by Heather Carey, Helen Sheldon and Monica Andriescu, The Work Foundation

Improving fringe benefit schemes

for low earners

This report explores how to maximise the value of fringe benefits – an important but under-re-searched component of good work. It offers insight to businesses committed to improving the

quality of jobs, and to catalysing industry-wide action on this issue.

November 2018 www.jrf.org.uk

Improving fringe benefit schemes for low earners Heather Carey, Helen Sheldon and Monica Andriescu, The Work Foundation

With a growth of employment rates alongside record high levels of in-work poverty, attention has shifted to focus on the quality of work and how that might be improved. The Work Foundation has worked in partnership with businesses in the retail and social care sectors to explore how to maximise the value of fringe benefits – an important but under-researched component of good work. This report seeks to offer insight to businesses committed to improving the quality of jobs and to catalyse industry-wide action on this issue. 

What you need to know

• Fringe benefits can support low earners, in particular schemes that help to mitigate living costs. But despite rapid expansion of the employee benefits market, employers are failing to maximise their value for low earners and failing to reap the rewards of improved employee engagement, productivity and performance. 

• This study proposes a ‘framework of good practice’ – comprised of seven important steps – for employers looking to maximise the value of fringe benefits for low earners.

• There is a need for new resources, support and incentives for employers to embed the framework for good practice within their business and raise the bar of job quality in low-paid roles.

We can solve UK poverty JRF is working with governments, businesses, communities, charities and individuals to solve UK poverty. Improving fringe benefits schemes for low earners plays an important part in our work with employers – a key focus of our strategy to solve UK poverty.

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Contents

Executive summary 1

1 Introduction 2

Context 2

Project overview 3

Project methodology 4

This report 5

2 Fringe benefits: definition and typology 6

Introduction 6

Defining ‘fringe benefits’ 7

Typology of fringe benefits 8

Key considerations in determining value 10

3 Fringe benefits: employer value and market trends 12

Introduction 12

Working practices and business performance 12

The business case for employee fringe benefits 14

Key trends in the employee benefits markets 16

4 Fringe benefits: value and barriers for low earners 21

Introduction 21

The value of employee benefits to low earners 21

Barriers faced by employees 29

5 Fringe benefits: Pathways, obstacles and success factors 32

Introduction 32

Pathway mapping 32

6 Fringe benefits: maximising value for low earners 37

Introduction 37

Towards a framework for good practice 37

7 Embedding the framework 43

Introduction 43

Existing resources: fit for purpose? 43

Additional support: a new toolkit for employers? 44

Raising the bar: strengthening support and incentives for

business 50

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Notes 50

References 52

About The Work Foundation 54

Acknowledgements 54

List of figures

1 Fringe benefits in the context of good work 3

2 Project aims and objectives 4

3 Project methodology 5

4 Our employer forum 5

5 A spectrum of fringe benefits 9

6 Typology of fringe benefits 10

7 Impact of high performance working (HPW) 14

8 Business case for employee fringe benefits 15

9 Deploying employing benefits to bring down the cost of living 23

10 Pathway mapping 33

11 Overview framework for good practice 38

12 Review of toolkits: definitions, content and format 45

List of tables

1 Mapping of different types of fringe benefits 8

2 Minimum Income Standard for four family types, April 2017 22

3 Low earners’ preferences for different employee benefits 28

4 The seven stages of the fringe benefits pathway 33

5 Specifying a toolkit to support employers in embedding the

framework for good practice 48

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Executive summary Traditional employment policies to address poverty have primarily focused on securing work. But with a growth of employment rates alongside record high levels of in-work poverty, attention has shifted to focus on the quality of work and how that might be improved to support in-work progression and higher rewards. While improving wages will always be central to tackling in-work poverty, there are other steps that businesses can take to improve working practices and offer greater support to low earners. This research explores the potential to improve the take-up and value of fringe benefit schemes. Despite a broad and growing array of employee benefits available in the market, the research found a more limited number of benefits that low earners may in fact prefer and use. The research suggests that low earners attach greater value to those benefits that mitigate their highest living costs: such as food and leisure, travel, childcare, and housing and utilities; as well as those that provide financial education and support. We also found that paid breaks, paid sick leave/compassionate leave/parental leave, as well as training, matter a lot. However, we found both employers and employees face several barriers that serve to undermine take-up and value, which means there is no ‘silver bullet’ that will dramatically shift the reach or impact of employee benefits for low earners living in low-income households. Rather, we identify a framework of good practice for employers looking to maximise the value of fringe benefits for low earners:

1. Securing commitment among business leaders to support the needs of low earners, using research, stories and case studies to illuminate the challenges they face, and the impact employee benefits can have on their living standards.

2. Building a business case that fully reflects the impact of employee benefits, including acknowledging tangible and intangible benefits and recognising the role employee benefits can play in supporting wider organisational priorities.

3. Recognising the distinct needs and preferences of low earners, and the varied circumstances of those within this group, in the design, implementation and evaluation of fringe benefit schemes.

4. Providing additional support to inform choice, enable access and demonstrate value, striking the right balance between offering flexibility, while also providing support to enable take-up of those benefits of greatest value.

5. Working collaboratively with third-party suppliers to tailor off-the-shelf products so that they are more closely aligned to the needs and challenges of low earners.

6. Promoting benefits in a way that reaches and resonates with low earners, recognising and helping to tackle digital exclusion and a lack of digital skills among some of this group.

7. Monitoring and measuring take-up and impact, to assess how successfully they are meeting their objectives, to refine the approach to improve impact, and to demonstrate their value in driving business performance and supporting low earners.

The research suggests that to embed these actions within business practices, there is a need for new resources to support each stage of the decision pathway, and other forms of support including business advice services, mentoring, professional membership organisations or networks that enable businesses to connect with others in their eco-system.

Finally, the research highlights the need to ‘raise the bar’ of job quality in low-paid roles, establishing a new baseline for the minimum level of benefits employers are expected to offer low earners. This should be supported by new incentives that recognise and reward businesses that offer ‘good work’, including greater transparency in financial reporting and stronger kite-marking to catalyse a new model for corporate governance: one centred around ‘responsible business’.

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1 Introduction Context Despite many calls for urgent action since 2010, in-work poverty has reached record highs in recent years. In 2015/16, there were 13.9 million people in poverty in the UK (22% of the population). While poverty is influenced by many factors – including benefits and tax credits, employment and earnings, and living costs – more than half of those in poverty were in working families (JRF, 2017). In-work poverty has been increasing rapidly, and has risen most among those in atypical employment, working part-time and/or self-employed. Even with the introduction of the National Living Wage (NLW), those working full-time on this rate still earn less than the minimum level of income required for a socially acceptable standard of living in the UK (the Minimum Income Standard (MIS)): a single person working full-time on the NLW still earns 22% less than the MIS. For a couple with two children on tax credits, the shortfall is 13% (Padley and Hirsch, 2017). In 2014/15, more than 19 million people earned less than the MIS – equivalent to 30% of the population and a figure that has increased by 4 million since 2008/09 (Padley et al, 2017). But while low pay is a common and growing issue, there are many other factors that influence whether low earners are living in poverty. These include the number of hours the individual works, other sources of income (including benefits and tax credits) and the presence of children or other earners that live in the same household (Millar and Gardiner, 2004). These factors can make the difference between whether households are getting on and getting by; or getting stuck and finding the challenges they face getting harder (Hill et al, 2016). They also highlight the varied circumstances of those within this group and the challenge this poses to businesses, who are unlikely to be able to identify which low earners in their workforce live in poverty or target support towards those in greatest need of help. Traditional employment policies that aim to address poverty have primarily focused on securing work. But with a growth of employment rates alongside in-work poverty, attention has shifted to focus on the quality of work and how that might be improved to support in-work progression and higher rewards. While improving wages, for example through initiatives that promote the voluntary higher Living Wage, will always be central to tackling in-work poverty, there are other steps that businesses can take to improve working practices and offer greater support to low earners.

“Better pay can be complemented by a range of other actions that help combat poverty – taking on more apprentices, offering more secure contracts, providing innovative training and development programmes and fringe benefits packages that help with the cost of essentials. These measures can help boost productivity for businesses at a time of increasing global competition.” JRF (2016) We can solve poverty in the UK

More recent developments have also brought the debate around ‘good work’ – that is work that offers fair reward, terms and conditions; that counterbalances security and flexibility; and that provides scope for development and fulfilment – back in the spotlight (Taylor, 2017).

“The quality of work affects us all. Happier workers are more productive and when productivity increases, the economy grows, boosting earning power for everyone. The government is acting. We will make the changes necessary to improve the quality of work in the UK economy. We cannot do it alone, and we need everyone – employers, individuals, unions and others – to work with us to deliver the flexible and productive labour market we all want to see.” HMG (2018) A response to the Taylor Review of Modern Working Practices

Research findings repeatedly emphasise the role of work as a vital mechanism in an individual’s social identity and good work has been advocated as a critical way not only to enhance business performance but to drive social prosperity. Good work is shaped by working practices that benefit employees through good reward schemes and terms and conditions, having a secure position, better training and

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development, good communication and ways of working that support task discretion and involve employees in securing business improvements (Work Foundation, 2016). Good work as a concept is therefore multi-faceted; influenced by factors relating to the workplace and working practices – the nature of the role itself, social factors and personal circumstances – as well as place-based factors that often affect the availability and accessibility of good jobs. Employee benefits are an important, but under researched, component of good work. Figure 1: Fringe benefits in the context of good work

Work Foundation (2018)

Project overview Overarching approach and aims The use of employee ‘fringe’ benefit schemes has increased rapidly over the past decade, reflecting a growing emphasis among employees on non-financial aspects of their reward package and a recognition by more businesses that such benefits make good business sense – supporting talent acquisition, enhancing employee engagement and retention, and ultimately improving productivity and business performance. Despite this, not all businesses show commitment to offering good work to their employees and research suggests there is potential to improve the take-up of fringe benefit schemes among those businesses that do, to deliver improvements in productivity and business performance, while also supporting low earners and tackling the growing issue of in-work poverty. This project has aimed to offer additional insight to businesses committed to improving the quality of the employment experience they offer their workforce and to catalyse industry-wide action on this issue. It has sought to:

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• provide insight into the business case for fringe benefits and their potential value to low earners; the practical challenges and key success factors when implementing such schemes in different contexts

• inspire action; facilitating collaboration between employers operating in different industry sectors that demonstrate leadership and a commitment to enhancing the value of their benefits package to their employees

• maximise impact; by co-designing practical tools with businesses, that will enable employers operating across all parts of the economy to implement the right schemes for their business, and their workforce.

Figure 2: Project aims and objectives

This project is part of JRF’s wider programme of research and development exploring measures to improve the quality of work, support productivity improvements in low-wage sectors, and help solve poverty in the UK by more people finding a route out of poverty through work.

Project methodology The first stage of the research entailed a rapid evidence assessment (REA), to bring together existing academic and grey literature to explore the business case for adopting, designing and implementing fringe benefit packages that are aligned with business growth strategies and deliver appropriate rewards for low earners – reflecting the varied circumstances of these individuals and the needs of those employed in different occupations and sectors. The desk-based research was supported by a wide-scale programme of consultation with employers, employees and benefit providers, during September – December 2017. These semi-structured interviews sought to understand the potential value of fringe benefits from multiple perspectives; identify the constraints that serve to limit provision, take-up and value; and demonstrate the approaches that employers have successfully deployed to overcome these obstacles. The evidence gathered has been used to develop a framework of good practice for maximising the value of fringe benefits for low earners and particularly those living in low-income households, supported by a series of case studies that showcase good practice and demonstrate ‘what works’. The research has also sought to explore the case for additional resources to support employers in this endeavour, designing a practical toolkit to enable employers to better evidence the business case for investment in fringe benefits for low earners, to overcome obstacles in the design and implementation of benefits, and to evaluate the impact of investment on their business and their low-paid workforce. To support the aims and objectives of the project, we took a sector-driven approach to the research; with a primary focus on the retail and social care sectors due to the incidence of low pay and high rates of in-work poverty, where an estimated 14% of workers are in poverty (Sissons et al, 2017). The research has, however, sought to draw on best practice from other sectors and present a framework and toolkit so all employers can maximise the value of fringe benefits for low earners.

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Figure 3: Project methodology

Finally, evidence has shown that business solutions are more effective if shaped by businesses themselves, confronting ‘real’ problems. This project has benefitted immeasurably from the support of an employer forum of businesses drawn from across our target sectors that demonstrate leadership on this issue and share a deep-rooted commitment to supporting their workforce. Figure 4: Our employer forum

John Lewis Partnership Joseph Rowntree Foundation

Crossroads Care Kent The Albatross Group

Making Space Health and Social Care Services British Retail Consortium

The Royal Naval Benevolent Trust Tesco

Lincolnshire Co-op Belfast Health and Social Care Trust

Penrose Care

This forum has worked in partnership with the Work Foundation to share their invaluable insight into decision pathways, real-life challenges and successful approaches, co-creating practical resources that would serve to fill gaps in existing intelligence and deliver much needed insight to support employers to maximise the value of fringe benefits for low earners.

This reportThis report aims to bring together findings from each stage of the research process. Chapter 2 outlines the definition of employee benefits and proposes a typology for describing different types of benefits; Chapter 3 considers the business case for employee benefits, discussing recent trends in their use and identifying the key trends driving change in market; Chapter 4 explores employee benefits from the perspective of low earners, identifying those of greatest potential value and the factors that act to constrain take-up; Chapter 5 explores the ‘pathway’ that employers go through when implementing employee benefit schemes and the obstacles they face in doing so for low earners in their workforce; Chapter 6 outlines the actions businesses can take in order to maximise the value of fringe benefits for low earners, laying the foundations for a framework of good practice; Chapter 7 discusses how we can embed this framework in business practices, in particular exploring the potential for new resources, support and incentives for employers.

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2 Fringe benefits: definition and typology

Key messages

The market for employee benefits has changed dramatically over the past decade. A growing recognition of their importance in attracting talent, employee engagement and retention has driven growth and a broadening of the types of benefits deployed by businesses.

While workers are entitled to a range of workplace benefits, some employers go beyond these statutory minimums to offer a range of fringe benefits for their workers. Our light-touch assessment of the market identified more than 50 different types of employee benefits, spread across a broad spectrum ranging from those that offer increased job security, flexibility or discounts on household essentials, to those that are more obviously lifestyle perks, such as sporting or recreational facilities.

This research argues that some of these benefits would be better considered ‘fundamental’ rather than ‘fringe’ benefits; an integral part of a fair work package that employers would be expected to offer their workers.

In the middle of the spectrum lie fringe benefits that offer enhanced support to employees and these offer considerable potential for businesses to demonstrate leadership in alleviating in-work poverty. We establish a new typology for describing these types of fringe benefits based on the outcome they look to deliver for employees:

health and wellbeing – benefits that aim to support and encourage employees to maintain good health, including physical, mental and financial wellbeing

work conditions – benefits that offer terms and conditions for workers that extend beyond the statutory minimum, to enhance fairness, security and flexibility

skills development – benefits that develop skills additional to those required by the role and which are transferable to other organisations/industries;

employment costs – benefits that seek to offset and/or subsidise the costs associated with work

living costs – benefits that aim to offset and/or subsidise the cost of living for their employees.

Finally, we recognise that the value of fringe benefits for workers will vary depending on several factors, which include: demographics, life stage, social or economic circumstances, tax implications, employment characteristics and place-based considerations.

Introduction The market for employee benefits has changed dramatically in recent years and continues to evolve quickly. From their inception in the mid-1800s through their evolution in the 1970s and 1980s, employers have long used benefits to support, retain and reward staff, outside of adjustments to their fixed pay that incur high rates of marginal taxation (CIPD, 2017a). Today, employers increasingly recognise benefits as: a key facet in the race for global talent; an integral part of the total reward package they offer employees; an important component of high performance working practices that promote a happy and healthy workforce, enhance employee engagement and retention, and ultimately improve productivity and business performance. This shift has gone hand in hand with a ‘broadening’ of the fringe benefits market. Employers and workers are now faced with a vast array of different benefits and a competitive market of third-party

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suppliers. The growth of big data analytics and customer insight evident across the economy is also enabling benefits providers to offer individualised packages tailored to the diverse needs of businesses and their workforce. While this increased choice, competition and personalisation offers the potential to improve the return on investment for employers and the value of benefits for workers, we are now faced with a complex and confusing landscape. This chapter considers the definition of ‘fringe benefits’ and the extent to which they are a commonly understood concept among employers, third-party suppliers, workers and other stakeholders, and draws out the implications of this for defining fringe benefits for the purposes of this research. It explores the breadth of fringe benefits provided by employers and suppliers and seeks to establish a simple, intuitive typology for understanding the different types of fringe benefits on offer, centred around the outcomes they look to deliver. Finally, we discuss the factors that influence the take-up and value of fringe benefits and begin to explore their relevance to low earners.

Defining fringe benefits Despite their growing popularity and prevalence in the market, preliminary findings indicate there is a lack of clarity about what is meant by fringe benefits and what this term incorporates.

As Box 1 illustrates, ‘fringe benefits’ are frequently described as any benefit that employees receive outside of their normal salary. ‘Fringe benefit’ therefore is an umbrella term that includes many different categories of benefits, that vary depending on the organisation that implements the package or the institution that assesses their distribution and take-up. As a result, elements such as training may or may not be included in the definition of fringe benefits. Moreover, in official statistics, the preferred term is ‘benefits in kind’.

Box 1: Alternative definitions of employee fringe benefits

Thompsons online benefits (2017a) Expectations vs reality: the widening gap in global benefits

CIPD (2018) Employee benefits: an introduction

Citizens Advice website (2018)

The lack of agreement on what the term ‘fringe benefit’ incorporates has important implications for this research. While we propose a working definition of fringe benefits based on the existing literature and evidence as outlined in Box 2, it is clear that fringe benefits are a relatively fluid concept that may be perceived differently by different employers, potentially varying depending on the size of the business, the sector of the economy they operate in, the profile of their workforce, their operating model, financial constraints and so on. Further, low-paid employees themselves may perceive and understand the role of different types of fringe benefits differently depending on their demographics, social or economic circumstances, the nature of their occupation, or their household characteristics for example.

“Definition of benefits given to employees: what we mean by this are the perks that you receive from your employer outside of your normal wage or salary – also called fringe benefits or perquisites. Examples include pensions, gym membership, annual leave, health insurance etc.”

“Employee benefits are non-cash provisions within the reward package, although they have a financial value and cost for employers, for example paid holidays, pensions and company cars.”

“Benefits in kind are benefits which employees or directors receive from their employment but which are not included in their salary cheque or wages. They are sometimes called ‘perks’ or ‘fringe benefits’. They include things like company cars, private medical insurance paid for by the employer and cheap or free loans.”

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Box 2: Working definition of fringe benefits for this research

This research has sought to strike a balance between narrowing the scope by limiting the type of benefits it will investigate, with the need to include stakeholder perspectives on what fringe benefits mean (either to employers, providers, or employees). It has therefore been guided by a relatively loose concept of fringe benefits, that has allowed stakeholders’ and the interviewees’ perceptions and understanding of the topic to guide our analysis, evaluation and recommendations.

Typology of fringe benefits Workers are entitled to a range of workplace benefits, including employer pension contributions, statutory sick pay, paid holiday, maternity/parental leave and flexible working, among others aligned to individual circumstances and the nature of the role.1 However, it is clear that some employers go beyond these statutory minimums to offer a whole range of fringe benefits to their workers. In fact, our relatively light-touch mapping identified more than 50 different types of fringe benefits, which makes for a daunting proposition for both employers and workers. Table 1: Mapping of different types of fringe benefits2

Accommodation/rent subsidies Death in service/life assurance Private medical insurance

Access to GP services Dental insurance Relocation costs

Access to savings schemes/affordable credit

Dental plan Recognition awards

Affordable loans Elder care support Rent deposit schemes

Bereavement leave Employee assistance programmes

Shares

Bonuses Employee liabilities and indemnity insurance

Shopping and lifestyle discounts

Car parking onsite/offsite subsidies

Financial education and advice Social function/parties

Cashback Flexible working Sporting/recreational facilities

Cash sum payments Free/subsidised meals and drinks

Subscriptions and professional fees

Childcare/childcare vouchers Health cash plans Technology and telecoms loans/subsidies

Club and gym subsidy/membership

Health screening

Tool allowances

Company car/van Holiday buy/sell Training loans/allowances for the development of transferable

skills

Credit arrangements Home working Transport season ticket loans

“Fringe benefits’ are types of benefits that are provided by employers to employees – subject to certain conditions – as a form of compensation which does not affect wages directly. They can, however, have a monetary value or an indirect financial component, for example where they reduce beneficiaries’ expenses (for example childcare vouchers, subsidised meals, product discounts).”

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Critical illness protection Income protection Travelling expenses

Credit, debit and charge cards Long-service awards Uniform/clothing

Credit union Paid time off for caring responsibilities

Vouchers

Cycle-to-work/bike loans Pension3 Work bus/public bus subsidies

In addition to a lack of agreement on what the term fringe benefits refer to, there is very little structure or categorisation given to different types of benefits and their role in supporting and rewarding employees. Some of these benefits may in fact be better considered ‘fundamental’ rather than ‘fringe’ benefits: integral to many of the dimensions of fair work, part of the minimum level of standards that employers would be expected to offer their workers, and often delivered in response to legislation such as health and safety, safeguarding and employment law. This includes, for example, pensions and insurance that provide security and protection, but also the equipment (uniform, tools) and training (including health and safety, Disclosure and Barring Service (DBS) checks, professional fees) required to do their jobs, and the flexibility that enables people to balance work and family life. At the other end of the spectrum are employee fringe benefits that are more obviously lifestyle perks. This can include a range of things, from a discounted eating out card, sporting or recreational facilities, gym or golf club membership. Somewhere in the middle of this spectrum lie fringe benefits that offer enhanced support to employees and it is in this space where there is considerable potential for employers to go beyond minimum standards and statutory requirements and demonstrate leadership in alleviating in-work poverty.

Figure 5: A spectrum of fringe benefits

For the purposes of this research, it is useful to have a common and intuitive way to describe different types of benefits that have the potential to be valuable to low earners. As such, we have developed a typology of benefits that is based on the outcome they look to deliver for employees (Figure 6).

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Figure 6: Typology of fringe benefits

Key considerations in determining value While the breadth of fringe benefits is vast and growing, it is clear that different ones will be of greater value to some than others. This fact lies at the heart of the shift in the market towards rewards packages closely tailored to the characteristics of the workforce. Evidence suggests the key factors that influence the value of benefits to employees include:

• Demographics – age is an important influencer of the demand for employee benefits. Health-related benefits (such as health screening, private medical and dental), for example, have been found to appeal to older workers, while those aged between 16 and 24 favour gym membership and retail vouchers (Capita, 2017).

• Life stage – the stage employees are at in their lives, and inflection/disruption points where circumstances change (eg buying a house, having a child, supporting an elderly parent) can be a critical factor in determining which benefits are of most value. Those with dependents unsurprisingly consider childcare vouchers to be of great importance, but also value benefits that offer protection and insurance (eg private medical insurance, life assurance and income protection) for example (Capita, 2017).

• Social and economic circumstances – income is a key determinant, with lower earners experiencing day-to-day financial pressures. Those that earn less than £10,000, for example, have been found to place greater value on retail vouchers which help to make living costs more affordable, and would probably benefit from schemes that support with accommodation and travel-to-work costs, provide access to financial products, and offer financial education and advice.

• Tax implications – tax is an important aspect which will directly influence value and take-up. While some fringe benefits are tax-free or National Insurance Contributions-free, there are often significant tax implications attached to fringe benefits for both employers and employees, and this is particularly true when we consider low earners and employers operating low-cost business models. For those earning below the income tax thresholds, benefits that offer tax advantages (eg salary sacrifice schemes4, childcare vouchers5) will hold little value. Similarly, for employees earning close to the income tax threshold, the take-up of taxable benefits (such as private medical insurance, a company car or van) will reduce their personal allowance, potentially increasing their tax bill and reducing their net income.

• Employment characteristics – the industry, the size of business and the nature of work undertaken by employees will also influence the relative importance and provision of fringe benefits. Those businesses that operate a low-cost model, face tight margins and experience high levels of staff

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turnover, will find it more challenging to invest in fringe benefits that have a high cost component (either directly, or indirectly through tax). In contrast, businesses could offer discounts on their own goods and services at great benefit to employees but relatively low cost to themselves, an approach widely adopted by retail, hospitality and transport businesses as we explore further in Chapter 4. The nature of roles will also have a part to play; employees working in industries with a high degree of seasonality or a frequent need to travel will value paid overtime or travel time, for example.

• Place-based considerations – place of work can also influence the relative value of different fringe benefits. Those working high-cost areas would, for example, benefit from support for rent, subsidised childcare, food and drink. In contrast in rural locations, poor accessibility and a lack of public transport could act as a significant barrier for low earners (particularly given low rates of car ownership) meaning benefits that ease access to work could hold great value.

Together these factors highlight the importance of understanding the characteristics, circumstances and constraints faced both by employers and by low earners, and the need to recognise the diversity of these groups when seeking to understand the value and take-up of fringe benefits.

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3 Fringe benefits: employer value and market trends Key messages

While employers generally accept that fringe benefits help attract talent, employee retention and engagement, and the health and wellbeing of the workforce, we found a dearth of robust research evidencing this relationship or the role these factors have in driving business performance.

There are several shifts underway in the market. Some have the potential to improve the value of employee benefits to low earners – such as the individualisation of benefits packages and the growing interest in health and wellbeing (including financial wellbeing) at work.

Others, particularly the move towards co-funding of employee benefits, growing interest in lifestyle benefits and the increased use of digital channels, have the potential to create a market disconnected from the needs of low earners, who are likely to place greater value on benefits that provide additional security and help bring down the cost of essentials, who are less able to co-fund benefits, and who often lack digital access and digital skills to take up and maximise the value of fringe benefits.

Introduction In-work poverty is concentrated in several labour-intensive sectors of the UK economy, especially in smaller-scale service providers in the private sector (Philpott, 2014: 4). Such companies are often subject to intense competitive pressures and operate according to a low-skills equilibrium business model that is focused on short-term gains, limited expenditure on staff wages and associated costs, and extensive supply chains that provide flexible employment relations that fit business cycles and needs. The core challenge for this type of business model, that operates on low margins and competes on price (rather than on product quality), is to adopt practices that aim to build and/or adequately use employees’ skills, motivation and engagement, while improving the quality of their working lives. This chapter assesses evidence of the value of fringe benefits to employers, blending evidence from the rapid evidence assessment, with new insight drawn from consultations with employers and providers. It begins by discussing the growing recognition among policy-makers of the role that working practices play in improving productivity and business performance. It then looks specifically at fringe benefits, exploring the business case for adopting, designing and implementing fringe benefit packages that deliver appropriate rewards for employees. Finally, it considers the key trends in the market today and their potential implications for low earners.

Working practices and business performance With UK productivity stalling since the global financial crisis and a growing recognition that improving productivity is central to boosting performance, wages and living standards, there is much debate among policy-makers, the research community and business about how to tackle Britain’s productivity problem. While in the past government policy has tended to focus on investment in the business environment (fiscal and regulatory environment, infrastructure and education for example) there is growing recognition that much of the problem and solution lies with business. In particular, research by the Productivity Leadership Group identified that three-quarters of the gap between UK and US total factor productivity is attributable to management and working practices (Productivity Leadership Group, 2016). In recent years great strides have been made in exploring the business case for high performance working practices (HPW), which the UK Commission for Employment and Skills (UKCES) defines as ‘a general approach to managing organisations that aims to stimulate more effective employee involvement and commitment to achieve high levels of performance’ (Belt and Giles, 2009: ii).6 While the content can

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vary among organisations, the practices included under the HPW label are usually in the space of human resource management, work organisation, employment relations, management and leadership, or organisational development (Belt and Giles, 2009: ii). Several types of employee benefits are included in these categories, some of which are provided by employers, while others can be provided by external providers, eg provision of on-the-job training, coaching/mentoring, performance-related pay/performance bonuses, flexible benefits policies, flexible working, wellbeing policies, and employee assistance programmes (Tamkin et al, 2010: 65). Previous studies show that there is a strong positive relationship between HPW practices, business performance and employee outcomes, including higher job satisfaction and motivation, employee involvement and commitment and lower labour turnover (Belt and Giles, 2009: ii). The evidence is substantial and compelling: HPW practices have yielded positive effects on a variety of organisational (eg sales, product and service quality, customer satisfaction, profitability) and individual performance indicators (eg productivity, engagement, motivation). UKCES case studies of companies of different sizes in different sectors of the UK economy reference – on the basis of monitoring of key performance indicators – increased levels of employee productivity, better performing working environments, staff feeling more empowered, improved levels of customer satisfaction, lower levels of customer complaints, increasing sales and billable hours, increasing number of awards for companies implementing HPW practices, improved product quality, improved employee morale, reduction in staff turnover and absence (including sick leave) – in some cases up to 25% of previous values – increased managerial confidence in performing their role, an increase in effective team-working, increased job satisfaction and staff engagement levels and improved educational outcomes for staff (Tamkin et al, 2010: 82–85 ). Combs et al (2006) conducted a meta-analysis of 92 studies that provide statistical evidence about how HPW affects organisational performance and found that 20% of organisational performance differences are explained by the use of HPW practices7, which is aligned with the findings of other studies that report up to one-fifth of the differences in productivity and profitability of UK companies was attributable to HR management practices ( see for example Patterson et al, 1998). The study also reports a significant positive effect of HPW practices on reducing staff turnover, from 18.4% to 14% (p. 518). Tamkin et al (2008) found that a 10% increase in investment in HR management practices and training (as sub-components of HPW systems) results in an average increase in gross profits per employee of between £1,139 and £1,284, an increase in profit margins per employee ranging from 1.19% and 3.66%, and that business accreditation such as Investors in People8 was positively associated with business performance as a result of a greater prominence on HR management practices. Similarly, Philpott (2014) on behalf of JRF also found compelling evidence that human resources management and development (HRM/D) practices provide a financial return to employers associated with lower absenteeism, reduced labour turnover and improved performance and productivity. However this research did note that the business case was less clear among those businesses operating in low-quality and low-cost markets and in loose labour markets where employers are able to easily recruit low earners. Other research has identified links between an increased use of HPW practices and increasing levels of product and process innovation and job satisfaction (Shipton et al, 2005), as well as increasingly positive perceptions of employees about their work environment, processes of change and flexibility (Sung and Ashton, 2005). Finally, there is a growing body of evidence concerning the costs to business of staff sickness, employee turnover, and ill health which is often used to get businesses to address these issues. Mental ill health, for example, is estimated to cost business £10.6 billion in sickness absence, £21.2 billion in presenteeism (reduced productivity when at work), and £3.1 billion in staff turnover.9 Similarly, a recent survey of more than 1,800 UK employees signals that a quarter of the surveyed individuals have financial problems that are so severe that they interfere with their abilities to perform their jobs (CIPD, 2017b). In the case of young people (aged 18–24 and 25–34) and those living in London, the share rises to almost a third of the surveyed sample.

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Together, this evidence highlights that HR policies and practices, including employee fringe benefits, have a direct positive impact on productivity and business performance – as summarised in Figure 7. Figure 7: Impact of high performance working (HPW)

The business case for employee fringe benefits Employee fringe benefits have long been used by businesses to support, attract and retain employees. Over the past 10 years, there has been a rapid increase in businesses offering an extended package of fringe benefits to their employees, as benefits are no longer seen as ‘nice to have’, but instead critical to remaining competitive when attracting talent (Grassroots, 2016). Research into the value of benefits to employers and the reasons why businesses offer benefits points to a business case centred around four core dimensions: talent acquisition, employee retention, employee engagement and health and wellbeing (see Figure 8).

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Figure 8: Business case for employee fringe benefits

New insight from our consultations with employers and providers confirms these findings (Box 3). Further we found that while improved productivity and business performance may be implicit considerations arising from these outcomes, few employers explicitly state improved business performance as the key rationale for providing employee fringe benefits.

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Box 3: Employer rationale for investing in fringe benefits

Employer

Employer

“There are more people leaving the sector than joining the sector. Our significant challenge is bringing in the right number of people with the right values. Being able to attract the right talent is really important.”

Employer

“We have occupational health, we have health matters and counselling and we can start to see the difference in getting people back to work.”

Employer

“In the sector where we are, these kinds of employee benefits do have significant business benefits, but that was never the primary driver for us.”

Employer

“I probably don't have anything other than our employee engagement stats (81% currently). There is definitely a link to the rewards, but not solely. It's quite hard to measure these things.”

Employer

Indeed, despite an acceptance by business that fringe benefits are important in attracting talent, promoting employee retention and motivation and driving business performance, our research suggests that the evidence base underpinning these assertions is limited. There is a lack of official statistics on the provision or take-up of employee benefits; instead we face a fragmented evidence base comprised of a vast number of research reports and surveys, often focused on particular types of benefits (eg health and wellbeing, financial products), underpinned by a relatively small sample of HR professionals and employees, and undertaken or supported by third party suppliers of employee benefits. Research by Philpott (2014) on behalf of JRF found a lack of evaluative evidence to assess the business case for providing fringe benefits to low earners or to assess their value to this group. Research by the Institute for Employment Studies (IES) for the NHS found that high levels of performance were associated with employees feeling they were ‘totally rewarded for their contribution…and valued and recognised by managers’ and that these performance improvements were most likely to occur in customer service and care roles. However, the research also highlights a lack of a significant evidence base, echoing our own findings, which they attribute to a separation between HR professionals who find it challenging to evaluate the effectiveness of their methods, and academics, who fail to provide the answers that practitioners need (Brown et al, 2016).

Key trends in the employee benefits market The employee benefits market is moving quickly. Below we highlight the key trends affecting the market and explore their relevance in the context of fringe benefits for low earners.

“We operate in a competitive market and thought is given to retention and recruitment. We see this [benefits] as a driver to recruiting talent. We look at what improvements we can make to improve employee engagement and enrich the lives of our workforce.”

“The two key things are around recruitment and retaining staff. It's not been that much around increasing productivity at this stage. These are key – many organisations want to stop the flow of people leaving them. How can we hold on to people? That's the key for many social care providers at the moment.”

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Rapid growth and expansion The employee benefits market is rapidly changing, no doubt because of the quickly evolving labour markets and local economies across the UK, Europe and the world. Over the past decade there has been increasing recognition that pay and other financial rewards are only part of the picture, and that non-financial benefits are an increasingly integral part of talent acquisition and retention (Grass Roots, 2016). Growth in the market has gone hand in hand with a broadening out of the term ‘benefits’, with employers pitching a ‘total reward package’, including healthcare, learning and development and other non-financial benefits. As we highlight in Chapter 2, there is now a vast array of different benefits, when just a decade ago the offer was largely limited to pensions, healthcare, insurance and cars. We have also seen an increase in lifestyle benefits, including gym membership, sports and recreational facilities and shopping and leisure discounts.10 While low earners could potentially benefit from the addition of these benefits, it will be key that they do not displace traditional benefits – such as insurance, paid breaks or sick leave, and subsidised meals – that significantly affect the budgets of low-income households. The benefits market is expected to continue to grow and become more sophisticated as employers look to refine their offer to remain competitive in attracting and retaining the best talent. The benefits likely to grow significantly include subsidised or free home technology (an increase of 42%), holiday trading, where employees can buy or sell days of annual leave via adjustments to their annual salary (an increase of 38%), and financial advice and education (increasing by 29%), all of which we anticipate being of value for low earners. Car ownership through employee car ownership schemes (ECO) is also on the rise and expected to continue to grow over the coming years. There is an anticipated increase in the demand for this type of benefit, especially in the case of the so-called ‘job need cars’, which are necessary for employees to perform their jobs (Brown, 2016:6). Still, increasing pressures on company spending is likely to turn this into an area of contention. This type of benefit is not only necessary for higher paid individuals, but also those on lower wages whose jobs require them to travel constantly (eg domiciliary carers).

Growing interest in health and wellbeing Our research confirms that physical, mental and financial wellbeing of employees is firmly on the agenda of employers, with a rapid increase in the number of businesses that have health and wellbeing strategies in place for their workforce. REBA’s Employee Wellbeing Research 2017 found that almost half (45%) of wellbeing strategies have been put in place within the past three years and this speed of change is set to continue, with 46% of those without a strategy planning to put one in place during 2017 (O’Donovan and Hayne, (2017). The same research highlights ‘support for carers’ and ‘financial education or guidance’ as among the fastest growth areas/biggest priorities for employers.

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Box 4: Employer interest in health and wellbeing

“The company has partnered with… a credit union, as part of the recognition that there is a gap in terms of employees’ access to credit and assistance with debt – even though the company has a good financial counselling service as part of their benefit schemes. This is a step to ensure that employees who have such issues are supported in a timely way.”

Employer

“Even though we pay our staff well, they are still low-wage staff. So when they have expenses they don't expect, we do usually lend them money for that. That is quite significant, because if you think about what causes stress, these types of things really stress people out.”

Employer

“People have the flexibility to start and finish work when it suits them and alternate. I think you can't put a value on that, especially when people have caring responsibilities for others and they have issues also in their private lives.”

Employer

Employer

“We realised the staff had health problems because they were on their feet all day, so we put that into the scheme.”

Employer

Employer

This growing interest in health and wellbeing, financial education (for example financial advice, planning and budgeting tools) and guidance as part of this, and support for carers has the potential to benefit low earners, if employers fully understand their needs and the benefits that are likely to be of most use to their circumstances. However, research by Simplyhealth (2017) suggests that 56% of employee benefits professionals say they don’t know what the top health and wellbeing priorities are for their employees.

Individualisation of employee benefits Recent research highlights that understanding the needs and preferences of the workforce is of growing importance to employers as they recognise a one-size-fits-all approach is unlikely to meet the needs of a workforce that now encapsulates four generations of workers, and as they look to increase employee engagement, improve alignment of their benefits with organisational goals and drive enhanced value from their investment. This shift has affected the provision of employee benefits over the past decade, with an increased focus on delivering a more personalised package of benefits and a growing offering of ‘flexible benefits packages’ among third-party employee benefits providers (Brown, 2016).11 This was echoed in our consultations with both providers and employers.

“We like to support people with benefits that'll help them in day-to-day living… discounts for their supermarket shopping, or their dental, or their real-life spending.”

“We provide an employee assistance programme that many people use… This is a good option to have to encourage people, especially if they've fallen into a difficult time or they’re struggling with their health.”

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Box 5: Consultee views on tailoring benefits to the needs of businesses and workers

Provider

Provider

Employer

Employer

Such packages bring together a bespoke mix of benefits, tailored to the characteristics of the workforce, and often allow employees themselves to choose the benefits of greatest value to them (Brown, 2016:6). While this has the potential to improve value and reduce costs for businesses, there is a risk that there may be increased pressures on employees to shoulder a larger slice of the costs. In fact, emerging flexible benefit schemes appear to illustrate a shift away from the fully employer-funded model to a more fluid employee benefit system where employers and employees share the costs directly or indirectly (for example through salary sacrifice schemes).

Voluntary benefits and the ‘gig’ economy Alongside the emergence of flexible benefits schemes, the shift towards individualisation of benefits has also led to the resurgence of the voluntary benefits market, which allows employees to directly buy goods and services through their employer (at discount) out of their taxable income or through salary sacrifice (CIPD, 2017c). Employee benefits provider websites12 indicate that there are options available in the form of voluntary benefits that are negotiated by employers but can be taken up by low earners directly. This market is expected to remain buoyant, with growing demand from the increasing numbers of people working in the ‘gig’ economy (Grassroots, 2016; Brinkley, 2016). Research by Grass Roots (2016) highlights a growing number of employees that expect to be working for multiple employers, particularly among those aged 18 to 34. Growth of freelance working and self-employment will challenge the traditional employer-employee relationship and drive changes in corresponding reward packages; but current evidence suggests those who work on a part-time basis tend to receive far fewer benefits that full-time workers.

“In retail and social care... the employee population can be quite transient … so it's about working on what would be the best option for the type of employees they have – the requirements of someone working in social care or in a shop may be different than others. Their values may be different. You don't go into social care to make a lot of money, unless you're in senior management roles, you do it because you want to. So we work on packages that complement the earnings potential ... things like the cash plan, the EAPs.”

“Each company we are talking to right now is different… so they have different needs. For example, one of them has issues with getting access to GPs, so we are looking at that right now.”

Provider “It's all about communication. They need to communicate with their staff to find out what they want… there's no point on wasting money for benefits they don't want… Just ongoing, making sure they understand it.”

“Benefits work better if they are targeted. So the aspiration is to make it a more personalised journey, so they can see what is relevant to them, at their particular life-stage, or based on some core demographic.”

“One thing is that the benefits need to be flexible, they cannot be a one-size-fits-all approach, and it needs to be flexible in a way that we can apply it across the sector but also for individual organisations to pick and choose what's right for them. So the issue would be to start assessing what the workforce actually wants before someone working in HR comes up with another idea.”

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Driving value through improved engagement Our research suggests that an increase in spending on company communication about employee benefits appears to be a strategic priority for many companies, as is increasing employee engagement with benefits in order to drive increased value from their investment. This points to potential failings in strategy and implementation, but also a lack of awareness among employees about which types of benefits are of value, and their financial implications (Brown, 2016:29–31). Furthermore, there are indications of wide gaps between employees’ expectations and perceptions in terms of support (via fringe benefits) and their employers’ approach (for example, HR and reward professionals have a goal of increasing their support for, and the engagement of, employees, but more effort is needed to make that a reality); the relevance of employee benefits (ie the type of benefits available may not be the most adequate); and financial support (there is a striking difference between the number of employees wanting financial support that improves their wellbeing from their employers (65%), and the percentage of companies that actually offer this (7%) (Thomsons Online Benefits, 2017b: 65–67).13

Box 6: Employer approaches to improving engagement

Employer

“We never want to be complacent, because as soon as you feel you might have gotten something right, a year or two down the line, the type of things [benefits] that people look for, for motivation change.”

Employer

“It's understanding, with research, which benefits support our staff in the best way we can.”

Employer

Employer

Employer

Employer

Employer

“The priority is to increase employees’ awareness about the broad range of benefits that are available to them and applicable to each of them as individuals.”

“I ran a benefits survey for nearly 12,000 employees and one of the things that came out – staff want things like a free uniform, flexible working, additional holidays, rather than £10 on your birthday or cinema tickets or a bonus and that kind of stuff.”

“I've looked at how many people are using childcare vouchers, and remembering that many people working in our sector are female and part-time, we have six people that access childcare vouchers and two people that access cycle-to-work. We then have around 50 people that buy extra holidays. We have around 1,000 staff – so that's how far-reaching those benefits are.”

“We have rewards in place that are poorly utilised because of the lack of intelligence involved in choosing them. So more work needs to be done about what people want and come up with a rewards system.”

“I think you need both… to get their benefit package right, but to also have a system that motivates people.”

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4 Fringe benefits: value and barriers for low earners Key messages

Despite a broad and growing array of employee benefits available in the market, low earners may in fact prefer and use a more limited number of benefits.

Low earners attach greater value to those benefits that mitigate their highest living costs, such as food and leisure, travel, childcare, and housing and utilities. We also found that paid breaks, paid sick leave/compassionate leave/parental leave, as well as training, matter a lot.

There are several barriers to take-up that suggest that incentivising employers to offer an optimum mix of fringe benefits for low earners will not be enough.

Fringe benefit schemes will need to be supported by a range of other activities including: basic skills training (including digital skills), communications that build awareness, support for employees to make an informed choice, and wider employee engagement programmes that strengthen the relationship and build trust.

Introduction The key solution to addressing in-work poverty is a rise in pay. This constantly features as the preferred option for low earners in low-income households. Still, the existing evidence indicates that there are other measures that can improve the living standards of low earners. This chapter looks at fringe benefits from the perspective of employees, drawing on the findings from the rapid evidence assessment, along with new insight from our consultations with employees. It considers the budgets of low-income households to better understand the diversity that exists among this cohort. While it is not in the scope of this research to calculate the financial impact of different types of fringe benefits on household budgets, it seeks to explore those benefits that are likely to hold greatest value, offering cost savings on essentials, helping with travel-to-work costs or supporting improved quality of life for those on low incomes. It subsequently assesses evidence on the needs and preferences of those working in retail, hospitality and social care, to identify those fringe benefits that are likely to carry the most weight for low earners. Finally, it considers evidence of barriers to the take-up of fringe benefits among low earners.

The value of employee benefits to low earners In Chapter 2, the section Key considerations in determining value looked at the factors that are expected to influence the value of benefits for employees. We listed a range of considerations, including demographics, life stage, socio-economic characteristics, tax implications, and employment characteristics. We anticipate that for low-paid employees, factors such as individual and household income (and outgoings) are likely to carry more weight than other characteristics. As such, the types of employee benefits that will be of more use to low earners will depend on:

• workers’ individual and household income and composition (eg with or without children)

and

• the costs associated with various types of essential needs.

The latest estimates of the Minimum Income Standard – the income required for a socially acceptable standard of living in the UK – consider spending across several categories including food, clothing, rent,

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water rates, council tax, household goods and services, personal good and services, childcare, travel costs (including fuel and motoring), and social and cultural participation (Padley and Hirsch, 2017). The research shows that rent, food, travel, social and cultural participation are the most costly areas, totalling from £230 a week for single individuals (without children) up to £390 a week for a couple with two children. For those with dependents, childcare is the biggest cost – more than £200 a week. Total outgoings are therefore considerable, with a couple with two children (for example) needing to earn £800 a week to maintain a socially acceptable standard of living (Table 2). Table 2: Minimum Income Standard for four family types, April 2017

Source: Padley and Hirsch, 2017:7

For individuals or families earning the National Living Wage (or below), these costs are clearly a significant challenge. The employee benefits which are likely to be most valuable for low earners living in low-income households will be those that mitigate the highest living costs, such as childcare, rent, food, and travel. This research has sought to overlay different types of fringe benefits with the Minimum Income Standard to identify those with the potential to reduce the cost of living for low earners in a range of different areas, as illustrated by Figure 9, and discussed in detail below.

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Figure 9: Deploying employing benefits to bring down the cost of living

Housing and utilities (18%–44% of MIS) Housing and utilities make up between 18% and 44% of household outgoings, and there is a range of fringe benefits that can help with these costs, including:

• Rental deposit schemes which provide interest-free loans for employees to cover costs of deposits on rented accommodation when an employee moves. Such schemes are particularly valuable to low earners working in high-cost locations (as illustrated by the case study below).

• Accommodation and rent subsidies where employers cover part of the cost of an employee’s rent, to ensure they can access affordable housing. There is a growing interest in such schemes, particularly where businesses can offer rent subsidies on their own properties.14

• Energy switching schemes which provide advice on the best household energy deals, thus reducing bills.

• Technology and telecoms loans or subsidies so staff can buy a computer, tablet or smartphone or that offer discounted set-up or monthly charges with particular telecoms service providers.

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Case study: Rental deposit loans, Starbucks

Starbucks is a global coffee retailer with more than 900 UK stores, directly employing around 5,500 partners (employees). It is estimated that around 2,500 of these partners are employed in Greater London and that 50% are under the age of 25. In the UK, the business looked for relevant ways to support staff with living costs, knowing that it’s these extra support packages that help to attract talent and enable the business to keep staff. With most rents in many parts of London over £650 a month, someone looking to move into rented property may have to find a deposit of more than £1,500. The barrier this presents to moving has clear implications for staff recruitment and retention in any business, but particularly so in a business-like Starbucks where the nature of the shift patterns necessitates that staff live close to the stores they work in. Furthermore, the business model means Starbucks coffee shops are typically in central urban centres where the costs of accommodation are highest. In response to these problems, Starbucks introduced a scheme to support existing employees to pay a deposit on rented accommodation In 2016, Starbucks launched ‘Home Sweet Loans’, a rental deposit scheme, which provides an interest-free loan, up to the value of one month’s salary, to cover the cost of a deposit when moving into rented accommodation. Employees pay back the loan over 12 months. The scheme has been a success, with Starbucks reporting significant numbers of applicants and it intends to extend the scheme to more employees. Sources: www.bitc.org.uk/resources-training/resources/case-studies/good-work-all-how-starbucks-found-simple-way-help-staff www.employeebenefits.co.uk/issues/june-online-2017/starbucks-uk-enhances-rental-deposit-loan-scheme

Childcare (0%–35% of MIS) For those households with children, the cost of childcare can be a substantial proportion of outgoings. Employee benefits that can help to mitigate these costs include:

• flexible working which enables employees to ‘fit’ work around school hours, reducing the need for (and cost associated with) before and after school care

• paid time-off for caring responsibilities to help staff avoid high-cost emergency childcare or a loss of earnings associated with unpaid leave

• subsidised childcare either through workplace nurseries or subsidised places at local childcare providers, which help with the cost of childcare faced by low earners with children

• childcare vouchers which offer tax savings when paid for through salary sacrifice; albeit these are now being superseded by the government’s tax free childcare scheme.

Further, government support for childcare has been subject to significant change over the past two years. Employers are well-placed to help staff with childcare responsibilities to navigate these changes and ensure they are maximising the support available.

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Case study: Advice and support for childcare, E.ON Amid a major shift in government support for childcare, E.ON – an energy company that employs 11,000 staff – sought to help staff by demystifying the changes to parental leave policy and the introduction of the new tax free childcare scheme. The business offers parental leave and childcare vouchers to its staff, but recognised that changes in government policy and support could have important implications about which benefits are best suited to the needs of its workforce. E.ON provided guidance about whether employees might be better off in the new government tax-free scheme or the existing company-provided childcare voucher scheme, and encouraged employees to sign up to the existing childcare scheme to maximise their choice when the new government scheme was launched. The business was pleased to see the take-up of childcare vouchers increase from 9% to 13% of the workforce following the campaign.

Ant Donaldson, global product expert, benefits at E.On Source: www.employeebenefits.co.uk/issues/april-online-2015/e-on-informs-staff-about-childcare-and-pension-reforms

Travel (4%–11% of MIS) The Minimum Income Standard suggests that travel costs can account for more than 10% of household outgoings. Employers have long looked to help mitigate travel-to-work costs for employees and there has been an increased range of schemes, including:

• transport season ticket loans – employers pay for the full cost of season tickets with employees repaying via salary sacrifice, providing access to the cheapest possible fares for staff journeys to and from work

• travelling expenses – reimbursing employees for the cost of any journeys taken for work, including the cost of their time

• company car/van – the employer covers the expenses of a vehicle used for work purposes. While taxable, this can help to reduce reliance on public transport and help with the costs of vehicle maintenance

• cycle-to-work/bike loans – employers offer loans or subsidise the costs of buying a bike used to travel to work or for work

• work bus/public transport subsidies – to remove or reduce the costs of travel to and from work on public transport.

Food and leisure (33%–59% of MIS)Over the past decade there has been substantial growth in retail and leisure benefits provided by employers, often as part of flexible benefits packages or aligned to the goods and services sold by the business. Such benefits include:

• free or subsidised meals and drinks – giving staff access to facilities, on-site or nearby, to eat at low cost while at work

• shopping and lifestyle discounts – employers arrange discounts with popular/local retailers, food and leisure outlets, helping to bring down the cost of groceries and leisure

“We want our employees to make informed choices and not be put off by the apparent complexities, so we always try to demystify our schemes by sending out high-level information in plain English and signposting other resources available to help staff make the right choices for them.”

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• staff discounts – businesses offer discounts on their own good and services, so staff can to buy day-to-day essentials at a greatly reduced rate

• vouchers – offered to employees for food or other essential items; also popular to reward staff for special effort

• sporting and recreational facilities, and club and gym subsidy or membership – providing employees with low-cost leisure access that they might otherwise be unable to afford.

Our consultations suggest that many of these benefits, particularly discounts for cost-competitive supermarkets or general retailers (see Box 7), can offer substantial value for those in low-income households as food and leisure accounts for a large share of outgoings. There is also a preference for digital vouchers/discount codes for local businesses, that aren’t subject to time constraints or upfront payments.

“There is a reward scheme – but it is really confusing and hard to use – you have to order a card with a certain amount pre-paid on it. It’s a lot of effort. It would be better if instead of cashback we had discount codes – it would be a lot easier to use – people would actually benefit from that. When you are very busy – it is very time-consuming.” Social care employee “One of the problems is that everything seems internet based. It doesn’t present a barrier for me, but when you have to start printing vouchers off – I wouldn’t go ahead with it. There is a scheme where you can get 10% off an MOT or a restaurant. I’ve had a look but nothing interests me because it’s not local to me. I might use them – if it was local – but if it is these voucher codes, I wouldn’t. It’s limited to what time you can use it and things like that.” Social care employee

Financial education and support As we highlight in Key trends in the employment benefit market in Chapter 3, there is growing interest in employee benefits that support health and wellbeing (including financial wellbeing) of the workforce. Employers can play a central role in:

• promoting financial education that helps low earners better manage their money

• providing or facilitating access to low-cost, low-risk financial products, helping employees to get affordable finance including loans, and credit, debt and charge cards

• offering crisis loans to employees, that can be repaid monthly through salaries

• credit unions (in some industries or local areas) which offer a whole host of financial services at competitive rates.

Case study: Financial wellbeing benefits, London City Airport London City Airport has implemented a suite of financial wellbeing benefits to support staff members who are struggling with their finances. The airport’s research in 2014 found that 22% of its workforce were living paycheck to paycheck, and in 2016 21% of those asked the question ‘how confident are you managing your financial affairs?’ answered negatively. Recent inquiries into accidents at the airport had raised concerns about the impact that these money worries were having on the performance of its 620 employees, 70% of whom were in operational roles. In response, the airport has created a three-sided financial wellbeing strategy to help staff manage their money and improve confidence in their financial choices. The package of measures introduced includes:

a savings tool which allows staff to create different pots in which to save, eg a holiday pot, and which has a delayed pay feature, so staff can split their salary to be paid weekly rather than monthly to help with budgeting

a debt consolidation service to provide all staff with access to loans

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a financial education programme, provided with HSBC, consisting of seminars on topics such as planning for a first home or preparing for retirement.

London City Airport says the initiative has had a positive impact. At June 2017, 4% of staff had taken up the savings tool and 25 employees had taken up the debt consolidation service. The 2017 annual staff survey demonstrated improvements in the financial confidence of staff, and there was also an 18% increase in the proportion of employees providing a positive response to the statement: ‘London City Airport cares about my health and wellbeing’. Source: www.employeebenefits.co.uk/london-city-airport-offers-benefits-increase-employees-financial-confidence

Sector-based perspectives In addition to the characteristics and needs of low-income workers, previous studies suggest the nature of work and the job roles filled by these employees – in particular the sectors and occupations of employment – play an important role in determining the preferences for and attitudes towards employee benefit packages. This seems to indicate that the design and success of these benefits is strongly related to the characteristics of the sector and the workplace, as well as those of the individual. Research has made headway in revealing perceptions about, and challenges related to, the take-up of employee benefits, including qualitatively exploring how low earners from the retail, hospitality and social care sectors in England perceive ‘good’ and ‘bad’ jobs and considering the employer role in sustainably reducing in-work poverty in the UK (see for example Hay, 2015). Though not exclusively aimed at understanding the role of employee benefits, they provide insight into how fringe benefits can contribute to creating better jobs and supporting individuals working on low pay to deal with their non-work commitments. For workers in retail, mentoring and work-related training, time off in lieu of overtime, help with childcare, paid parental leave and paid transport costs were most important; for workers in hospitality flexible working, staff discounts, free or discounted meals at work, as well as workplace training, paid travel costs and financial support with childcare were ranked as having a direct and immediate impact on the participants’ lives, and were therefore favoured; for social care workers help with childcare, paid sick leave, paid travel time (especially for community carers), improved work-related training, staff discount and free meals at work were ranked highest (Survation, 2015; Hay, 2015: 37–47). Other studies also found similar results in terms of sectoral divisions, for example, that low earners in hospitality and retail ranked paid breaks and paid sick/compassionate leave as employee benefits of most use, while workers in social care emphasised the importance of paid travel time between their appointments with their service users (Hay, 2015: 25–35). These findings are displayed in Table 3 for comparison purposes. There are two key conclusions: first, and overall, low earners in these three sectors appear to prefer very similar categories of employee benefits; second, the benefits are nevertheless ranked differently depending on the sector. We notice greater similarities between retail and hospitality than between either of these and social care, potentially reflecting similarities and differences in working practices and workforce demographics.

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Table 3: Low earners’ preferences for different employee benefits

Retail Social care Hospitality

Paid breaks Paid travel time (on the job) Paid breaks

Paid sick and compassionate leave

Assistance with childcare Paid sick and compassionate leave

Mentoring, work-related training

Paid sick leave Flexible working

Time off in lieu of overtime Paid travel time Staff discount

Assistance with childcare Improved work-related training Free/discounted meals at work

Paid parental leave Staff discount Workplace training

Paid transport costs Free meals at work Paid travel costs

Financial support with childcare

These findings are to a large degree echoed by our own research (Box 7), which emphasises the varied circumstances of low earners and how sector-specific conditions influence individuals’ perspectives of what good jobs are and what it takes to achieve them in practice. Care workers we spoke to regularly highlighted the importance of paid mileage; sick pay and holiday pay; paid training courses; and flexibility. They also highlighted the value of discounts, although we found that these benefits were more regularly cited among retail employees, including discounts on goods in store and other retail and leisure discounts.

Box 7: Employee views on the value of fringe benefits

Retail employee

Social care employee

Retail employee

“Sick pay is great; and holiday pay. But I’m not sure if these are fringe benefits – it’s valuable because the job can be emotionally, mentally demanding, especially when working nights.”

Social care employee

“The discounts in-store are good – you get money off food, furniture, electrical goods. You also get discounts on products from other stores, eg cheap cinema tickets, offers in local shops etc.”

Retail employee

“It would be helpful to be paid mileage travelling to and from clients – we used to get this but don’t any more. That is the only thing I would like. You do a lot of miles in your car and there is a lot of wear and tear on your car.”

“The most valuable benefits are discounts offered through the benefits website eg 5% off Sainsbury’s. I have saved more than £1,000 over five years by buying on the website. For example, I got £80 cashback on car insurance. You can get 10%–15% cashback with most high street shops. You get discounts and cashback on holidays, flights and hotels. It just saves you money and makes you feel good when you save money.”

“I have been providing care to some of my clients for a long time and their needs change as they get older, so it is good to have training to ensure I am able to continue to meet their needs and are doing things the right way, such as following guidelines.”

“The discount on goods sold in-store really helps – it is a nice treat. If I had to do it on my basic pay I would have to cut back.”

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Social care employee

Retail employee

Social care employee

Retail employee

Social care employee

Social care employee

Social care employee

Social care employee

This evidence further supports the need to develop a work- and place-based approach to increasing the quality of work that is tailored to sectoral and local economic conditions, as well as individual demographic characteristics, social and economic circumstances.

Barriers faced by employees In addition to providing insight into the benefits of greatest value to low earners, this research also explored the factors that constrain take-up in this group. We identify three primary barriers.

Employees’ awareness of fringe benefits The evidence suggests there is a general lack of awareness of fringe benefits across different sectors, where low-paid employees are often unaware of the available benefits, even when they are offered by employers (Hay, 2015:30). Research by Capita found that nearly 22% of low earners didn’t know which benefits would be of value to them or couldn’t see any on the list of benefits that appealed (Capita, 2017). This potentially suggests either a lack of awareness of the potential value of fringe benefits among low earners, or a potential disconnect between the benefits employers and third-party suppliers offer and those needed by low earners.

‘My employer provides rewards for good customer service – anything from a gift voucher to a bottle of wine or chocolates. These rewards drive you to do more.”

“The flexibility is very good – my employer has been very accommodating in terms of providing shifts that are close to home so don’t have to be away for too long; and time off and rearranging shifts so that I can provide care for my elderly mother.”

“Discounting leisure trips does save us money. And there have been a few trips that we wouldn’t have gone on otherwise. The trips provide the opportunity to socialise with colleagues you have never spoken to before – that can be morale boosting.”

“Money-off discounts – company benefits and discounts scheme, eg reloadable cards to get discounts in certain stores. I’ve used it quite a bit, eg to book train tickets, had a couple of days away. It all adds up – all these little bits of discount. Some of them are vouchers. With train tickets you pay full price then get cashback paid into your bank account.”

“I have used the cycle-to-work scheme twice and encouraged and helped others to use it who didn’t understand how it worked. You pick a bike from Halfords and ask for vouchers which the employer provides and then takes it directly out of your wages – a reasonable sum every month. There are quite a number of people now who are taking advantage of that.”

I would say the health benefits (the health cash plan) are the most valuable, ie getting the cash back for optical or dental care – that is a very good one, ie you can get £60 back a year.

“One of my colleagues took a hardship loan from them which was helpful to her. She was in a bit of a dire straits situation. She pays that back monthly. That was good. So if I needed a crisis loan it is there.”

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This points to difficulties in communicating the fringe benefits offer in a way that reaches and resonates with low earners and encourages take up. Several consultees highlighted the challenge associated with reaching those working in low-paid roles, many of whom lack access to a computer and the digital skills to use one. Overcoming this issue is of crucial importance and is in line with our finding in the previous chapter that improving employee engagement with benefits is a key priority for employers.

Box 8: Lack of awareness of, and access to, fringe benefits

Social care employee

Social care employee

Social care employee

Employer

Employer

Social care employee

Social care employee

Employees’ perceptions about the value of fringe benefits Despite a growing evidence base on the value of fringe benefits to employees, the literature suggests that some low earners don’t fully recognise the use and importance of fringe benefits that directly or indirectly provide financial support with daily living costs. This is partly echoed by our consultations with employees, which also emphasise that the value attached to different types of fringe benefits is influenced by range of factors, not least whether there are other earners in the household.

“The reward website is not promoted as well as it should be if they want people to actually use it. We get a lot of emails from head office but it is never mentioned.”

“I don’t know what benefits they could give me; that is the thing. [My employer] could send something round to jog our memories or mention it at a staff meeting as we have those regularly.”

“If I could go on the internet and see exactly what was provided, then that would help. They could provide more information (about the website with discounted products) …they could provide a newsletter with information about benefits. The organisation doesn’t promote it a lot. It’s not been discussed at staff meetings.”

“When I started this role, one of the main problems was the access to benefits – the ones you access online. When I started to go out and travel, those people didn't have access online. They may have had a smartphone, but they didn't have the skills.”

“The majority of our staff operate in a frontline position, providing care and support services to our clients, so they are not necessarily sat in front of a computer or have access to devices as part of their day-to-day work.”

“I haven’t used it for a while because you need to book these online and I don’t have internet at home, so can only do it at work. It’s a bit of a problem. So I probably don’t use it as much as I should do really, but I have used it.”

“I’m not on the internet, but I can get on it at work – and that is pretty good. The company does provide support for staff to get a computer but I already have a computer – I just can’t afford the cost of the internet connection at home. I went to see about internet access at home but it was £25 a month and that is a barrier.”

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Box 9: Barriers to employee take-up of fringe benefits

Social care employee

“Benefits would have no impact on the way I do my job. I wouldn’t do anything any differently. My husband gets benefits as he works for a big company. So I do understand what they are about. I work for a charity and it is very different… It might be handy if we could get discounts when we bought certain things, or from certain stores. But it wouldn’t make much difference. It wouldn’t make much impact on my everyday life or my household budget.”

Social care employee

A lack of trust among employees Finally, even when low-paid employees are aware of fringe benefit schemes, there is evidence that points to employees’ cynicism about how much employers will do to improve the quality of their jobs (Hay, 2015:30). For example, JRF research emphasises that some workers do not want to access measures such as financial advice or counselling because they fear that confidential information will be leaked and their employers will use it against them; others report that they do not take up pension schemes or private medical insurance because they believe that employers could use this as a means of keeping them tied to the job. Moreover, studies report a high level of cynicism related to what workers believe employers are willing or not willing to do to improve their working conditions (Hay, 2015:30). These are clear indications that subjective factors such as perceptions about employers’ intentions affect employees’ attitude towards, and behaviour in, the take-up of fringe benefits.

“It’s ok telling people to go online and check these things out but it would have more impact if they told us about specific benefits, eg about discounts offered on the online shopping site or tyres for the car at 10-20% off…discounts on going out for a meal or for a coffee. Then I would have a look.”

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5 Fringe benefits: pathways, obstacles and success factors Key messages

Employers typically progress through seven key stages: strategic prioritisation; developing the business case; understanding employee needs and preferences; deciding which benefits to offer; finding/commissioning suppliers; design, implementation and promotion; measuring value and impact.

The process followed varies considerably by organisation and is non-linear, where employers engage in different stages at different times, rather than following the steps sequentially.

If they are to maximise the relevance and impact of their benefits package for low earners, there are key considerations for employers at each stage. These begin to lay the foundations for a framework of good practice.

Introduction While improving wages will always be paramount in the battle against in-work poverty, fringe benefits – if used effectively – have the potential to support better working practices and an improved reward package for low earners. However, our research suggests that we are not fully exploiting their potential. Employers recognise a need to improve the relevance, take-up and impact of their benefits programmes among low earners. Further, employees face several obstacles that limit take-up of the benefits their employers offer, and the value they get from them. This chapter explores these issues from a business perspective and begins to lay the foundations for a framework of good practice. It explores the pathway that employers go through when implementing employee benefit schemes, the challenges they face and the actions they can take to maximise the value of fringe benefits for low earners.

Pathway mapping To enable more businesses to implement the right employee benefit schemes for their business and their workforce, we must first understand the pathway they progress along when implementing fringe benefits schemes and the challenges they face in doing so. Our research with employers suggests that there is no single process that each employer follows, and in fact the stages and weight given to each varies considerably by organisation and (as might be expected) is heavily influenced by the size of the business and the scale of investment. Further, our discussions highlight that the process is non-linear, where employers engage in different stages at different times, often revisiting stages, rather than following the steps sequentially. Despite this, we found that employers generally progress through seven main stages, as outlined in Figure 10. We also found there are several key considerations for employers when looking to maximise the value of employee benefit schemes for low earners, discussed further below in Table 4.

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Figure 10: Pathway mapping

Table 4: The seven stages of the fringe benefits pathway

Strategic prioritisation

The first crucial step highlighted by employers is the need for organisations to recognise the value of employee benefits at a strategic level; important both in supporting low earners and delivering wider organisational goals. In practice, the strategic prioritisation of employee benefits is often a result of catalysts, both internal and external to the organisation. This includes:

competition: competitive pressures in the sector and tightness in the labour market can be a key driver for employers that face difficulties in recruiting and retaining staff

regulatory change: which can impact the funding available for employee benefits, the range of benefits on offer, and the balance of spending across the benefits

organisational challenges and priorities: aligning benefits with wider ambitions to support workers and promote health and wellbeing and deploying benefits to tackle specific challenges faced by organisations, such as high levels of absence or staff turnover.

Key considerations: some business leaders may not fully understand the challenges faced by the low earners and those living in low-income households. It will be important to use stories and case studies to illuminate these issues and demonstrate how employee benefits can help them.

Developing the business case

Once employee benefits are firmly on the agenda of business leaders, the next challenge is to make the business case for investment.

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Our research suggests that the scale and nature of this stage in the process varies considerably by organisation. As might be expected, smaller businesses appeared more agile and less dependent on rigorous analytical exercises in making decisions. Larger organisations have more complex and formal processes for justifying spending and demonstrating potential return on investment. Making the business case is also heavily dependent on internal and external factors, such as tax regulations, minimum wage regulations, as well as competitive pressures. The evidence indicates that given the complexity of decisions businesses must make in fluctuating economic conditions, employers weigh the costs and benefits of fringe benefits schemes together with other factors (such as higher wages) and they perceive it as a trade-off. There is also a wider variety of financial pressures that are weighed against higher investment in employee benefits packages. Key considerations: it can be more challenging for businesses that operate on low-cost business models to justify investment in employee benefits, particularly when turnover rates are higher among low earners. It will be crucial to fully recognise the impact fringe benefits can have on both the employee (increased physical, mental and financial wellbeing) and the business (attracting and retaining talent, reduced absences, improved staff motivation, and increased productivity and performance).

Understanding employee needs and preferences

Many of the businesses consulted use processes to understand the benefits that are valued by employees and determine the range of benefits they offer. Understanding employees’ needs and preferences is a key dimension that is assessed continuously to maximise the intended beneficial effects for employees and value for money for the business. Smaller businesses tend to be better placed to understand need, given shorter management structures and less ‘distance’ between business leaders and staff. Many employers (particularly larger businesses) use staff surveys to understand needs and preferences, but often these surveys do not include in-depth questions about fringe benefits. Other approaches include consultation events, one-to-one interviews and employee forums. Key considerations: the needs of low earners are distinct from the overall workforce. A lack of basic and digital skills can be an obstacle to their participation in online employee surveys. Our research suggests employee forums can act as focus groups to explore employee preferences for different types of benefits and the factors that influence take-up. Evidence also suggests trade unions can provide a useful route to engage with employees to explore their priorities (Bryson and Forth, 2017). Other resources and research, such as the Minimum Income Standard, can provide further insight into the needs and preferences of low earners.

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Deciding which benefits to offer

This insight into employee needs and preferences plays a central role in employers’ decisions on what benefits to offer. Our consultations suggest employers research the various ‘off the shelf’ options available from suppliers, looking for those that best meet both the needs of their workforce and their business. Employers subsequently decide whether to implement their own benefits schemes or to commission external suppliers. A key determinant of this choice is cost-effectiveness and value for money, with employers weighing the costs of external commissioning, the costs of internal implementation and the risks and outcomes associated with these options. Key considerations: some benefits that offer lifestyle perks will probably be less valuable for those who struggle to meet day-to-day living costs. Our research suggests benefits that improve security and flexibility (eg paid sick leave, insurance, flexible working) and skills, and help to manage living and employment costs, hold greater value for low earners. It is also important to consider the tax implications of different benefits, to mitigate any impact on net pay.

Finding/commissioning suppliers

Our research suggests that even when employers use third-party providers, the relationship is rarely transactional; many of our consultees work collaboratively with providers to design and tailor benefits to the needs and preferences of their workforce, where providers draw on their experience of designing and implementing similar schemes in different businesses/industries. The consultations show that the quality of the relationship between employers and providers is a key determining factor in the success of the fringe benefits scheme and is particularly important given few providers explicitly offer schemes targeting low earners. Key considerations: our research suggests that many commercial providers focus on profit maximisation and often fail to develop products targeted at low earners. It is important that employers commission third-party suppliers that recognise the distinct needs of this group, and who are willing to work collaboratively to tailor off-the-shelf products to the needs of low earners.

Design/implementation/promotion

The implementation of benefits schemes is clearly a complex process. Its success depends on several factors, in particular the quality of the relationship between employers and providers, and mechanisms that monitor take-up and impact among different types of employee and enable employers to refine what they offer and improve delivery and value. Our consultations suggest that take-up among low earners hinges heavily on the relevance and perceived value of different benefits and the way in which schemes are communicated to employees, including the channels through which employers promote and deliver the benefit programmes.

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Key considerations: low earners are less likely to have access to email and technology and often lack digital skills. To reach low-paid employees employers/providers must therefore look outside digital channels and deploy a multi-channel approach that includes traditional methods. Employers could also seek to improve the digital skills of their workforce through training and the use of ‘digital champions’, and improve access through benefit schemes that subsidise the cost/provide loans for technology. Such schemes would both promote access to fringe benefits among low earners, and deliver wider benefits to the individual and business (discussed further in Chapter 6).

Measuring value and impact

The final crucial stage is measuring impact and understanding what works for low earners. This generally has two stages: the first assesses the level of take-up for different types of benefits, among different types of employees; the second is understanding the impact of benefits on employees (eg wealth, wellbeing) and the business (eg motivation, engagement, productivity). Our research suggests few employers progress further than the first stage (measuring take-up), despite widespread recognition of the importance of understanding impact in improving employee engagement and maximising return on their investment in employee benefits. Key considerations: it will be important to continuously monitor the success of benefit schemes and their impact on low earners (particularly those in low-income households) to refine schemes to ensure they are delivering their objectives and avoiding unintended consequences. Further, when assessing impact it is important to acknowledge both tangible and intangible benefits, given some of the outcomes schemes deliver may be difficult to measure and monetise, but may be significant to the lives of low earners.

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6 Fringe benefits: maximising value for low earners Key messages There is no silver bullet that will dramatically shift the reach or impact of employee benefits for low earners living in low-income households. Rather, both employers and employees face several barriers that undermine take-up and value, and therefore employers must take actions to overcome these issues. Our research points to seven steps to maximise the value of employee benefits for low earners. These include:

1. Securing commitment among business leaders to support the needs of low earners, using research, stories and case studies to illuminate the challenges they face and the impact employee benefits can have on their living standards.

2. Building a business case that fully reflects the impact of employee benefits, including acknowledging tangible and intangible benefits and recognising the role employee benefits can play in supporting organisational priorities and challenges.

3. Recognising the distinct needs and preferences of low earners, and the diversity of this group, in the design, implementation and evaluation of fringe benefit schemes.

4. Providing additional support to inform choice, enable access and demonstrate value, striking the right balance between offering flexibility, while also providing support to enable employees to take up those benefits that offer the greatest value to them.

5. Working collaboratively with third-party suppliers to tailor off-the-shelf products so they are more closely aligned to the needs and challenges of low earners.

6. Promoting benefits in a way that reaches and resonates with low earners, recognising and helping to tackle digital exclusion and a lack of digital skills in this group.

7. Monitoring and measuring take-up and impact, to assess how successfully they are meeting their objectives, to refine the approach to improve impact, and to demonstrate their value in driving business performance and supporting low earners.

Introduction One of the key messages emerging from our mapping of the decision pathway is that there are several issues employers must consider and actions they can take to maximise the value of their fringe benefits package for low earners. This section brings together findings from the consultations, desk research and employer forum meetings to explore ‘what works’ in this endeavour. It highlights examples of best practice, both from within our target sectors (retail and social care) and beyond, and lays the foundations for a framework of good practice to guide employers on this journey.

Towards a framework for good practice What is clear from our research is that there is no silver bullet that will dramatically shift the reach or impact of employee benefits for low earners. It is not simply a case of choosing a different mix of benefits or delivering them in a different way. Rather, both employers and employees face several barriers that serve to undermine take-up and value and therefore employers must take action to overcome these issues.

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Our research suggests there are seven key steps that employers can take to maximise the value of their fringe benefits packages to low earners and that these actions are distributed widely across the decision pathway – from making the case for investment, through design and implementation, to measuring value and impact. Figure 11 provides an overview of these steps and below we discuss each in turn, where possible highlighting examples of good practice. Figure 11: Overview framework for good practice

Secure commitment among business leaders to support the needs of low earners Securing commitment among business leaders to support the needs of their low-paid workforce is crucial, and fundamental to this is alignment to the wider mission and goals of the organisation and hot topics that are likely to be high up the agenda. We are seeing growing recognition of the need for ‘responsible business’; bringing together corporate social responsibility and social value at board level, to embed stakeholder value at the heart of a new model of corporate governance. Fundamental to this is providing ‘good work’ for employees, and a fringe benefits package that increases security, promotes health and wellbeing, supports education, enables progression and mitigates the costs faced by low earners is an important dimension of this.  Other shifts in the market – particularly tightness in the UK’s labour market, increased awareness of mental health problems, and greater recognition of the role of work in supporting health and wellbeing – all contribute to the urgent need for businesses to prioritise this issue. However, those working at board level do not always fully understand the challenges low earners and low-income households face – they are not, and may never have been, low-paid or part of a low-income household. Research (such as the Minimum Income Standard), stories and case studies that illustrate the

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realities of life for those in low-income households and the value of employee benefits can help to illuminate these issues.

Build a business case that fully reflects the impact of employee benefits To secure approval for investing in fringe benefits for low earners it is key that the business case includes both tangible and intangible benefits, given some of the outcomes schemes deliver may be difficult to measure and monetise. This could include benefits to employees (eg through improved health and wellbeing) and to the business (eg through reduced absences, improved staff motivation), drawing on evidence from staff surveys, management information and impact/value for money calculations. Further, it will be important to closely align the business case with wider organisational values and business and people strategy, recognising the role that benefits can play in supporting wider priorities including talent acquisition, improvements to product/service quality, enhanced customer service/value, innovation, productivity and profitability. Finally, several businesses consulted emphasised the importance of prioritising fringe benefits that strike the appropriate balance between cost and value; that are reflective of the available budget; and that are financially sustainable over the medium- to long-term. We found several examples of businesses being creative in their use of constrained budgets, managing to deliver several benefits of considerable value to their workforce.

Case study: Striking a balance between cost and value, Crossroads Care Kent Crossroads aims to be an employer of choice: an organisation that people choose to join and then stay. The charity recognises that the package it offers its staff – including pay and benefits – was important both in improving staff recruitment and retention and in maintaining a committed and experienced workforce that would deliver a high-quality service for its customers. Crossroads takes a grassroots approach to understanding the needs and circumstances of its staff, using one-to-one meetings between employees and line managers to understand where staff are finding life difficult. These meetings, plus views expressed in the annual staff survey, are used to determine which benefits would be of greatest value, balancing this against the cost of implementing the schemes. External constraints on the unit price that Crossroads can charge led the organisation to explore low-cost ways they could achieve improvements to staff benefits. Crossroads places importance on maintaining a flexible approach that is not regimented, and considers the range of benefits available, including travel costs, occupational sick pay, and training opportunities. One of the existing benefits it offers low-wage employees is the Christmas Club scheme, which has been operating for about seven years. Crossroads is now looking at extending this concept to help staff manage other aspects of their finances. It has launched a discount buy-in card and crisis loans for staff have also been introduced for when additional finances are needed. Crossroads Care is looking to connect the hardship fund with a wider debt management service and evolve the Christmas Club into a more general savings club, potentially connected with external, independent financial advice services.

Irene Jeffrey, Chief Executive, Crossroads Care Kent

“Our staff are our greatest asset and the best ambassadors of our service. We try to look at the whole person and develop a range of benefits which can recognise the challenges they face in their daily lives. Staff know they can approach their manager with personal issues as well as work ones and find a listening and empathetic ear. I believe this holistic approach is valued by staff. “

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Recognise and respond to the distinct needs and preferences of low earners Not only are the needs of low earners distinct from the wider workforce, but there is also a considerable degree of variation in the circumstances of different low earners. This includes their demographic characteristics and the hours they work and is particularly relevant when we explore household composition, for example where some low-wage workers may be the secondary earner in their household, while others may be the primary earner in a household that falls below the poverty line. Household composition also affects the cost of living (as we illustrate using the Minimum Income Standard in Chapter 4) and can also influence the drivers behind low earnings, for example where workers may be limited in the hours they can work due to care responsibilities. Understanding the distinct needs and preferences of low earners is important at all stages of the decision pathway, but particularly so when employers are seeking to engage employees in the design of benefits packages, implement schemes tailored to the needs of their workforce, and maximise take-up and value. Our research suggests that employers use a variety of means, particularly staff surveys, to understand the needs of their workforce. Others highlight the role of trade unions and the value of face-to-face interaction (via employer forums or staff councils, for example) in exploring needs and preferences.

Case study: Understanding the distinct needs of your workforce, John Lewis Partnership The John Lewis Partnership offers a broad range of benefits to its ‘partners’ (employees) but is continually seeking to improve and ensure it is ‘fit for the future’. The partnership recently completed a review of its portfolio of employee benefits, which looked in detail at the benefits offered, gathered internal feedback, engaged in external benchmarking and overlaid these findings with its vision for the future. John Lewis used various different approaches, including:

data analysis: exploring management information on the take-up of different types of benefits, data from the annual employee survey to understand employee preferences, and historical and contextual data

focus groups: with partners from across the business and with its network of ‘leisure co-ordinators’ whose primary role is to foster good social activities in local areas and build communities

consultation with the organisation’s democratic bodies including its employee forum which is a sounding board for issues that John Lewis wants to discuss with staff; and its partnership council made up of partners elected by their colleagues, which considers how the organisation should use its profit

competitor benchmarking: assessing performance not only against traditional competitors but also against those in other industries in the supply chain, to get a really broad picture of what is on offer and where the opportunities are.

The benefits review highlighted a need to think differently about the way benefits are designed and delivered, including targeting the benefits proposition to different demographic segments, and has led to a renewed focus on improving the proposition for partners in the low-earner bracket.

Alan Antunes, Development Manager Benefits, John Lewis Partnership

“Engagement is really important because if you ignore that you are highly likely to introduce something that staff will not engage with. It is about having the opportunity to have a discussion that is well informed and is based on information that people can relate to. That really helps in the decision-making.”

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Provide additional support to inform choice, enable access and demonstrate value Businesses also need to strike the right balance between offering flexibility while also providing support to enable employees to make informed choices about the benefits that will offer greatest value to them. This is crucial given the lack of awareness among low earners about the potential value of benefits and a lack of access to information about benefits when this is provided online. Where low earners lack the basic or digital skills to find out what is on offer and what value these options present, there is scope for businesses to provide one-to-one support (eg through line managers, digital champions or HR support) or events that help to showcase the benefits on offer. Over the past decade there has been growing interest in quantifying and showing the value of employee benefits alongside pay and bonuses to capture ‘total reward’ and demonstrate this through ‘total reward statements’. The research also found some examples, including among our employer forum, of where businesses have sought to illustrate the potential value or cost savings associated with benefits to their workforce.

Work collaboratively with providers to maximise the value of benefits for low earners Our research suggests few providers actively target benefits at low earners and hence many off-the-shelf products may not be tailored to the needs of those on low income or those working within low-paid sectors, and may fail to deliver value for this cohort. It is crucial therefore that employers work with third-party providers to design new benefits, or tailor off-the-shelf products to the needs of low earners in their workforce. There may be scope to offer discounts on particular products and services with specific stores, or provide support to address particular challenges faced by low earners. Employers may also need to challenge the channels through which providers deliver and promote products, as few benefit providers have an ‘offline’ offer. Our research suggests close collaboration between employers and providers can help both to improve the relevance of benefit schemes for low earners and maximise return on investment for businesses.

Deliver and promote benefits in a way that reaches and resonates with low earners Promoting employee engagement with fringe benefits packages is one of the biggest priorities for businesses, yet choosing the right suite of benefits only addresses part of the problem. Our research has highlighted that for low earners one of the primary obstacles to take-up is a lack of digital skills and digital access. For employers to overcome this challenge it is essential to deliver and promote benefits through many channels including traditional media (print, posters, forums, competitions) as well as digital channels. This does, however, go against the grain, with a widespread shift in the market towards the delivery of benefits online and a move within businesses to go paperless (for example with payslips and reward statements being sent electronically or accessible through online portals). It is crucial that employers understand digital access in their workforce, and provide an educational campaign alongside any ‘switching off’ of paper-provided information. Employers can also improve the digital skills of their low earners through training, deploying digital champions across their business, and implementing schemes that subsidise the costs of/or provide loans for technology. Such schemes offer a triple dividend: improving the digital skills of low earners; increasing engagement across the full benefits portfolio; and reducing the costs associated with engaging and supporting typically harder-to-reach, low-paid employees.

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Case study: Tackling digital exclusion while promoting employee engagement, JRF The Joseph Rowntree Foundation and the Joseph Rowntree Housing Trust (a registered housing association and care provider) work together for a prosperous and poverty-free UK. In 2016 JRF launched its anti-poverty strategy, which incorporated employee benefits as one of the ways employers can support those on low income. JRF’s employee benefits team is charged with demonstrating how this can work in practice, working within the guidelines of an anti-poverty strategy affordably; showing that fringe benefits can help with the cost of essentials; fostering a healthy, happy and committed workforce; and supporting a reduction in absence, sustaining turnover and helping with recruitment. A big challenge for the organisation was a lack of digital skills among the workforce, leading JRF to include digital as one of the four themes running through its strategic plan. The organisation has a digital inclusion policy to ensure that individuals have equal and affordable access to digital technology as well as the skills, motivation and trust to engage in the digital aspects of modern society. These aims led JRF to work with benefits provider Reward Gateway (RG) to explore how it could help JRF support employees who lacked access to a smartphone, tablet or computer, or the digital skills to use them. JRF was one of the first employers to offer Smart Tech, an RG benefit that enables staff to buy a range of computers, laptops and tablets from Currys-PC World and spread the cost over 6, 12 or 24 months, paying direct from their salary. Once employees choose their technology, JRF connects them with digital training opportunities either delivered by their digital champions or by other on- or offline resources so that they can take full advantage of what technology and the internet has to offer. Not only did Smart Tech enable employees to access information that delivers financial, social and health benefits and supports better life choices, but these benefits were also passed on to their families and those they provided care for.

Julie Morris, Employee Benefits Advisor, JRF

Monitor take-up and impact to test, refine and evidence value While many employers monitor the level of take-up of different types of benefits and conduct annual staff satisfaction surveys, our research suggests few measure the impact of their investment in fringe benefits on low earners in general, different groups of low earners, or on wider business objectives. Monitoring and evaluation is crucial, to test and refine employee benefits schemes and to ensure they are reaching low earners and particularly those low earners in greatest need of support, delivering their objectives and avoiding unintended consequences. Further our research suggests there is a dearth of objective evidence on the link between the provision of benefits and business outcomes (such as staff retention, reduced absences, employee engagement, productivity and performance) which makes it challenging for those looking to develop a business case for investment. Businesses themselves can play a key role in filling this gap, collating and sharing evidence on the value and impact of fringe benefits to better enable them to make the case for further investment in the future.

“Smart Tech helps us to provide affordable access to technology and we use our digital champions scheme to give staff digital skills and confidence. In this way, the staff benefits scheme supports our digital inclusion initiatives, as well our broader organisational aims.”

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7 Embedding the framework Key messages

This research has found that the evidence base on employee benefits in the UK is under- developed, highly fragmented and lacking in objectivity. There is a dearth of evidence in several key areas including: insight that supports the development of a business case for investment in fringe benefits; understanding of operational issues, implementation challenges and critical success factors; and an appreciation of the specific needs of low earners.

There is a need for new resources so employers can embed the framework for good practice in their business. Interviews with employers suggest a single tool – a toolkit – that consolidates information and provides insight to support each stage of the decision pathway could be of great value, particularly for smaller organisations that lack dedicated, specialist benefits personnel.

However, while hugely valuable, it is unlikely that this alone will be enough. In addition to new resources, businesses would benefit from other forms of support including business advice services, mentoring, professional membership organisations or networks that enable businesses to connect with others in their eco-system.

At the same time, we need to raise the bar of job quality in low-paid roles, establishing a new baseline for the minimum level of benefits employers are expected to offer low earners – part of a fair package for all employees.

We need new incentives that recognise and reward businesses that offer good work, including greater transparency in financial reporting as part of a new model for corporate governance centred around social value, and stronger kitemarking so consumers and investors can wield their collective purchasing powers to the benefit of responsible business.

Introduction Having outlined the components of a framework of good practice for maximising the value of fringe benefits for low earners, this final chapter begins to explore how we can embed these actions in business practices – in our target sectors and beyond. We consider the availability of existing resources to support employers in prioritising, designing, implementing and evaluating the impact of benefits for low earners; we discuss the potential for new resources and in particular a toolkit to support employers through the decision pathway; and finally we explore scope for wider support and incentives needed to deliver this step-change.

Existing resources: fit for purpose? This research has found the evidence base on employee benefits in the UK to be under-developed, highly fragmented and lacking in objectivity, comprised of a vast number of research reports and surveys, often focused on particular types of benefits (eg health cash plans/dental plans, pensions, voluntary benefits), underpinned by a relatively small sample of HR professionals and employees, and undertaken or supported by third-party suppliers of employee benefits. Existing sources fail to provide insight in several vital areas including:

• Evidencing the business case for investment in fringe benefits or establishing the link between employee benefits, staff retention and engagement, productivity and business performance. This insight is crucial to enable employers to make the case for investment in their own organisations. While this research has gone some way to filling this gap, we need more rigorous impact evaluation and for the approach to be embedded in businesses themselves.

• Understanding operational issues, implementation challenges and the critical factors that help to make these schemes successful in different contexts. This research has sought to provide several

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examples of what works and develop a framework of good practice, but the market is moving quickly and there is scope to add further to the evidence base.

• Objective insight on the employee benefits market. The dependence on the research and intelligence of third-party suppliers of employee benefits means there is limited transparency in areas that are likely to be commercially sensitive, including for example the design process, delivery models, alternative suppliers, product offering and pricing. In particular, there is a dearth of intelligence on the relative costs of different types of fringe benefits – insight that is crucial to employers when weighing the cost of fringe benefits against increases in salary, holiday or sick pay, deciding which benefits to offer, choosing third-party suppliers, and implementing benefit schemes for their workforce.

• Cohort-specific intelligence, with a dearth of resources or products that address the specific needs of low-wage employees. As we have highlighted throughout this research, low earners have specific needs, face specific barriers to take-up, and present specific challenges to employers in terms of access, engagement and impact. This research has sought to illuminate many of the issues, but has also highlighted the value employers derive from opportunities to discuss these issues and learn from others operating both within their industries and in other sectors.

Together, these ‘information failures’ have a negative impact on employers looking to provide fringe benefits for their employees, requiring them to consult many sources at great expense to their time, develop costly in-house approaches, or preventing them from investing all together (Box 10).

Box 10: Employer perspectives on existing resources

“We would like to offer employees a subsidised meal or coffee at local cafes and restaurants, but it's challenging trying to find an organisation that will help us do that and support the logistics of how we can deliver it for our staff...”

Hospitality employer

“There are challenges related to the data that is collected through third parties, platform delivery partners and suppliers – access to individual-level data is very fragmented. For example, a discount voucher for food is not always captured by the respective supplier, so there is no way of knowing details about who used it and their characteristics.”

Retail employer

“We would like to look at things around wellness. I have budget to spend on this, but nobody seems to be offering anything like that; where can I go with it? We are looking to develop something ourselves, but it is quite time-consuming.”

Hospitality employer

“It takes a lot of time to research things... we don't have the expertise, we just go out and see what we can find. More advice and some shared expertise would be useful.”

Care employer

Additional support: a new toolkit for employers? Both our desk-based research and our consultations suggest a need for new resources so employers can embed the framework for good practice in their business. Toolkits are becoming increasingly popular among practitioner communities to bring together information and signposting support across a wide range of disciplines and subject areas. We reviewed 18 such toolkits, and Figure 12 draws out commonality in their defined purpose, content, formats and functionality. This review identified a number of components that could be useful in a toolkit for fringe benefits, including: a clear statement of purpose and target audience; being easily navigable; having a

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summary/overview of key points in clear simple language with detailed text in a secondary location; being easily accessible online but readily available for printing; having a simple structure (eg three key components); including a variety of case studies with contact details so users can get further information and to facilitate collaboration, and further learning; containing checklists and templates which can easily be used in practice. Figure 12: Review of toolkits: definitions, content and format

Our interviews with employers suggest that a single tool that consolidates information and provides insight to support each stage of the decision pathway could be of great value, particularly for smaller organisations that lack dedicated, specialist benefits personnel. Such a toolkit could mean employers could overcome several barriers, as outlined below:

Choosing the most suitable benefits and selecting providers Nature of the challenge: this research has outlined the recent trends in the benefits market, particularly the increasing number of benefit providers and the diversity of products that are now available. While this

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could create greater opportunities for employers to negotiate the right package for their business and workforce, many of those consulted emphasised the cost associated with identifying the right benefits for their workforce and finding the right external benefits provider(s). Implications for the toolkit: the toolkit should include useful resources to help overcome this challenge, such as an A to Z of employee benefits and an objective and impartial guide to the providers of different types of benefits (such as health and wellbeing, shopping discounts etc). This could include guidance on which types of benefits/providers have worked well in different contexts, eg different sectors, tackling different issues, for different groups of workers. This could include references to how not-for-profit external benefits providers can supply services suitable for smaller organisations and also tailored to the needs of low-paid staff. It should also explore the tax implications for both employers and employees of different types of benefits.

Evidencing the business case and measuring impact Nature of the challenge: our review highlighted a lack of robust evidence demonstrating the value of employee benefits to low earners and their impact on employee engagement, productivity and business performance. Many of those consulted highlighted the challenge this presents when developing the business case for investment. While this research has gone some way to bringing together the evidence that does exist, it is crucial that businesses begin to measure the impact of their benefit schemes to strengthen the evidence base available. Implications for the toolkit: the toolkit should be a repository of information and facts evidencing the business case for investment in fringe benefits for low earners. It could be an open resource for businesses and providers to share learning and evidence on the business impact, and stories that illustrate the difference fringe benefits can make to low-paid employees. It could also include guidance on data collection, management information systems and monitoring and evaluation approaches, and the importance of these activities in improving employee engagement and return on investment.

Promoting fringe benefits to low-paid employees Nature of the challenge: many of those employers consulted highlighted the challenge of promoting benefits and improving engagement among low-paid employees. As seen in Chapter 4, digital exclusion and a lack of digital and other basic skills can make low earners harder to reach. Further, the need to contact these employees via traditional channels (for example by post, posters, forums) and to provide additional guidance to help them understand the potential value of benefits and support their access can also increase the costs associated with engaging and supporting this group. Implications for the toolkit: the toolkit should provide guidance for employers on how best to engage low earners in employee benefits. This could include information on effective channels of communications, strategy and messaging, best practice approaches to reaching and supporting low earners, and case studies/illustrations of the potential value of different benefits in reducing living costs.

Successfully implementing employee benefit schemes for low earners Nature of the challenge: the empirical evidence reviewed in the REA and collected during the consultations has shown that there are important challenges around employers’ awareness about what their low-paid employees need, but also the steps that can be taken to maximise the value of their employee benefits package for low earners. Implications for the toolkit: the toolkit should include action points and simple steps that organisations can consider when designing and implementing benefits schemes for their low earners. This can include guidance on the types of benefits that are low-cost, medium-cost and high-cost, to support employers in making decisions about what is feasible within their budgets. It should also seek to highlight that some benefits can in fact be low-cost for the organisation but have a significant positive impact on engagement, morale, productivity and retention (for example employee assistance programmes). In addition to exploring the potential content for the toolkit, our consultations with employers discussed potential channels through which to deliver, functionality and accessibility. Our employer forum

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suggested a strong preference for an online resource, directly targeting employers (and particularly small employers that may not have specialist benefits/rewards professionals or the staff capacity to conduct a thorough assessment of the market), that was open access, making it as accessible as possible to business. While the priority for the toolkit would be to provide information, advice, signposting and case studies, some members of the panel highlighted the value of benchmarking capabilities to allow employers to assess their benefits package against their peer group, while others sought financial models that would enable employers to explore the cost of providing benefits under different take-up scenarios. Table 5 provides an overview of the potential specification for the toolkit.

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Table 5: Specifying a toolkit to support employers in embedding the framework for good practice

Purpose

To bring together information and insight and signpost additional sources of support that will enable employers to embed the framework for good practice in their organisations and maximise the value of their employee benefits for low earners

Audience

Employers of low earners, with a particular emphasis on low-pay/low-productivity sectors and smaller organisations that lack dedicated, specialist benefits personnel.

Components

A-Z of employee benefits, including guidance on cost and tax implications

Evidence of the business impact of employee benefits

Guide to employee benefit providers, including not-for-profit organisations

‘What works’ guides and case studies, exploring different contexts/challenges/cohorts

Guidance on data collection, management information systems, monitoring and evaluation approaches

Guidance on understanding the needs of low earners, including communication channels, messages and best practice approaches to supporting low earners

Employee stories, illuminating the challenges faced by low-income households and the impact of different benefits

Benchmarking tool to enable employers to compare their benefits against peers

Financial models that provide illustrative costings for benefits under different scenarios (eg take-up)

Links to further information

Checklists and templates that can readily be used by practitioners

Structure and format

Simple structure, orientated around the decision pathway for easy navigation. Content available online but readily downloadable/printable case studies, ‘how-to’ guides, checklists and templates available for printing

Accessibility

Primary content open access, making it as accessible as possible to business. Scope to require registration to access a higher level of information, such as benchmarking tools and online

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portal enabling businesses and providers to share learnings and provide peer-to-peer support.

Raising the bar: strengthening support and incentives for business A toolkit – as specified in Tables and 5 – could prove hugely valuable in enabling employers to overcome some of the obstacles they face in maximising the value of fringe benefits for their low-wage workers. However, it is unlikely that this alone will be enough. In addition to new resources business would benefit from other forms of support including business advice services, mentoring, and professional membership organisations or networks that enable businesses to connect with others in their eco-system. These networks could be virtual (potentially connected to the toolkit) or physical, and might incorporate a range of events and forums for businesses to share ideas, understand market shifts, and identify new types of benefits, technologies or approaches to connecting with low-paid employees. Further, this research has benefitted from an employer forum of businesses already committed to this cause – employers that recognise the importance of supporting low earners and the potential role of employee benefits in this endeavour; that are looking for solutions to some of the challenges they face; and that are taking active steps towards improving their benefits offer. However, not all businesses are so far advanced on this journey of awareness, attitudes and action. To drive widespread improvements in the benefits offered to low earners – to raise the bar of job quality in these roles – more work is needed to promote the importance of this agenda, to build intent among all businesses to improve their working practices, and to create the right mix of support and incentives to enable and drive behavioural change. The important first step on this journey is to establish a new baseline for the minimum level of benefits employers are expected to offer their low-paid workforce – the fundamentals – such as paying for uniform, equipment and training that employees need to do their jobs; offering pensions and insurance that provide a basic level of security and protection; and providing flexibility that enables workers to juggle work with family commitments. These fundamentals are part of a wider discussion around the business imperative of good work and modern working practices, and could be supported by new employment legislation or charters that seek to clearly articulate a commitment to deliver a fair package (extending beyond pay) for all employees. But the work should not stop there. This research has highlighted the scope for employers to use fringe benefits to demonstrate leadership in alleviating in-work poverty by providing enhanced support for low earners; to use benefits to increase security, promote health and wellbeing, support education, enable progression and mitigate the costs faced by those in low-income households. We need new incentives that recognise and reward businesses that offer good work for all employees, including greater transparency in financial reporting as part of a new model for corporate governance centred around social value, and stronger kitemarking so consumers and investors can wield their collective purchasing powers to the benefit of responsible business.

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Notes 1. TUC Workplace Guidance www.tuc.org.uk/workplace-guidance.

2. Various studies on fringe benefits list a range of benefits, such as: Expenses and benefits: A to Z, at www.gov.uk/expenses-and-benefits-a-to-z; Simplyhealth’s Health and Wellbeing Guide 2017 at https://insights.simplyhealth.co.uk/storage/uploads/pdfs/health_and_wellbeing_benefits_guide.pdf; www.citizensadvice.co.uk; www.bhsf.co.uk/corporate/employeebenefits; www.broadstone.co.uk; www.healthshield.co.uk/our-products/tailored; www.hsf.eu.com; www.employeebenefits.co.uk/issues/december-online-2016/reward-gateway-acquires-logbuy; www.rewardgateway.com; www.employeebenefits.co.uk/next-jump; www.nextjump.com/perks-at-work.

3. While pension contributions (beyond the statutory minimum) are an important fringe benefit offered by employers, this research has not sought to explore in-depth pension schemes for low earners.

4. Salary packaging (also known as salary sacrifice) is an arrangement where the employee pays for some items or services from their pre-tax salary. This can reduce taxable income and put more money in your pocket.

5. On 4 October 2018 the childcare voucher scheme will close to new applicants, and superseded by the government’s Tax Free Childcare. Those who joined the scheme before this date will continue to receive childcare vouchers while they remain with the same employer.

6. Other definitions are listed and reviewed at pp. 10–15 in the same report.

7. The estimate includes a correction for measurement error; see details in Combs, J., Liu, Y., Hall, A. and Ketchen, D. (2006). How much do high-performance work practices matter? A meta-analysis of their effects on organisational performance, in Personnel Psychology, 59: 501–528, pp. 517.

8. Investors in People is an internationally recognised standard for people management. The Investors in People standard is underpinned by a rigorous assessment methodology and a framework which reflects the latest workplace trends, essential skills and effective structures required to outperform in any industry.

9. The figures were updated for 2016/17 and evidence aggregate costs to employers of £34.9 billion. For details about this analysis see Parsonage, M. and Saini, G. (2017). Mental health at work: Business costs 10 years on. pp. 3, available at www.centreformentalhealth.org.uk/Handlers/Download.ashx?IDMF=691e14d1-e3c7-4803-a0d9-bb488bc46653.

10. www.hrmagazine.co.uk/article-details/where-next-for-employee-benefits.

11. The research is based on a survey conducted in August–September 2015, which captured the responses of a non-representative sample of 286 pay, reward and benefits specialists from a wide range of organisations of different sizes (smaller to larger) and which are active in different sectors (including manufacturing, not-for-profit, financial and professional services, retail, health, engineering, leisure and travel, transport).

12. See for example: www.bhsf.co.uk/corporate/employeebenefits; www.healthshield.co.uk/our-products/tailored; www.hsf.eu.com; www.rewardgateway.com; www.nextjump.com/perks-at-work; www.neyber.co.uk/employees;

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www.personalgroup.com; www.personalgroup.com; www.westfieldhealth.com; www.xexec.com; www.capitaemployeebenefits.co.uk; www.simplyhealth.co.uk; www.thomsons.com/resources/whitepapers.

13. Thomsons’ report focuses on data from the UK (as part of a wider sample of employers, HR professionals and employees as part of their Global Benefits Watch survey in 2016). It derives conclusions from a sample of 200 UK employers and 500 UK employees, and emphasises the need to identify leading employers that are persevering in adapting their organisational processes to a rapidly changing labour market and employees’ changing needs in response to that.

14. www.theguardian.com/money/2017/may/07/employeee-benefits-cheap-housing-accommodation.

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About The Work Foundation The Work Foundation is a leading provider of analysis, evaluation, policy advice and know-how around developments in work, targeting organisations, cities, regions and economies, now and for the future. Our mission is to improve working practices to make the best of people and create more ‘good work’. As a charity owned by Lancaster University we advance good work in all its forms from a truly objective position, getting under the skin of problems, developing actionable solutions and practical tools, and networking to share ideas and learning with leading thinkers and practitioners who have first-hand experience of what works. Good work for all by necessity encapsulates the importance of productivity and skills needs, the consequences of technological innovation, tackling inequality and creating a work environment to support a healthy, happy and productive workforce. For further details, please visit www.theworkfoundation.com.

Acknowledgements The authors would like to thank Louise Woodruff at the Joseph Rowntree Foundation, members of the Employer Forum and all those who participated in the interviews. We are also grateful to those who kindly took the time to review and feedback on this report. This research was conducted on behalf of the Joseph Rowntree Foundation.

 

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The Joseph Rowntree Foundation has supported this project as part of its programme of research and innovative development projects, which it hopes will be of value to policy-makers, practitioners and service users. The facts presented and views expressed in this report are, however, those of the author[s] and not necessarily those of JRF. A pdf version of this publication is available from the JRF website (www.jrf.org.uk). Further copies of this report, or any other JRF publication, can be obtained from the JRF website (www.jrf.org.uk/publications) or by emailing info@jrf.org.uk A CIP catalogue record for this report is available from the British Library. All rights reserved. Reproduction of this report by photocopying or electronic means for non-commercial purposes is permitted. Otherwise, no part of this report may be reproduced, adapted, stored in a retrieval system or transmitted by any means, electronic, mechanical, photocopying, or otherwise without the prior written permission of the Joseph Rowntree Foundation. © 2018 The Work Foundation First published November 2018 by the Joseph Rowntree Foundation PDF ISBN 978 1 911581 45 1 Cover image: iStock / smirart Joseph Rowntree Foundation The Homestead 40 Water End York YO30 6WP www.jrf.org.uk Ref 3300

Inspiring Social Change

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