The Engaged Employer - Whitepaper (Moorepay)

WHITEPAPER

THE ENGAGED EMPLOYER

Making payroll & HR easy

Contents

FOREWORD

METHODOLOGY

INTRODUCTION

EXECUTIVE SUMMARY

THE PEOPLE CHALLENGES FACING EMPLOYERS

BENEFITS BAROMETER: THE PERKS PROVIDED BY EMPLOYERS

WHAT EMPLOYEES WANT

POSTSCRIPT

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Foreword

By Stephen Bevan, Head of HR Research Development, Institute for EmploymentStudies

All of this adds up to a labour market which, in many respects is defying convention and forcing employers to think differently about the ‘deal’ they offer their employees and the psychological contract they want to nurture, especially with their most prized and talented staff. These challenges face firms in all sectors and regions, and they affect small and medium–sized enterprises (SMEs) and large corporations alike, but perhaps in different ways. One of the big questions which the research in this report by Moorepay is asking is, if employers are to compete for skills in what is an increasingly buoyant labour market, how can they differentiate themselves from their competitors? More specifically, it is also asking what SMEs, with perhaps more constrained resources and less immediate access to specialist HR support, can do to make employees feel valued and make their reward and benefits packages fit for purpose, flexible, personalised and effective. One of the many valuable insights from the research contained in this report is the slightly uncomfortable mismatch between the needs of those who work in SME’s (to feel valued, to get recognition etc) and the perhaps misplaced confidence with which the leaders of many SMEs claim they are meeting these same needs. While this is by no means a new phenomenon, it seems to me that the existence of this ‘perception gap’ is worrying if SMEs are going to avoid losing out in the ongoing war for talent as the squeeze on labour supply tightens further.

I’m very conscious that it is easy for people like me, who are paid to provide an ‘informed’ commentary on the changing world of work, to lecture busy employers about getting better at managing uncertainty, change and precariousness. To be honest, in the last thirty–five years, I’ve not met a successful business yet which hasn’t had to master all of these challenges – and a few more besides – as they strive to be sustainable, innovative and competitive. But even I have to admit that we are living in pretty extraordinary times. Of course, Brexit is a dominant source of disruption and uncertainty, but even without this the UK has a persistent productivity problem, we have almost stagnant real wage growth even though unemployment is at a record low, and we also have growing fears about rampant automation and the ‘casualisation’ of work through the so–called ‘gig economy’. On top of this, UK employers have the demographic challenges of an ageing workforce and the growth of chronic ill–health in the working age population to contend with.

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My other reflection is that closing this gap shouldn’t be beyond the wit of most SMEs because many of the tools which can help them are not as complex or expensive as they might believe. The report does a good job, I think, of both highlighting the problem as well as presenting some neat solutions. It makes a compelling case that doing nothing is not really a credible option and neatly differentiates between the kinds of traditional staff benefits which have a financial element and those which respond more to the need for flexibility and the benefits that help employees navigate the tricky boundaries between work and home or help them invest in personal development. My experience is that many leaders of SMEs ‘get’ this. They argue that agility, flexibility and being ‘fleet of foot’ are attributes which they need to hone just to respond to the sometimes fickle demands of their customers and clients. My argument is that, if they treated their employees as just another important group of customers and clients and constructed an ‘offer’ which both anticipated and responded to their needs, then much of the ‘perception gap’ would be eradicated. It’s no coincidence that many of the companies which have achieved the best rates of customer loyalty also have high levels of staff loyalty – they are strongly linked and are often driven by the same philosophy of management.

One of the other messages from the report is that SMEs are not just smaller versions of larger firms. Their character and purpose can often be different, their ability to ‘turn on a sixpence’ is more pronounced and their willingness to experiment and innovate can be higher. The report also seeks to reassure SMEs that they don’t necessarily need the resources of their larger cousins to put together a compelling and effective package of benefits which can deliver loyalty, engagement and discretionary effort from their employees. I found this to be an ultimately optimistic message at a time when it would be easy to be disheartened by the challenges the UK jobs market is posing many employers.

“It’s no coincidence that many of the companies that have achieved the best rates of customer loyalty also have high levels of staff loyalty”

Stephen Bevan, Institute for Employment Studies

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Methodology

The employee survey was conducted using an online interview administered to members of the YouGov Plc UK panel of 800,000+ individuals who agreed to take part in surveys. All figures are from YouGov Plc. The total sample size was 2,053 employees. Fieldwork was undertaken between 13th – 19th June 2019. The figures have been weighted and are representative of British business size.

The employer survey was conducted by Moorepay using an online interview administered to a combination of Moorepay contacts and a SurveyMonkey Audience panel reached through the Cint Insights Exchange. The total sample size was 556 UK employers, of which 334 are SMEs with between 1–250 employees. Responses were sought from the individuals whose primary role in their organisation was as either an HR Manager, Senior Manager, Chief Financial Officer, President/CEO/ Chairperson, C–level Executive or Director. Fieldwork was undertaken between 26th June – 12th July 2019. The figures have been weighted and are representative of British business size.

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Introduction

Anthony Vollmer Managing Director, Moorepay

At the same time employers are having to contend with a dangerous cocktail of a shortage of candidates with the right skills; demographic changes leading to a decline in the number of 18 to 24–year olds entering the workplace and fears about Brexit which have deterred many EU citizens from seeking employment in the UK. The balance of power between employees and employers is changing. Even the language surrounding recruitment and retention signals how hard it is to find the employees companies need. It’s now a ‘war for talent,’ and ‘a recruitment battlefield.’ This reinforces the gravity of the issue, as the productivity and growth plans of companies are affected. As a partner to SMEs we wanted to see whether the benefits companies offer have an impact on how valued employees feel. We asked the views of employees and also those of employers. In the struggle to recruit and retain the best staff are companies giving their people the benefits they want? At Moorepay we know that some SMEs feel that they cannot afford to offer benefits or that administering them will be too time–consuming. But can SMEs afford not to as they compete for the best recruits? SMEs shouldn’t underestimate the power of recognition and acknowledgement. Expressing how much you value your employees increases their engagement with your organisation. We would urge companies to carefully consider what will make them a great place to work, whether that’s a great atmosphere, a well–designed and administered benefits system that responds to what employees want, a defined sense of collective purpose or promoting a better work–balance. Being an ‘engaged employer’ is vital to the health of businesses. I hope you will find the results of our research interesting and that they offer some insight into how benefits could help you succeed in the recruitment and retention of employees.

As the company that manages payroll and offers HR services to over 10,000 businesses nationwide, Moorepay has conversations with the leaders of SMEs all over the country every day. Overwhelmingly the issue that concerns SME leaders is how and where to recruit the skilled staff they need, and then how to keep them. has never been so many of us in work. However, although this is heartening news, wage growth has been depressed since the financial downturn of 2008 and has only picked up over the last 12 months according to the ONS. In real terms (after adjusting for inflation), total average annual pay is estimated to have only increased by 1.9% compared with a year earlier. 1 “Wages may be rising but so are prices, particularly food and clothing, which has a big impact on families. They have less disposable income so many feel compelled to look for better remunerated employment.” The latest figures from the Office of National Statistics show that with a UK employment rate of 76.1%, there

1 Office of National Statistics: Average weekly earnings in Great Britain, September 2019

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Executive Summary

Introduction

Chief among the challenges faced by SMEs is how to attract and keep good people – the beating heart of any organisation. More than three in four SMEs taking part in our research (77%) said they find it challenging to recruit suitably qualified staff for their business. And two– thirds of SMEs we surveyed (64%) said they found staff retention an issue. The recruitment and retention challenges facing SMEs have been exacerbated by a ‘perfect storm’ of low unemployment, and slow wage growth that has squeezed household incomes. This has encouraged people to start looking for new opportunities at a time when good people are in high demand. But employers can’t simply blame macro–economic factors for their employee woes. They must look closer to home and identify what factors are contributing to a lack of staff satisfaction in their own organisation, from low pay to a lack of flexibility, poor career progression opportunities or the absence of real responsibility. 1. The Value Gap: employees feel undervalued, but employers are often unaware SMEs need to ensure they are aware of their employees’ expectations, in order to be able to minimise the threat of losing key staff to competitors and having to embark on a costly and time–consuming search for suitably qualified replacements which may be unsuccessful. The four key findings

However, our study reveals that a large proportion of employees feel undervalued, many of them seemingly without the knowledge of their employers. • 85% of SMEs surveyed think their employees feel valued, compared to just 15% who believe their workers don’t feel valued. • Just 71% of SME employees say they feel valued by their employer, 14 percentage points below the finding from the employer survey. More than one in four SME employees (27%) say they don’t feel valued, 12 percentage points above the corresponding finding from the employer survey. SMEs can’t afford to be complacent when they are under constant threat from competitors of all sizes who are fighting hard for the top talent. 2. Benefits Barometer: SMEs are being out–gunned by larger rivals Keeping employees happy is a complex task, influenced by a broad range of factors from the transparency and clarity of HR processes and policies to the content of a job, working conditions, the personalities and relationships between colleagues, or the workplace culture. Many of these are complex issues requiring a high degree of HR expertise, but SME owners are usually time–poor and without the kind of dedicated HR support enjoyed by larger businesses. Employee benefits, if correctly considered, administered and communicated, can provide a relatively simple yet effective weapon in the fight against dissatisfaction in the workforce.

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3. London leading the way There are significant disparities between the prevalence of benefits offered in different parts of the country and in different industry sectors. • According to employees, it is businesses (of all sizes) in London who are leading the way on the provision of employee benefits. • Just 10% of employees surveyed who work in London said their employer provides none of the benefits listed, easily the best result around the country, compared to 29% of those working in Yorkshire & the Humber and 27% of those working in Wales and the North East respectively. • Companies in the capital are particularly far ahead in the provision of financial benefits, with over half of London–based employees (52%) saying they receive financial bonuses or incentives for example, but workers in London are also much more likely to be offered the opportunity to work flexibly or remotely (52%), with the next most likely region for employees to be offered this the South East (33%). • On a sector basis, companies in the IT & telecoms sector seem to be offering the most benefits, with just 9% of employees in this sector saying their employer doesn’t provide any of the listed benefits. At the other end of the scale, more than one in three workers in the hospitality & leisure sector (37%) claim their employer provides them with none of the perks listed.

In a competitive labour market where small businesses are in direct competition with larger firms, unsurprisingly SME’s are being comprehensively out–gunned by their larger rivals on employee benefits packages. Large businesses, which usually have dedicated HR teams, are more likely to provide almost every type of benefit listed in our study. • One in five (22%) of all employees said their employer provides no benefits, rising to one in three (34%) for employees of SMEs. • According to employees, the most common benefits being provided by SMEs are financial benefits, with six of the top ten most common benefits offering some form of financial reward or discount such as financial bonuses; pension contributions over the minimum legal requirement; discounts on leisure and shopping; or free or subsidised travel. • The single most commonly–provided benefit, according to employees of SMEs, is flexible and/ or remote working, provided by 28% of small and medium sized firms. However, other ‘perks’ offering flexibility or increased work–life balance are relatively uncommon. • Benefits revolving around socialising are also relatively prevalent in SMEs, with 22% of SME employees saying their employer organises team social events or functions, and 10% saying they have socialising space within the work environment, such as a games room or a chill–out area. • There is a huge disparity between the benefits employees say they are offered, and what employers say they offer. This suggests that SMEs have a communications challenge. They are either not making it clear to employees what benefits they are entitled to, or they are providing benefits that are irrelevant to employees and therefore not stimulating their interest, or even awareness, at all.

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4. Employees want flexible as well as financial benefits There is widespread agreement from employers that in 2019, employees are looking for more than just a salary, with 87% of SMEs participating in our study believing this to be the case. But one in three SMEs (30%) believe ‘soft’ benefits have no or only slight importance in recruiting and retaining staff. However, some of these benefits are, according to our study, of real appeal to employees. • The benefits that employees believe are most important for their employer to offer are traditional financial benefits. The single most important benefit for workers in smaller businesses is financial bonuses and incentives, cited by 30% of respondents. This is followed by the provision of pension contributions over and above the minimum legal requirement, cited by one in four employees (27%). • Beyond the top financial rewards, it is flexibility that holds most appeal for SME employees, with four of the top eight most attractive benefits offering some form of flexibility or improvement to work–life balance. Flexible working or remote working is viewed as the third most important benefit overall, cited by one in four SME employees (26%). The option of working a four–day week is important to 24% of respondents, and performance–based leave is prioritised by one in ten (10%). • While attitudes to most financial benefits are fairly uniform across ages and genders, there is greater disparity in the attitude of different age groups to some flexible benefits. This is most striking when it comes to flexible and / or remote working, which is much more popular for younger age bands.

• Women place significantly more importance than men on benefits that allow flexibility – particularly flexible and/or remote working, which is cited by 35% of female employees compared to just 26% of male employees. • Female employees and younger age groups place much more importance on family–related benefits such as childcare vouchers, parental leave beyond the minimum requirement, or the provision of childcare in the workplace, than their male counterparts. • Benefits providing some form of social interaction, including the organisation of team social events or the provision of social space within the work environment, are also more important to the younger age groups. • Other types of benefit cited by employees include professional development and training, Employee Assistance Programmes, and community leave.

The top 10 most important benefits For SME Employees

Benefit

Financial bonuses / incentives

30%

Pension contributions over the minimum legal requirement

27%

Flexible and/or remote working

26%

Four–day working week

24%

Professional development and training

20%

Life insurance and/or critical illness insurance

15%

Performance–based leave

10%

Holiday buy, sell and trade schemes

Free or subsidised travel (e.g. Cycle to Work scheme, company car etc)

Team social events / functions

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Conclusion

In a job market where companies are fighting tooth and nail for top talent, businesses have their work cut out, and they can’t afford to be complacent about disaffection in the ranks. SMEs must do more to find out if their employees are happy and what they expect from them as employers and use this knowledge to form the starting point of a deeper relationship with employees. By understanding their expectations, employers can adapt and take actions to build relationships with their people that are based on much deeper–seated foundations, such as care, collaboration and respect. While doing this effectively requires a good deal of HR expertise that many SMEs simply don’t have and can’t afford, there are a few simple steps they can take to start developing a more loyal and productive workforce.

One of these simple steps is employee benefits – an important area where SMEs are lagging behind larger businesses. Benefits programmes must be employee–focused, taking into account the value and relevance of different benefits to employees of different ages and life stages, genders, and interests, from those who are primarily motivated by financial incentives to those who value flexibility and work–life balance, or training and professional development opportunities. Modern technology means many benefits can be easily implemented and managed without making unrealistic demands on the precious time of business owners or senior management. Benefits don’t have to be expensive for employers, and if well–conceived and executed, can generate a lot of value for businesses from improved staff satisfaction and productivity to increased appeal to prospective employees and reduced churn.

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The People Challenges Facing Employers

SMEs make a vital contribution to the UK economy. They currently deliver £202bn to the economy and this is expected to grow to £241bn by2025,accordingtotheSMEGrowth Watch. The health of this sector is crucial to UK productivity. However, when it can take many months to find suitably qualified candidates then that can severely impact the growth plans of these companies and the economy as a whole. 2 According to the CIPD 3 , recruitment and retention continue to pose major tests, with 41% of employers reporting that it has become harder to fill vacancies during the past year, and 33% claiming that retaining staff has grown more difficult. A recent report from the British Chambers of Commerce 4 suggested that half of UK businesses now find it takes longer to recruit people compared with five years ago, with one in five saying it now takes up to six months to fill a skilled role. Our findings back up these studies. More than three out of four SMEs taking part in our research (77%) said they find it challenging to recruit suitably qualified staff for their business.

The undervalued employee

The recruitment and retention challenges facing SMEs have been exacerbated by a ‘perfect storm’ of low unemployment, and slow wage growth that has squeezed household incomes to levels not seen since the recession of the mid–1990s. This has led employees to look elsewhere in a labour market where good people are in high demand. But employers can’t, of course, simply shrug their shoulders and blame macro–economic factors for their employee woes. They must look closer to home and identify what factors are contributing to a lack of staff satisfaction in their own organisation, from low pay to a lack of flexibility, poor career progression opportunities or the absence of real responsibility. More than ever, SMEs need to ensure they are aware of their employees’ changing expectations and are able to respond to them to minimise the risk of losing staff to competitors and finding themselves in a potentially drawn–out and costly search for suitably qualified replacements. Our findings suggest that the vast majority of SMEs don’t consider this to be a problem in their own organisation. Some 85% of SMEs surveyed think their employees feel valued, compared to just 15% who believe their workers don’t feel valued. This is broadly similar to the feeling amongst representatives of larger businesses taking part in our study. However, employees themselves paint a different picture. Across all sizes of company 64% of workers feel valued by their employer compared to one in three (34%) who don’t. Just 71% of SME employees say they feel valued by their employer, 14 percentage points below the finding from the employer survey, suggesting that employers are unaware of the scale of the problem. More than one in four SME employees (27%) says they don’t feel valued.

And two–thirds of SMEs we surveyed (64%) said they found staff retention challenging.

2 SME Growth Watch CEBR and Hampshire Trust Bank 3 CIPD Labour Market Outlook Spring 2019 4 British Chambers of Commerce, 25 June 2019

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Percentage of employees who don’t feel valued, sector by sector

This is a more positive picture than in large companies, where just 57% of employees feel valued and 41% say they don’t feel valued. However, it still reveals a significant problem for SMEs, with a large proportion of employees feeling undervalued, many of them seemingly without the knowledge of their employers. “While employees of smaller businesses appear to feel more valued than their counterparts in larger organisations, SMEs can’t afford to be complacent,” explained Anthony Vollmer, Managing Director of Moorepay. “As businesses grow it can become more difficult to stay truly engaged with their employees, and they are under constant threat from competitors of all sizes who are fighting hard for the top talent. Keeping staff satisfied is of paramount importance to smaller businesses, and our study suggests that there are currently far too many unhappy workers to ignore.” Retail and Transport sectors face the greatest challenge with disaffected workers On a sector by sector basis, businesses (of all sizes) in the retail and transportation & distribution industries face the greatest challenge with disaffected employees. In total 44% of employees surveyed in each of these sectors say they don’t feel valued by their employer. This may be linked to the particular economic pressures impacting these sectors, or the relentless demand for customer service which is so fundamental to them. In contrast, businesses in the construction sector have the lowest proportion of employees saying they don’t feel valued (22%).

Industry sector

Retail

44%

Transportation & Distribution

44%

Medical & Health Services

39%

Media, Marketing, Advertising, PR & Sales

38%

Hospitality & Leisure

36%

Finance & Accounting

35%

Manufacturing

33%

Legal

32%

IT & Telecoms

31%

Construction

22%

27%

The Value Gap

15%ofSMEsbelieve their workers don’t feel valued 15%

27%ofSMEworkers don’t feel valued by their employer

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North–South satisfaction divide

Percentage of employees who don’t feel valued, by region

Workers in Wales are the most disaffected, with four in ten of them (39%) saying they don’t feel valued by their employer, closely followed by workers in the North West (38%), North East (37%), and Scotland (36%), demonstrating something of a North–South divide. By contrast, just 27% of employees in the South West said they don’t feel valued. With so many unsatisfied workers, businesses are doubtless suffering from reduced productivity levels, regardless of whether those employees move on or not. For those businesses who do lose more employees than they would expect, the additional burden of finding suitably qualified candidates and then training and integrating them into the workplace can be significant, and costly.

SCOTLAND 36%

NORTH EAST 37%

NORTH WEST 38%

YORKSHIRE & THE HUMBER 34%

EAST MIDLANDS 33%

In short, unhappy staff make for very unhappy business owners.

WEST MIDLANDS 35%

EAST OF ENGLAND 32%

WALES 39%

LONDON 34%

SOUTH EAST 33%

SOUTH WEST 27%

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Benefits Barometer: The Perks Provided by Employers

Why benefits? Keeping employees happy is a complex task, influenced by a broad rangeof factors fromthetransparency and clarity of HR processes and policies to the content of a job, working conditions, the personalities andrelationshipsbetweencolleagues, or the workplace culture. Many of these are complex issues that can be improved over a period of time, with a high degree of governance and people management expertise. But while SMEs should undoubtedly strive for these high standards in their human resources function, SME owners are usually time–poor and without the kind of dedicated HR support enjoyed by larger businesses. Consequently, for SMEs to start addressing these problems they need to make greater efforts to engage with their workforce and they need a relatively simple but effective starting point. Employee benefits, if correctly considered, administered and communicated, can provide a highly potent weapon in the fight against disaffection and disengagement in the workforce.

Large businesses, which usually have dedicated HR teams, are more likely to provide almost every type of benefit listed in our study. In some cases, the disparity between large and small businesses is vast. For example, over half of employees of large businesses (53%) say their company provides discounts on leisure and shopping, such as gym memberships, cinemas or restaurants, compared to just one in ten (9%) SME employees. Similarly, employees say 47% of large businesses provide an Employee Assistance Programme, which typically offers services such as confidential counselling and advice on personal issues, compared to just 7% of SMEs.

SMEs lagging behind large businesses

In a competitive labour market where small businesses are in direct competition with larger firms, unsurprisingly they are being comprehensively out–gunned by their larger rivals on employee benefits packages – particularly on financial ones.

Most businesses provide some form of benefits to their employees over and above a salary. However, the findings of our study amongst employees reveal that one in five (22%) of all employees said their employer provides none of the listed benefits, rising to one in three (34%) for employees of SMEs.

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Top ten largest disparities between large and small firms’ benefits

Percentage of SME employees (<250) who say their employer provides this

Percentage of employees of large businesses (250+) who say their employer provides this

Percentage point difference

Benefit

Discounts on leisure and shopping (e.g. gym membership, cinemas, restaurants)

53%

44pp

Employee Assistance Programme

47%

40pp

Holiday buy, sell and trade schemes Pension contributions over the minimum legal requirement

40%

35pp

21%

55%

34pp

Life insurance and/or critical illness insurance

38%

30pp

Financial bonuses / incentives

20%

46%

26pp

Free or subsidised travel (e.g. Cycle to Work scheme, company car etc)

35%

26pp

Community leave

28%

25pp

Professional development and training

20%

41%

21pp

Childcare vouchers

26%

19pp

The benefits being provided by SMEs

According to employees, the most common benefits being provided by SMEs are financial benefits, with six of the top ten most common benefits offering some form of financial reward or discount. One in five (21%) SME employees say they are provided with pension contributions over the minimum legal requirement, and 20% say they receive financial bonuses or incentives. Other financial benefits provided are: discounts on leisure and shopping such as gym membership or restaurants (9%); free or subsidised travel such as the Cycle to Work scheme or a company car (9%); life and/or critical illness insurance (8%); and childcare vouchers (7%).

saying their employer organises team social events or functions, and 10% saying they have socialising space within the work environment, such as a games room or a chill–out area. The single most commonly–provided benefit, according to employees of SMEs, is flexible and/or remote working, provided by 28% of small and medium sized firms. However, other perks offering flexibility or increased work–life balance are relatively uncommon, with just 6% of employees saying their employer offers a four–day working week; 5% offering holiday buy, sell or trade schemes; 3% offering flexible pay schemes (where employees are allowed to withdraw a percentage of their earned salary in advance of pay day); and just 1% offering performance–based leave.

Benefits revolving around socialising are also relatively prevalent in SMEs, with 22% of SME employees

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Communications gap

However, comparison of our two studies shows a huge disparity between the benefits employees say they are offered, and what employers say. For example, while 63% of SMEs claim to offer professional development and training, just 20% of SME employees claim that is the case in their workplace. Similarly, while 41% of SMEs say they provide childcare vouchers, just 7% of SME employees seem to be aware of this. Almost one in three SMEs (29%) say they offer community leave, where employees are given opportunities to work with charitable organisations during working hours. Yet just 3% of SME employees believe their employer provides these opportunities.

These disparities suggest that SMEs have a communications challenge. They are either not making it clear to employees what benefits they are entitled to, or they are providing benefits that are irrelevant to employees and therefore not stimulating their interest, or even awareness, at all. “Providing benefits to employees is not enough,” explained Anthony Vollmer. “Apart from being relevant to employees, for benefits to be truly effective, employees have to understand their value and appreciate their existence. This requires clear communication on the part of the employer.”

Employee benefits provided by SMEs

0% 10% 20% 30% 40% 50% 60% 70%

Professional development and training

Financial bonuses / incentives

Team social events / functions

Flexible and/or remote working

Pension contributions over the minimum legal requirement

Socialising space within the work environment

Childcare vouchers

Life insurance and/or critical illness insurance

Employee Assistance Programme

Free / subsidised travel (Cycle to Work scheme, company car etc)

Longer paid parental leave than the minimum legal requirement

Leisure / shopping discounts (gym membership, cinemas, restaurants)

Community leave

Flexible pay

Four-day working week

Holiday buy, sell and trade schemes

Performance based leave

Workplace childcare / nursery provision

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Percentage of SME employees (<250) who say their employer provides this

Percentage of SMEs who say they provide this

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London leading the way

According to employees, it is businesses (of all sizes) in London who are leading the way on the provision of employee benefits. Just 10% of employees surveyed who work in London said their employer provides none of the benefits mentioned, easily the best result around the country. In contrast, 29% of those working in Yorkshire & the Humber said their employer provided no benefits, followed by 27% of those working in Wales and the North East respectively. Companies in the capital are particularly far ahead in the provision of financial benefits, with over half of London–based employees (52%) saying they receive financial bonuses or incentives, 49% saying their employer provides pension contributions over the minimum requirement, and 46% claiming they receive discounts on leisure and shopping.

But workers in London are also much more likely to be offered the opportunity to work flexibly or remotely (52%), with the next most likely region for employees to be offered this the South East (33%). Just 18% of workers in the North East say their employer allows flexible or remote working, barely a third of those in the capital. On a sector basis, companies in the IT & telecoms sector seem to be offering the most benefits, with just 9% of employees in this sector saying their employer doesn’t provide any. At the other end of the scale, more than one in three workers in the hospitality & leisure sector (37%) claim their employer provides them with no perks.

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Amoria Bond CASE STUDY ONE

Established in Manchester in 2006, Amoria Bond is a fast–growing recruitment consultancy that has since developed offices in the Netherlands, Germany and Singapore and now employs over 140 people. From its inception, the company’s founders recognised that the quality of their staff would be the difference between success and failure and invested heavily in employee benefits to help it recruit, develop and retain the best recruitment professionals. “Our people are predominantly goal orientated and mostly work within competitive sales–based roles,” explained Abi Mason, Global Head of Talent Acquisition, “so a lot of our benefits are engineered to recognise high achievement with the kind of rewards that appeal to staff who want to celebrate their success and achieve personal goals, whether they are focused on finances, additional time off work or otherwise.” The company provides a wide range of financial benefits, from a pension scheme and commission to a profit share plan for senior employees. Staff also become eligible for top of the range iPhones and a tiered company car programme as they progress and their levels of pay improve. It also provides a wide range of additional “time off” incentives, including two extra paid days off gifted to all employees over the Christmas break; an additional three days annual leave for those who achieve 100% attendance over the financial year; four “duvet days” a year for senior staff members and one for trainees; and a 1:30pm finish on Fridays for any consultants who have hit their objectives for the week.

Amoria Bond has created social break–out areas in its offices where space allows, such as its Amsterdam base where there is a bar, sofas, an Xbox, a pool table, and an outdoor terrace where the company hosts summer friends and family barbecues. As well as an award–winning training programme, the company has invested in wellbeing initiatives, including a visit by the Sale Sharks rugby club to talk to staff about its mental health awareness programme.

It has also set up the Amoria Bond Charitable Trust, through which employees get the chance to give back to the community and social causes, both locally and internationally. One of the biggest commitments made by the Trust to date was to build 100 houses for families in the impoverished town of Las Laderas on the outskirts of Lima in Peru, which it completed in 2017 after a visit from a team of employees. “We want people to be focused and to correlate professional success with additional rewards and freedoms, but we also want our people to feel that they are cared for,” explained Abi. “It’s a simple equation for us; providing the best benefits in the industry has a really positive impact on our ability to attract and keep hold of the best people.”

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What Employees Want

There is widespread agreement from employers that in 2019, employees are looking for more than just a salary. Indeed, 87% of SMEs participating in our study believe this to be the case, just slightly less than the 93% of representatives of large businesses who are of the same opinion.

Traditional financial benefits are still king

The group of benefits that employees believe are most important for their employer to offer are traditional financial benefits. The single most popular benefit for workers in smaller businesses is financial bonuses and incentives, cited by 30% of respondents. This is followed by the provision of pension contributions over and above the minimum legal requirement, cited by one in four employees (27%). Other financial benefits offered are mid–table in their desirability for employees, including life and/or critical illness insurance, prioritised by 15% of respondents; free or subsidised travel (8%); and discounts on leisure and shopping (6%). “For all the increasing popularity of new, innovative types of benefit and ways of working, traditional financial bonuses and generous pension schemes still hold the most appeal for workers,” said Anthony Vollmer. “Businesses seeking to develop a benefits package should always design the ‘perks’ to be relevant to their people, but unsurprisingly, when people feel their standard of living is being squeezed then it is money in the bank that is most important to them, so a strong core of financial incentives is essential.” Flexibility and work–life balance The Taylor Review of Modern Working Practices states that encouraging flexible work is good for everyone and has been shown to have a positive impact on productivity, worker retention and quality of work . It also demonstrates the increasing importance of flexibility that holds most appeal for SME employees, referencing a rise over recent years in the proportion of employees saying that flexible working was important to them when they decided to take their current job.

But while businesses are clear that employees expect more from them, they are much less clear about exactly what ‘more’ is – certainly when it comes to benefits. Indeed, one in three SMEs (30%) believe ‘soft’ benefits have no or only slight importance in recruiting and retaining staff – a greater degree of scepticism towards soft benefits than exists in larger businesses (22%). But as we have seen earlier in this report, there is often a gap between the perception of SMEs and the perception of their employees. So, what do employees in smaller businesses really want in terms of benefits?

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Percentages indicate proportion of male and female employees that believe this is important for their employer to provide... Female flexibility: How female employees attach more importance than male employees to flexible benefits

Our findings echo this sentiment. Beyond the top financial rewards, it is flexibility that holds most appeal for employees, with four of the top eight most attractive benefits offering some form of flexibility or improvement to work–life balance. Flexible working or remote working is viewed as the third most important benefit overall, cited by one in four SME employees (26%). The option of working a four–day week is named as important by 24% of respondents, and performance–based leave is prioritised by one in ten (10%). Nine per cent say that the provision of holiday buy, sell or trade schemes are important for employers to offer. Yet while attitudes to most financial benefits are fairly uniform across ages and genders, there is greater disparity in the attitude of different demographics to some flexible benefits. This is most striking when it comes to flexible and / or remote working, which 39% of under 35s and 38% of 35–44–year olds believe is important, compared to 28% of 45–54–year olds and just 19% of those aged 55 or over. Women place significantly more importance than men on benefits that allow flexibility – particularly flexible and/or remote working, which is cited by 35% of female employees compared to just 26% of male employees. A greater proportion of female employees name every flexibility–related benefit as a priority in comparison to their male counterparts, including holiday trade schemes (15% versus 12%); and performance–based leave (13% versus 10%).

Flexible Pay

male 4%

female 5%

Holiday buy, sell and trade schemes

female 15%

male 12%

Four–day working week

female 28%

male 27%

Flexible and/or remote working

female 35%

male 26%

Performance–based leave

female 13%

male 10%

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Family The other type of benefits that women place much greater importance on are family–related. One in ten (9%) of female employees believe it is important for employers to provide some form of childcare or nursery in the workplace, compared to just 5% of male employees. Similarly, while 13% of female employees name the provision of paid parental leave beyond the minimum legal requirement as a priority benefit, just 8% of their male counterparts agree. And significantly more women than men place importance on their employer offering childcare vouchers (9% versus 6%). Unsurprisingly, these benefits are much more popular amongst age groups likely to have a young family or be considering starting one, with employees in the under 35 and 35–44 age bands who consider family benefits important significantly outweighing those in older age groups. “It stands to reason that as employees go through different stages of life, the things that are most important to them change,” said Anthony Vollmer. “Family–related benefits are a perfect example of this – worth their weight in gold to those with a young family but without value to everyone else. This is why employers need to offer a wide range of benefits so employees who appreciate very different things can all derive value.” Socialising Benefits providing some form of social interaction are also more important to the younger age groups. The organisation of team social events or functions is cited as important to 12% of employees under the age of 35, decreasing to 8% of 35–44 year olds, 7% of 45–54 year olds and 6% of those aged 55 or older. A similar pattern is found with regard to the provision of socialising space within the work environment, such as games rooms or chill–out areas, with a higher proportion of under 35s valuing this benefit (9%) than in any other age group.

Other benefits Not all benefits fit under the categories described above. Indeed, some of the most important and innovative benefits sit elsewhere. Professional development and training is hugely important for many employees, lying in fifth place on the list of most important benefits to employees of SMEs (cited as important by 20%). It is particularly important for those at the earlier stages of their career, with 29% of employees under 35 naming it as a priority, steadily decreasing to 25%, 23% and 19% as we move through the age brackets. Employee Assistance Programmes , which give employees access to services such as counselling on personal issues, are named as important by 7% of SME employees, substantially less than the 18% of large company employees citing them, though this may be due to a greater level of awareness of these programmes within larger companies. Across all businesses , these programmes are more popular among female employees (14%) than male employees (10%). This may be because women are in general more likely to open up and discuss personal issues. These programmes are becoming increasingly popular as companies start recognising their value to employee satisfaction as much as their own CSR goals. Employees are becoming increasingly socially– conscious and want their employers to share their values. While just 3% of SME employees cited this kind of scheme as a priority (compared to 8% in large companies), across all size of company community leave is again more important for women (7% versus 4%). Community leave is the ability to take paid time off to volunteer to help a charity or community cause.

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The most important benefits for SME employees, and whether SMEs would consider offering them

Percentage of SME employees that would prioritise this as important for their employer to offer

Percentage of SMEs who don’t offer this and WOULDN’T even consider doing so

Percentage of SMEs who don’t offer this but WOULD see value in potentially doing so

Benefit

Financial bonuses / incentives

30%

21%

Pension contributions over the minimum legal requirement Flexible and/or remote working

27%

21%

26%

19%

26%

Four–day working week

24%

38%

35%

Professional development and training Life insurance and/or critical illness insurance

20%

16%

21%

15%

30%

29%

Performance–based leave

10%

42%

34%

Holiday buy, sell and trade schemes Free or subsidised travel (e.g. Cycle to Work scheme, company car etc) Team social events / functions Longer paid parental leave than the minimum legal requirement Employee Assistance Programme Discounts on leisure and shopping

46%

27%

30%

31%

19%

23%

30%

32%

27%

34%

32%

36%

(e.g. gym membership, cinemas, restaurants)

Socialisingspacewithinthe work environment

28%

30%

Childcare vouchers

30%

Flexible pay

42%

29%

Workplace childcare / nursery provision

52%

32%

Community leave

35%

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A question of cost or a question of ease?

Our analysis shows that of the SMEs that don’t currently offer a given benefit, in most cases there is a fairly even division between those who would see the value in considering introducing it, and those who wouldn’t even consider it. It is encouraging to see that so many SMEs are open–minded about the value of employee benefits, surprisingly so in some cases, such as the 35% of SMEs who don’t currently offer a four–day working week but can see some value in considering it; the 30% with the same attitude to creating a socialising space in the workplace; and the 32% who feel the same way about implementing some form of workplace nursery or childcare. However, there are still many SMEs that are not even considering the implementation of benefits that are among the most popular with workers. One in five SMEs (21%) say they won’t consider providing financial bonuses or incentives, despite them being the most important benefit for employees, and potentially a powerful motivational tool to drive productivity at the same time as staff satisfaction. Another one in five (19%) won’t consider offering flexible and/or remote working, despite its considerable popularity; and one in four (27%) won’t even think about offering an Employee Assistance Programme. Of course, it is far too simplistic to say that just because employees want a particular benefit, an employer should provide it. Benefits programmes come at a cost, and the employer always has to weigh up that cost against the rewards likely to be generated in terms of employee satisfaction, engagement, loyalty and productivity.

Business owners and managers also have to consider the time cost. Historically SMEs have been put off providing many benefits because of the perception that they are time–consuming and cumbersome to manage. While this may have been true in the past, technology platforms now allow employee benefits programmes encompassing a wide array of different perks to be managed with the bare minimum of input from company owners and managers.

Our results suggest that many SMEs are choosing to see benefits programmes as costs with no upside, closing their eyes to the rewards they could realise by implementing personalised benefits programmes that motivate, engage and provide value to staff. But happily, there are also many small and medium–sized companies that remain open–minded to the positive outcomes of employee benefits. If these companies seek to implement them in an efficient, cost–effective and personalised way, they will reap the rewards.

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