Opportunities in a changing workforce

Employee benefits have not kept up with changing employee demographics. needs. Providers and advisers need to work together to grow the group risk sector says Unum CEO Peter O’Donnell

The UK business environment today is unrecognisable compared with 30 years ago, but recent research by Cass Business School, supported by Unum, has shown that the employee benefits landscape has not kept pace with the changes. As a result, the protection gap for workers is wider than ever. UK employees are exposed to high – and I would say unacceptable – levels of financial risk.

As you might expect, I think that the findings of the Cass report, Keeping Pace? Financial Insecurity in the Modern Workforce, show the scope of the opportunity for group risk providers. But we cannot seek to close the protection gap without the support of our distribution partners. Equally, employers are looking to advisers for support in adapting to changing employee expectations. Advisers now have a real opportunity to help bring their benefits packages up to date.

Firstly, let’s look at the scale of the problem. There are now 12 per cent more women in the workforce compared to 1983, but the number of mothers receiving maternity pay is down 10 per cent. There are now twice as many older workers in the workforce, but providers have not created any new employee benefits to cater for them. The proportion of single parents in work has increased 11 per cent, but employer-supported childcare provision is up only 5 per cent. There are 11 per cent more disabled workers in employment, and 1 in 10 of us will be on long-term sick leave at some point in our working lives, but sick pay provision is down 45 per cent and 93 per cent of us do not have income protection.

As a result, Cass concluded that the ratio of wages to employee benefits in modern reward packages is outdated. ‘At risk’ groups, namely women, older staff and disabled workers, are disproportionately impacted by the employee benefits gap. The recent furore over zero-hours contracts is just one example of the insecurity faced by many workers.

At a time when firms are already examining their pension schemes as part of auto-enrolment, employers should be looking to rebalance their entire benefits packages to provide the long-term financial security that workers value most. Providers and brokers could do more to work in partnership to make the most of this opportunity, especially as in many cases the changes could be cost-neutral for the client.

There is growing recognition among employers that the wellbeing and financial security of staff impacts businesses, as well as their employees. Happy and financially secure workers are more productive, less likely to take sick leave or defect to a rival firm. Research shows that for every employee that leaves an organisation, the replacement cost is roughly equivalent to one year’s salary in the form of recruitment and training costs and lost productivity. Long-term sickness absence alone costs the economy £6.5bn per year.

That means employers will increasingly value better absence management to keep skills and experience in the workforce. It means they will have a greater focus on rehabilitation to support good employees in returning to work. It means flexible working will become the norm to allow knowledgeable workers to balance office and family life. In short, as skills and knowledge become more specialised, employers will have to take a more individual and tailored approach to people management to keep their competitive edge.

The government has shown recently that it not only has grasped this new reality, but that it is prepared to act to support employers embracing change. It accepted the recommendations of the Frost / Black Review of sickness absence and is consulting on a £500 tax relief on health interventions at work. Most importantly of all, it has mandated auto-enrolment in workplace pension schemes, demonstrating that the workplace is the most effective channel to deliver financial security for employees. But even with government support, this changing landscape will prove a major challenge for employers.

The current shifting business environment offers a real opportunity for the group risk sector to put advisers in the driving seat, supporting clients in updating outdated benefits packages to help them to tackle the increasingly important issues of sickness absence, lost productivity, recruitment and retention. Acting as strategic advisers for clients, rather than as a support function, is likely to prove the route to growth for brokers over the next 30 years, and we are ready to support you in this consultative role in any way we can.