Every employee wants to be rewarded with an annual bonus, especially just after the expensive Christmas period when household finances are stretched and the January blues have kicked in with full force.
Bonuses are an excellent way to reward employees and recognise outstanding effort throughout the year. In some sectors, bonuses are also vital for talent attraction and retention – this is particularly true across financial services where recent ONS figures revealed workers received an average of £18,000 in bonuses.
There is no doubt that in a cost of living crisis an additional lump sum in your monthly pay packet is hugely welcome. In fact, our recent research indicated that half of all employees admitted that their bonuses would keep them afloat this year. For younger employees, this jumped to six in ten (58%) – clearly, bonuses are vital to employees and no doubt highly valued.
However, bonuses may not be the most effective approach to provide financial support to employees.
The same research also revealed that although employees are reliant on their bonuses, they would actually prefer ongoing, year-round financial support. For example, six in ten (61%) younger employees who receive a Christmas bonus say they’d prefer other support such as workplace savings schemes or discount vouchers instead a one-off bonus payment.
Perhaps unsurprisingly, more than six in ten of all employees would rather a pay rise over a bonus – but given a third (29%) of businesses are unable to raise salaries due to ongoing financial challenges they need a more cost-effective and financially sustainable approach.
Benefits packages offer a solution.
Given that many employees value year-round financial support much higher than a bumper one-off payment, employers need to take notice and consider how they can build this into their renumeration packages.
Personalised benefits packages can help differentiate employers in a competitive landscape, whilst boosting the overall employee experience and providing enhanced financial support. For example, offering retail vouchers can support employees to manage rising food costs whilst financial education workshops can be effective at empowering employees to manage their finances and save for the future.
A flexible package that includes these types of benefits and is tailored to a workforce’s needs is essential, this should include modern, progressive benefits, both financial and otherwise, whether that’s budgeting tools, a work-from-home allowance or menopause support.
Employees increasingly understand the value of their benefits – over four in ten now say that a good package is the most important thing they look for in employment.
Not only are benefits packages essential in providing financial support, they are increasingly important for motivating a workforce. Over half of all employees say they are more motivated by their benefits package than a bonus – clearly, employers must allocate resource to ensure that benefits packages are effective and offer enhanced value for money for all sides.
The next challenge for employers is ensuring that employees understand the full value of their benefits packages. The value of a one-off bonus is easy to comprehend but a package that includes a range of perks can be harder to calculate. For example, how many employees with access to a diverse package including private medical insurance, energy bill support, financial education workshops, mental health leave and fertility support could accurately place a monetary amount on the value of these benefits?
This has led to an increase in the number of businesses introducing Total Reward Statements to employees – this simple and effective tool highlights exactly what an employee is worth and the total value of their benefits package.
Though a business may have a great benefits package to support in areas like wellbeing, it can often sit underused offering poor value for money to both employer and employee. Offering a total reward statement can be a great way to solve this issue, presenting employees with their benefits in a clear and simple form.
Previously building employee benefit platforms to showcase total reward statements has been extremely resource intensive – with many options becoming expensive, time consuming and notoriously difficult to implement. However, the key to offering personalised benefits packages is the ability to effectively communicate with employees to understand their needs and accurately track benefit take-up.
Employers need to ensure that they have access to the most accurate tools which can offer improved segmentation and greater insights ensuring they are more informed of employee needs and better placed to engage with their workforce on their specific requirements. This can be the difference in boosting take-up, value for money and employer experience simultaneously.
Employers won’t get rid of bonuses anytime soon, nor should they, but businesses will increasingly be mindful of whether this is the most effective approach and rewarding and motivating employees. It will be interesting to see how businesses respond to changing employee renumeration demands throughout 2024.
Matt Russell, CEO at Zest
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