The recession, it seems, is the mere cherry on top to widening the gap between employer-provided benefits and the protection required by modern employees. Real Business asked Unum CFO Steve Harry to identify the cause of this inconsistency.
Over the past 30 years, the make-up of the UK workforce has transformed dramatically. The reality is that an increase of older, disabled and female employees have changed occupational pension schemes and welfare benefits, not to mention a decline in what is known as real wages?, explains Harry. Essentially, there’s been a divergence between what an employer would typically provide and the protection an employee will really need.
Harry emphasises that there are some obvious cost pressures in terms of the economic environment. Indeed, 2012 has been a tough year for most businesses. Low interest rates and pricing pressure are definitely some of the major issues affecting businesses, and Unum is no different. We don’t like having to raise prices, but interest rates force us to do so in order to remain economic.
But employers should hop onto the benefits bandwagon to improve their bottom line , Harry continued. There is a genuine financial payback as people will work quicker while being more enthused and committed to the company. The key point is that a competitive employee benefit package is still an important talent attraction and retention tool.
The biggest risk is an employer’s inability to successfully communicate with their workforce regarding the employee benefits they offer. Some of the research that we’ve done with Cass Business School concludes that £2.7bn is being wasted every year. Failing to tell staff the benefits that you offer is no better than not offering them in the first place. If you’re unaware of benefits then you’re unlikely to be loyal or productive and more likely to call in sick.
When questioned about the strategies he’d recommend for employers and Government to ensure that today’s workforce is adequately protected, he begins with what politicians are calling the biggest shake up in UK pensions for over 100 years: auto-enrolment. It has the potential to be a major catalyst for change in the employee benefit market. It will be the needed push for employers to create a modern employee benefit package that recognises increased financial protection pressures. We’ve seen some initial signs from the government around providing tax incentives for employers to encourage them to adopt protection benefits in the workplace. It’s also important for employers to recognise the importance of getting people back to work, even if it means through various services of support, such as vocational support and workplace adaption. Employers need to start realising the importance of keeping their workforce well and motivated.
Only one in ten UK workers have financial protection, but will this figure change “Certainly. Over the next five years, wellness in the workplace will become synonymous with productivity and business growth. This concept will close the protection gap and I’m sure that technology will have a large role to play in the process.
Steve Harry will be speaking at Real Deals‘ Entrepreneurial FD event on 23 October about the art of negotiation. Join over 150 finance professionals and private equity investors for no-holds-barred debate on cash flow, leverage, refinancing, growth and exit.