There is an intense pressure on businesses to support employees with the increased cost-of-living, whilst balancing squeezed remuneration budgets. Economic uncertainty, talent shortages, and increasing employee expectations are compounding this issue further.
So how can companies manage rising people costs in a way that supports both business goals and the needs of their employees? Our experts explore some practical strategies which can help businesses contain costs in an efficient and effective way:
Use Salary Sacrifice
Salary sacrifice schemes are a valuable mechanism for reducing employer National Insurance Contributions and delivering a wide range of savings to employees. By implementing pre-tax benefits, such as pensions, cycle-to-work schemes or electric vehicles, companies can alleviate some of the payroll pressures. Salary sacrifice allows employers to strategically manage the increased National Insurance rate by reducing taxable salary amounts – helping to offset rising people costs.
Salary sacrifice schemes also offer employees the advantage of a tax-efficient way to access benefits, enhancing employees’ value perception of their overall compensation.
Our Mind the Gap research revealed that over two-thirds of employees want greater flexibility when selecting benefits [1], highlighting the fast-growing demand for a more personalised approach. Salary sacrifice is a powerful tool that can help employees have increased control over their benefits, allowing them to meet their individual needs.
Encourage employee engagement
High employee engagement can lead to increased productivity, reduced turnover, and lower recruitment costs which are all critical factors in maximising people costs. If companies don’t aim to engage employees with their benefits, they are missing a key opportunity to enhance employee health and wellbeing. Employees cannot engage with benefits they don’t know about.
Companies can engage employees through implementing robust and tailored communication strategies, focusing on reward and recognition, and promoting career development opportunities. Communications should be aligned to employee preferences – often email communications can be oversaturated, and companies should consider taking a multichannel approach to cut through the noise.
Despite companies often offering a range of valuable benefits from dental insurance to discounts, a significant number of employees are still not accessing any information about benefits; our research has shown an increase year on year from 28% in 2023 to 37% in 2024 [1]. This disconnect could be due to a lack of communication, putting companies at risk of employees underutilising key offerings that are designed to enhance wellbeing and improve retention.
Leverage technology and Total Reward Statements
Benefits technology and total reward statements can play a crucial role in helping companies manage expenses while maximising employee engagement and retention. Introducing technology can help streamline administration, improve efficiencies, and provide valuable data insights that enable businesses to optimise their benefits offerings, ensuring the delivery of maximum value without unnecessary overspending or duplication.
Total reward statements are an effective tool for enhancing transparency by clearly communicating the full value of an employee’s benefits package – including salary, benefits, pensions, and other perks like gym memberships and childcare vouchers. Cleary displaying the value of benefits can help employees to better understand and appreciate their perks beyond pay.
To read more about Managing Rising People Costs you can download our latest employer guide here.
What can employers do now?
With the budget changes just around the corner it’s more important than ever that companies look after both their budgets and their employees.
- Enhance your employee wellbeing strategies
- Optimise your benefits package and reduce duplication
- Evaluate your current benefits offering and communications to manage rising people costs
[1] Mind the Gap 2024
