This article was originally published on HR Daily.
Many employers needlessly fail to realise even modest returns on investment from one of their biggest employment costs, new research shows. An employee benefits study of 100 multinationals, conducted by Flare HR and CEB, found two in five spend 10% or more of their total employment costs on employee benefits.
But among these companies, which have average revenue of $1 billion, fewer than one in 10 HR directors think their employees have a great understanding of the benefits available, and nearly half believe employees are “less than satisfied” with their company’s current offering.
Flare HR co-founder Jan Pacas says the core of the problem is a widespread lack of appreciation for the best benefit on offer: superannuation.
Pacas says when he studied macroeconomics in Europe, Australia was often used as a best practice example of how to manage pensions, retirement and employee benefits.
“Superannuation is exactly the best way to do it if you look at all the statistics in terms of wealth management. This is in really stark contrast with the perception here in the country, and the perception is superannuation [is] not really a benefit, that’s just an expectation.”
The problem stems from employers presenting superannuation in a “boring, non-transparent way where employees don’t feel they are in charge”, he says.
Proof is the fact that 80% of employees default to their company’s super plan. “They say, ‘you know what? I don’t care where my super falls, because I don’t perceive it as a benefit’.”
The solution lies not in investing more money in other benefits, but in investing time into educating employees about superannuation so they “become engaged with all of the existing benefits that they have”. This can have a major impact on ROI and, depending on the approach, needn’t cost the employer “one additional cent”.
Many employers fail in this area, but some are making an effort and seeing results. Pacas says at least one company with headcount around 2,000 puts its superannuation out to tender every year (compared to two-thirds of companies surveyed that haven’t tendered their default super plan for two or more years) and involves employees in the process.
“They have all the biggest superannuation funds come to them [and] present, they make employees part of the choice [and] invest a lot into constant transparency to all their employees,” he says.
Employees at this company understand their health insurance options and know that they can access a higher level of life insurance within their superannuation, and they also know they can access various discounts and rewards, he adds.
Another way employers can improve ROI on their benefits is by presenting employees with a simple and engaging “total earnings package”.
Pacas did this in one of his previous companies. “People were always surprised – but in a positive way: ‘I didn’t know you were also paying me $10,000 in superannuation’, ‘I didn’t know the car allowance I have is valued at another $20,000’, ‘I didn’t know that the computer I get…’ and so on. It’s a great opportunity to do some great internal marketing.”
It pays to display the package information in an easily digestible format – colourful, pie charts and icons can help – and to release updates at least once a year. It’s also important to remind employees throughout the year that it exists, and they can choose to get involved at any time.
“If they decide now is not the right time to salary package, they can do it in three months,” Pacas says. Employers could include reminders in monthly payroll processes, weekly rewards presentations, or brochures.
It’s also important that employees who do become engaged and want to make changes can do so easily.
“Anything that takes longer than 15 minutes is in the too-hard basket,” Pacas warns. “Salary packaging has to be absolutely easy, otherwise it won’t fly.”
Some of the change needs to come from the superannuation providers, but employers can encourage them to humanise and simplify their explanations and processes by provoking “competitive tension” between them so that “a perceived pain becomes a perceived benefit”, he says.