), administrative costs can be reduced, passing on more value to employees.

White-collar workers, however, generally want more flexibility and control over their investments. A good retention strategy for companies employing highly skilled workers is to offer staff some control over their contribution level, investment choice and risk benefits.

Another option, often implemented in a mixed workplace, is purchasing advanced payroll software that allows staff to individually tailor their contribution level. The initial costs associated with this offering can offset the degree of flexibility required to encourage positive relations with all profiles of employees.

3Are your staff investment-savvy and what level of support is required?

White-collar workers tend to have greater levels of formal education and are in a better position to take responsibility for their own retirement provisions. Often highly digitally connected, these employees have sufficient access to information required to make good decisions. However, when needing assistance, they generally demand immediate individual attention.

Blue-collar employees generally display higher rates of consumer vulnerability. With limited access to the Internet, they rely on the fiduciary duty of trustees and decision-makers to make good decisions on their behalf.

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In a workplace with both white- and blue-collar workers, hands-on seminars and workshops should be facilitated by trained employee benefit consultants to bridge the gap in education and financial confidence.

When making these decisions, it can be beneficial to seek expert advice. Employee benefit consultants can assist in advising on the best structure for a specific business or workforce — one which not only delivers positive retirement outcomes for its staff, but also delivers on long-term strategic goals for their business.

Old Mutual is a Licensed Financial Services Provider.

Old Mutual
Old Mutual offers investment products, life and disability cover, funeral plans, short term insurance, financial advice and loans. We also offer business-to-business solutions such as asset management, employee benefits and insurance for your business.