Sometimes convincing senior management of the benefits of spending money on Employee Benefits (EB) can be a challenge. HR requests for additional budget will be assessed against other business requirements and often EB spend is moved to the category of ‘nice to have but non essential’.
It is our experience that this can be as a result of the way budget requests are articulated, often relying on what would appear to be common sense arguments, but without providing any tangible evidence to justify the cost versus benefit analysis. When requesting EB budget from the Board, it is essential to view the request in the same way as any other demand on business resources and create a clear business plan.
Whilst few would disagree that bolstering the value of your employees’ overall remuneration packages reduces staff turnover and increases staff motivation, resulting in a happier, more engaged workforce, proving the Return on Investment (ROI) for EB spend can be more difficult.
In this article we aim to highlight some of the more effective arguments which can justify the cost of a comprehensive suite of Employee Benefits. We will be looking at the following areas:
- Measuring HR Costs & ROI
- Cost of absence (short term, longer term, presenteeism)
- Staff turnover & recruitment / training costs
- Employee engagement
It is impossible in an article of this size to cover such a large subject comprehensively, so we have concentrated on identifying the key areas for discussion above and providing links to a range of resources which provide thought provoking insights and useful guidance. There is also a lots of statistical data to support you in developing your business plan.
Measuring HR Costs & ROI
It is safe to assume that no one likes to part with money without understanding what they are getting in return. EB spend is no different to any other business project. The Board will want to fully understand any financial outlay and measure this against the potential return on this investment. Some organisations are much better than others at measuring the impact of decisions made. Before implementing any employee benefits programme, it is worth considering what the business is hoping to achieve. For example, if you are introducing Private Medical Insurance on the understanding it will return absent employees to work faster, you need to measure the current absence position in order to measure the impact of introduction and the ROI. This sounds relatively straight forward, but the reality may be very different. The links below provide additional guidance & support:
Cost of absence (short term, longer term, presenteeism)
Offsetting the cost of absence is another argument often put forward to justify spend on health related employee benefits. Accurate measurement and monitoring, identifying trends and exploring the underlying causes are key elements in effective absence management.
The Office for National Statistics shows the average number of sickness absence days that UK workers take has almost halved since records began in 1993, however, there is a growing fear that these statistics are hiding a worrying trend of presenteeism. The attached articles and links provide additional guidance and support:
- Cost of sickness in the UK – pdf
Staff turnover & recruitment / training costs
It would appear obvious that if staff turnover is above average over a sustained period of time, there is a contributing factor somewhere. Conducting exit interviews in an efficient manner should provide some useful insights into the reasons why employees are dissatisfied. If it is found that a recurring theme relates to the employment package available at the organisation, then it is time to measure the impact of this on the business.
As with cost of absence, it is important to remember to include the indirect costs as well as the direct costs of recruiting, strain on workforce, training costs and time delay between start date and the point the new hire is fully effective in their role. These should all be part of the measurement process.
The links below explore in further detail:
Employee engagement is the common measure of motivation, satisfaction, organisational commitment and work effort. There is a wealth of information available in the public domain which evidences a clear link between an individual’s employment package and their engagement with their employer. We are witnessing significant shifts in how clients measure the engagement of their workforce and the positive impacts that well thought out strategies are having on productivity. The links below provide some additional reference material which may assist you:
For more information, please contact Employee Benefits specialist David Farebrother on 07840 054 051 or email@example.com
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