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When we think of a benefit at work, our minds are likely to switch quite quickly to a pay rise. And many are voicing their demands with strike action, as seen at Waffle House in the US, a worker sharing on TikTok how they clocked off bang on 5pm in ‘revenge’ for being refused a pay rise, while earlier in the year, Royal Mail had to apologise after an April Fool’s prank telling staff they were getting a pay rise.
There has been a rise in average total pay, according to the ONS, with average total pay (including bonuses) for employees rising by 6.5% in February to April 2023 compared with the same period the previous year.
But that pay rise demand is still very prevalent – and it’s likely as an HR professional, especially in payroll, that you’ve heard it this week or even today. Staff asking for pay rises is nothing new, but in a cost of living crisis it’s not always the possible solution – and companies are looking to balance that with benefits.
The thing with a pay rise is it connects to all the things that we see as work 'wins'. The significance of pay rises lies in their ability to impact various aspects of an individual's life, including financial stability, professional recognition, motivation, and overall well-being. But for companies, they're not always the percieved answer to employee wellbeing or progression - and they're not always possible to offer.
Staff asking for pay rises is nothing new, but in a cost of living crisis it’s not always the possible solution – and companies are looking to balance that with benefits
So what are the benefits of benefits vs cold hard cash?
Ruth Handcock, CEO of Octopus Money, says: “Right now, employee finances are in bad shape - as the cost of living crisis continues, the average worker is predicted to be £1000 worse off than they were in 2022. A third of employees are actively considering reducing or opting out of their pension contributions, which could leave them thousands of pounds worse off in the long run. All this may point to pay rises as the obvious solution but this puts employers in an impossible situation if they can’t match inflation with pay rises.”
She adds: "We often perceive a pay rise as a sign of success due to various ingrained societal, psychological, and economic factors. One primary reason is that financial compensation is typically linked to the value placed on one's skills, expertise, and contributions within a particular profession or industry. As such, a pay rise is commonly associated with recognition for one's hard work, dedication, and competence, fostering a sense of achievement and validation of one's efforts.
"Moreover, in a materialistic society, higher earnings are often equated with an enhanced quality of life, providing individuals with the means to afford a more comfortable lifestyle, better education, improved healthcare, and a sense of financial security. This association between monetary gain and improved living standards reinforces the notion that a pay rise signifies progress and accomplishment.
Balancing the feelings of benefits and payrises – money and mental health
For Handcock, there is a big element here: "How you make employees feel. Things like flex benefit pots - while innovative - encourage employees to associate benefits with a certain value. It can reinforce a transactional than familial relationship. Instead I’d argue employers should care more about how benefits make your employees feel, which is better measured by engagement than value. It’s a completely different lens to put on your selection process. It means I completely support your ‘redefinition’ of benefits to encompass this whole relationship."
"Secondly, many workplaces have ‘kitted out the gym but forgotten to provide the personal trainer’. Unless employees understand their benefits they’ll never value them. That, for us, is where coaching comes in. It’s a benefit that, on average, 40% of employers in any workplace signs up to, and has the added advantage of bringing to life the rest of employee’s packages."
Paul Holcroft, Managing Director at Croner, is a qualified employment law solicitor, specialising in HR, equal pay, and employment law. He says: “Business owners are having to think outside the box when it comes to supporting staff. With bills going up for everyone – businesses included – sometimes a pay rise just isn’t possible. While benefits don’t pay the mortgage or put food on the table, there are ways that employers can put more money in their employees pockets even if a pay rise is out of the question.
“Reduce the money employees are spending through travel ticket loans or hybrid working arrangements to save on commuting costs. Other ways to reduce travel costs include offering a cycle to work scheme which can help cover the expense of a bike, whilst enjoying tax benefits, and similarly, many companies are opting to provide electric car schemes to this effect too. With energy prices soaring, some businesses are giving remote workers the option to work in the office over the winter months – if requested - to help save on their energy bills.”
“Gym memberships or benefit platforms offering discounts on days out, food and drink, tech, food shopping, and everything in between, are all ways of saving money to help employees’ pay stretch further. Finally, helping your staff look after their mental health with the provision of an employee assistance programme (EAP) is also a benefit valued by many - particularly as financial issues can take their toll. An EAP provides your staff and their families with access to 24/7 counselling and support on all of life’s issues, all totally free.”
I am seeing a lot of businesses review their benefits offering and employees are still not happy with their total package. Small employers cannot keep up
Pay rises, benefits and SMEs
It’s all very well for large organisations to begin to address these issues, but what about SMEs? “In the current climate employees want it all! They want the pay rise and they also expect all the trimmings:- flexible working, extra holidays/healthcare and so on. I am seeing a lot of businesses review their benefits offering and employees are still not happy with their total package. Small employers cannot keep up,” says HR Consultant Emma Cromarty.
“The cost of living means employees are not shy asking for pay rises at the moment. When employers say there isn't any more money in the pot but we do offer this benefit and that benefit on top of your salary, employees tend to see that as a given rather than an employer benefit. Salaries always need to be competitive and benefits should be too, but it's a difficult balance between an sme's budget and employees expectations which are ever increasing."
Handcock agrees, warning that “SMEs are in a particularly tough spot right now,” warns Ruth Handcock. “Their finances are stretched, and they have even fewer resources to increase salaries. Many companies have therefore decided not to talk about money at all, because they’re worried about having a conversation about why salaries don’t match inflation. But I’d argue this is the wrong answer - all employees take from this is that leaders are out of touch or simply don’t care.
If that’s you, what next? Ruth has two pieces of advice: “Be bold – this is free! Create a safe space to talk about money: financial stress is the leading cause of mental health issues, and employees bring this stress to work. That might be training HR teams to encourage people to come forward if they’re in crisis, or using a third party like Octopus Money. Breaking down money taboos, and encouraging people to share their experiences, can help people feel less alone. I’ve come across some great examples of peer networks where people bring their money worries and seek advice from others.”
Secondly, she says, really listen and make every penny count. “Find out what benefits people value, as even asking this question will make people feel as if you care about getting the right blend for them. You can then cross check it against engagement and come up with a pretty good map of what’s worth keeping. Make sure you're focused on the benefits that have the strongest impact on long term employee wellbeing - free food and snacks are great perks, but do they really make someone feel more supported by their employer?”
“Once you have your targets, explore if the benefits offer partial employer subsidies, tiered packages depending on the product you choose, or salary sacrifice. With salary sacrifice, even though you're passing on some costs to employees, you're still opening up access to a valuable benefit at a more affordable rate.”
