Employee benefits review: how to assess value beyond cost

When it comes to an employee benefits review, one of the greatest considerations for businesses is cost.

Understandably so. Employee benefits often represent a significant and growing investment for employers, so cost will always be an important part of any review. However, focusing on cost alone can make it easier to miss where the real risks sit.

For many employers, the biggest issue is not necessarily what a benefits programme costs, but whether it will work in the way the business and its people expect when it is needed most.

A benefits structure may appear appropriate on paper, but if it no longer reflects the workforce, is not clearly understood, or does not work as intended at the point of claim, it may create a false sense of confidence.

People and businesses change over time

Few employers set out to create a benefits structure that does not work for their people. More often, the issue develops gradually.

Benefits may be renewed annually, with occasional changes made ahead of renewal. Over time, however, the workforce evolves, salaries change, business priorities shift and new stakeholders become involved in decision-making. In many organisations, employee benefits are no longer considered by HR alone. Finance, risk teams, senior leadership and boards may all have a role to play.

As a result, the wider people and business risks can be overlooked. Benefit structures may no longer reflect the workforce. Data may be broadly accurate, but not precise enough. Policies may sit alongside each other rather than working together. Employees may believe they are covered for things that they are not.

Individually, these issues may not feel critical. Collectively, they can create exposure for both the business and its employees.

The moment that really matters

Employee benefits are rarely tested in day-to-day working life. Their value often becomes clear at very specific points, such as serious illness, long-term absence or bereavement. This is when a well-designed and clearly communicated benefits programme can make a meaningful difference.

There can be a gap between what an employer expects a benefit to provide and what the policy will actually deliver. Employees may also assume they have a certain level of cover simply because the detail has not been clearly explained. This gap between expectation and reality is often where the real issue sits.

The disconnect between provision and understanding

On paper, provision across the UK is relatively strong. Data from GRiD shows that many employers offer core protection benefits such as Group Life Assurance. However, employee understanding is often far less consistent. Research from MetLife UK indicates that a significant proportion of employees do not fully understand the benefits available to them.

The CIPD also continues to highlight communication as one of the primary barriers to benefits delivering real value. If employees do not understand what they have, they are less likely to use it, trust it, or factor it into how they view their employer.

Cost is important, and always will be. It is measurable, comparable and often easier to justify internally. What can be more difficult during an employee benefits review, but ultimately more valuable, is properly challenging whether the benefits themselves remain fit for purpose.

The wider business impact

Employee benefits should not be viewed in isolation. They connect directly to broader people and business risks, including absence, retention, productivity and employee wellbeing.

The CIPD reported in its 2023 Health and Wellbeing at Work survey that UK employees were absent for an average of 7.8 days per year, with more recent data showing this has risen further to 9.4 days. Mental health and musculoskeletal issues remain among the leading causes of long-term absence.

At the same time, industry-wide data from UK insurers consistently shows that billions of pounds are paid out each year across Group Life, Income Protection and Critical Illness claims. This highlights the scale of protection that can be available when benefits are correctly structured, managed and understood.

These benefits can play an important role, but they are most effective when they are aligned to the workforce, clearly communicated and able to respond when employees need support.

What a meaningful employee benefits review should involve

A meaningful employee benefits review should go beyond premiums and a high-level overview of the current structure. It should take a more holistic view across five key areas:

• Cost
• Benefit design
• Data integrity
• Communication
• Alignment

Employees do not usually experience benefits as separate policies. They experience them as one overall package, and employers should consider them in the same way.

Employers should feel confident that they are not only paying a competitive price, but that the cover reflects their workforce, their data is accurate and consistent, employees can access and understand their benefits, and the different elements work together at the point they are needed.

Ultimately, the measure of a benefits programme is not just what it costs. It is whether it works.