Reward and retain

High staff turnover is bad for business. Edmund Tirbutt examines what group risk professionals can do to ease the pain

The revelation by the recent Oxford Economics/Unum research that it costs an average of £30,614 to replace a departing staff member may induce the group risk community to focus a little more directly on how its products can help with employee retention. After all, the subject is only going to increase in importance as we pull clear from recession and the war for talent begins to hot up once again.     

According to the annual resourcing and talent planning surveys produced by the Chartered Institute of Personnel and Development (CIPD), the issue has in fact been becoming increasingly critical even during the downturn. In 2010, 45 per cent of respondents reported they had no retention issues but by 2013 this had reduced to 22 per cent.

Staff turnover levels are invariably higher amongst younger workers than older ones and greater in certain specific industries like retailing, hotels, catering, leisure and call centres. But no business is immune, and the major costs involved include administering the resignation, recruitment and selection, covering the post during the vacancy and training the new employee.

Zurich Corporate Risk group risk proposition manager Nick Homer says “The Unum research highlights a very important business risk that doesn’t always have the visibility it should. If you have another person coming into the business because you don’t have good retention they undoubtedly come with an increased risk of error, and others have to take time out to train them.

“Valuable historical expertise going out of the door with lessons learned from the past can be hard to replace and anyone leaving a client-focusing role could mean their employer is losing years of relationships which have to be rebuilt. Low rates of turner suggest an excellent culture in which people feel valued, and benefits packages can play an important part in this.”

Research by Group Risk Development published in October 2013 suggests that the industry has at least moved beyond the Dark Ages in terms of communicating the benefits of its products. It finds that 41 per cent of employees would be prepared to waive a 1 to 3 per cent pay-rise in order to receive employer-paid group life or income protection. When asked which benefits they valued most, group income protection, life and critical illness cover were placed in their top three highest value benefits by 56, 47 and 41 per cent of employees respectively.

But there is clearly considerable scope for improvement. The impact of total reward statements could be significantly enhanced if group risk benefits were expressed in terms of what they would cost if employees moved to a firm that didn’t offer them and had to buy via in the individual market.

Chase de Vere principal consultant Sean McSweeney says: “£100,000 of life cover may cost an employer £30 a year but it may cost an employee £30 a month if a new employer doesn’t have it. If we include income protection and critical illness cover it could even cost them a couple of thousand pounds a year more, especially if they are a non-standard health risk, and many people move jobs for such amounts.

“Producing total reward statements with benefits calculated on a value basis could show quite straightforwardly that someone actually earns £39,000 a year rather than £34,000

a year. You don’t need sophisticated systems to produce such statements annually. You just get the base costs from the providers and then get their equivalents from the individual market and, once you’ve done the calculations, you can produce a mail merge.”

The importance of added-value features on group risk products should also probably be receiving more attention. Canada Life has shown initiative in calculating a specific cost per employee per annum to these. It attributes a stand-alone value of £40 to its Best Doctors second opinion service, £15 to its employee assistance programme (EAP), £24 to its RED ARC care advisory service and £9 to its bereavement and probate helpline. It also allocates £45 to its BusinessCare legal support service for employers on the grounds that it benefits employees indirectly by ensuring that they enjoy fair contracts of employment.

So a two-year limited-term group income protection scheme may only have an annual premium per employee of £60 but its overall value rises to £160 per employee because it includes access to Best Doctors, an EAP and BusinessCare.

Intermediaries tend to be better placed than providers to communicate these messages because group risk is normally only one component of a broader employee benefits package when considered in a retention context.

Lorica Employee Benefits senior employee benefits consultant Will McNaughton says: “If an employer is providing group risk in isolation then retention won’t get mentioned that often unless, for example, they want a best-of-breed income protection product. But when there are a range of benefits under a flex scheme, then retention would be discussed as one of various reasons for its introduction.” 

But providers can undoubtedly lend valuable communications support by producing relevant guides, posters, case studies and technical bulletins. They can also get involved in worksite marketing and provide platform mechanisms for digital communications that many intermediaries can’t afford themselves.

 Friends Life director of group protection David Williams says: “Although we can’t sell to employees we can make them aware of what’s available, so we support flex roadshows and have microsites so more employers can access tools to communicate with employees. Anything that brings value to employees helps with retention, so that includes supporting employees back to work who might otherwise have left through absence. This can create a halo effect around the organisation because they know the employer cares.”

Unum has been notable for the visual approach it has been taking towards communication by placing plain-English videos on its website, and Ellipse stands out by enabling employees to find out what benefits they have in addition to group risk via its Livewire link to the Thomsons Online Benefits and – more recently –  Staffcare benefits platforms. Canada Life and Aviva have also greatly facilitated communication about EAPs by automatically offering them to all clients’ employees as opposed to only those in the income protection scheme.

Grid spokesperson Katharine Moxham suggests that group risk providers should consider issuing scheme members with joining packs and with wallet-sized cards detailing EAPs and claims help-lines, and some commentators feel that insurers could be doing more to communicate amongst themselves.

Aviva head of group risk Steve Bridger says: “The starting point would be for insurers to start talking to each other more at Grid meetings and elsewhere. The ABI Protection Committee has it in this year’s plan to raise awareness of protection via the workplace, starting with employers so that they can start telling employees about it. With the agreement of the intermediary, providers can start to provide facts about group risk to employees but this needs to fit in with the employer’s messages about the products.”


Carole Hathaway, Towers Watson
Carole Hathaway, Towers Watson

There is little evidence to suggest that countries with high real-wage growth are able to use that to secure higher levels of employee retention, according the results of Towers Watson’s General Industry Compensation Survey Report released this February. Instead, employers need to take a broader view of the employee experience beyond pay if they are to retain talented employees in a competitive marketplace.

If that wasn’t already a good enough reason to offer an attractive employee benefits package, the UK – along with Switzerland and Sweden – was found to have one of the highest proportions of its professional-level workforce voluntarily leaving their organisations. There was a clear link with the fact that these countries also enjoyed high GDP growth.  

Carole Hathaway, director of Towers Watson’s Rewards Practice in EMEA, says: “It’s quite common to see people moving jobs more in countries with healthy economic conditions as there likely to be new roles available and movers have more confidence in their employment security. Talent retention isn’t a clear-cut issue and pay is just one of many factors that can affect it.”


Failing to tell staff about the benefits on offer is costing UK companies £2.7 billion every year, according to the Money Talks: Communicating Employee Benefits research findings published by Cass Business School in July 2013.

The research, commissioned by Unum, also found that the 64% of employers who have invested in good employee benefits but not told staff what they are entitled to are no better off than if they hadn’t provided the benefits in the first place.

A typical organisation with 1,000 employees that offers good benefits but fails to communicate them is found to spend £470,000 a year more on staff turnover and sickness absence than those companies with comparable benefits packages but good communications.

Unum head of marketing strategy Tim Jackson says: “Even I was surprised at the findings, and I had been examining this area in depth for the previous three years. Benefits packages do help with retention but if you don’t explain them well you get no retention value, no productivity value and no sickness absence value.”