Levelling-up & Employee Benefits



23 July 2020

This week marks a year since Boris Johnson become Prime Minster, and it’s fair to say that it’s been a turbulent 12 months what with party expulsions, a general election, Brexit, and (of course) the coronavirus crisis too.

With so many distractions it’s no surprise that a focus on the everyday domestic policy agenda has been rather overlooked in recent months.  But at some point the Prime Minister is likely to return to one of the most often used phrases of his successful 2019 election campaign, the need to “level-up” Britain.  The phrase probably means very different things to very different people.  But at the core of the concept would appear to be the somewhat vague idea of a more uniformly equal society across the nation.

A challenge to deliver

Of course delivering such an outcome is so much more difficult than the sound bite might suggest.  After all the United Kingdom is a complex democratic beast, and accordingly government can’t necessarily dictate the direction of the nation’s travel.  That said, they can help gently push it in the right direction.

And part of that approach is to identify pay gaps.  Most employers are now much more acutely aware of the Gender Pay Gap following the introduction of mandated reporting* for larger employers in 2017.  Far fewer are aware of the growing political pressure to report on other pay gaps including Executive/Worker, ethnicity, and disability.

Yet the reporting requirements don’t necessarily capture all the relevant elements of the employer’s remuneration offering, and indeed the Gender Pay Gap requirements actually excludes some of the more universal Employee Benefits in the United Kingdom.  It’s also worth noting that the use of salary sacrifice to fund some employee benefits might distort the report analysis further still.  So whilst such mandated reporting is a very useful starting point in the journey, it is very far from the comprehensive answer needed to fully level-up the compensation and rewards offering within any given workforce.

Given the above, a few of the more far-sighted employers are already looking to voluntarily go further than their legal reporting requirements on pay gaps.  In this way they aim to capture all the relevant areas of remuneration and reward, and accordingly such reports are much more likely to represent a significant step towards achieving a truly transparent and fair remuneration structure.

Are Employee Benefits equal?

Yet this in turn raises another question; just how equitable are many of the traditional Employee Benefits often on offer to employees? 

For the uncomfortable truth is that often the Employee Benefits offering of many employers disproportionately favours one grouping, and often the higher levels of management in particular.  So let’s look at one simplified example to explore this further.    

Example:  Group Life Cover

Many good employers will provide some form of Group Life Assurance scheme for their workers.  This is an important – but relatively low cost – benefit, and will typically provide a one-off payment of (say) 4 x salary to the employee’s loved ones in the event of death.  This sum can be used to settle outstanding financial commitments and/or ease the inevitable loss of income arising from the loss of a working age family member. 

Whilst the level of cover is set at a multiple of each individual employee’s salary (so the sum assured will vary significantly), it nevertheless remains proportionate to the income earned by each individual.  This makes sense, as the outgoings and financial commitments made by each employee during their life are likely to be directly linked to the level of their salary too.  So objectively this seems like a solution that protects all employees fairly.  

What perhaps makes less sense is that so many employers choose to markedly increase the multiple of cover offered for those employees achieving senior status within their organisation.  Cover levels of 8 or 10 x salary are not unusual for executive level workers.  Of course sometimes such an increase in cover is justifiable as part of an historic adjustment to benefits, or to allow for significant non-salary related income, or for genuine recruitment and retention purposes.  But it’s not uncommon to find no strong rationale behind such an unbalanced benefits structure.

But does an employee reaching a “senior” grade, and earning (say) £100k, really need life cover increased from 4 to 10 x salary?  And, if so, why would a worker at £25k not also require such an increase in cover too?  A case for greater equality could certainly be made here.

An equitable solution?

A fair way of resolving this issue would be to equalise cover for all workers** to (say) 5 or 6 x salary. 

Such an approach will certainly be easier to justify, and will probably also help simplify worker communications and HR administration.  And the savings achieved in providing a lower level of cover for senior individuals will often make a significant contribution towards the costs for increased cover for the rest of the workforce too.  It follows that cost might not always be the barrier that it might first appear to be.

The above is only one possible example of a benefits improvement that could be considered.  Other areas where a quick “equalisation” win might be achievable could be in the provision of Group Income Protection, Group Private Medical, and indeed Health Cashplans too. 

The reality is that any improvement in health and risk related benefits is always likely to be warmly welcomed by workers, and even more so in 2020 given the stark reality of the national health emergency that we have all so recently experienced.

From the employer’s perspective, any such change might well bring multiple benefits which include (but are not limited to) improved engagement, lower absence, and better retention and recruitment appeal. 

And all this whilst actively - and overtly - tackling the challenges of pay gaps and the government’s levelling agenda too.

For more information on any of the above topics, please speak to your usual Howden Consultant in the first instance, or visit our website for other contact options. For the latest details on COVID-19 & Employee Benefits provision please visit our coronavirus hub.

Howden Employee Benefits & Wellbeing, has launched Pay Intelligence Services to help employers with their gender pay gap reporting and to address any imbalance, as well as helping those that want to understand and report other pay gaps, which may become statutory in the future.

*  temporarily suspended in 2020 during the COVID19 outbreak

** please check contractual employment commitments before instigating such a change

(Published 23/07/20)

Steve Herbert

Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.

Steve Herbert

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