Industry experts are urging employers to make more savvy strategic adjustments to safeguard employee wellbeing, in the face of the government’s increases to National Insurance Contributions (NIC) which came into force on Sunday, with the rate rise from 13.8% to 15%.
Mark Jones, Employee Benefits Partner at Isio warns that employers who take a “wait and see” approach risk “falling behind in an already competitive labour market”.
“With the right approach, businesses can navigate these cost pressures without compromising their ability to attract and retain the best people,” he said.
Benefits more important than ever
He said that the NIC increases underline, more than ever, the importance of a “well structured benefits strategy” including flexible working, targeted support and financial wellbeing initiatives.
Experts like Jones agree that one of the most effective ways for employers to manage rising NIC is to use pensions as a way to offset these new cost pressures.
However, research from Towergate shows that less than half (48%) of UK companies offer salary sacrifice on their pension provision, means both employers and employees are missing out.
Employers are missing out
“Both gain from reduced NIC and the employee will gain from tax efficiencies,” said Sorangi Shah, Client Director at Towergate Employee Benefits, who advised employers to see this increase as an opportunity to review pension and salary sacrifice arrangements in order to ensure compliance as well as employee engagement.
Katharine Moxham, Spokesperson for GRiD, agreed that employers must now do more with less and stressed the importance of professionals working in the Workplace Wellbeing space upping their game when it comes to measurement.
Measurement must improve
She said:
“Employers will understandably be looking at their budgets in all areas to manage the additional NI contributions and other financial pressures. It’s unlikely that HR will be exempt from the tightening of purse strings, so they must prepare to demonstrate the effectiveness of their employee benefits programmes to retain the maximum possible budget for them.”
Some employers have used the NIC hikes to show their commitment to employee wellbeing and the importance of looking after staff to retain talent.
For instance, First Bus has committed to being a Real Living Wage employer, making it the first national operator to take this step. Not only that, the bus operator is committing to pay all apprentices the RLW too, who aren’t technically covered by the RLW initiative.
Some employers stepping up commitment
“We’re not going to leave anyone behind and from April 1st all apprentices will be paid the RLW too. The fact that they’ll receive a decent salary from day 1 is going to have an incredible impact. They’ve told me it’ll mean real improvements to their lives like buying their first car or can move out of their parents’ home,” said Gareth Hind, Director of Colleague Experience and Relations, First Bus.
First Bus is not the only employer to recognise the importance of looking after the financial wellbeing of its employees, especially its lower paid workers, despite the NIC increases.
John Lewis also announced earlier this month that it would be investing £114 million in pay rises. Its interim Chief Executive Jo Rackham outlined the clear business case, explaining that customer service is a differentiating factor for the retail brand, inferring that employees must be happy and healthy in order to perform best; something they can’t do if crippled by money worries.
Retailers back pay rises for lower paid workers
The fact that several retailers – like Curry’s, Marks & Spencer, B&Q, Sainsbury’s and Costa Coffee – have also recently introduced inflation-busting payrises suggests they also recognise the important correlation.
Meanwhile other sectors, such as hospitality, which also employ many lower paid workers have announced that the NIC rises will be crippling and prevent pay rises. However, employee benefits packages will increase in importance as a result.
Matt Russell, CEO at Zest, said of the hospitality sector:
“It’s a huge challenge for hospitality businesses to financially support their employees – for many firms, salary rises are off the table and they’re increasingly looking at more cost-effective approach to reward staff such as investing in employee benefits packages.”
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