There are of course many influencing factors on such trends, but it is undeniable that the pivotal driver of change in recent years has been legislation and initiatives imposed by HM Government. So the political map is important here, and the last few months has seen significant movement in this space with the return of a majority Conservative government and the Summer Budget statement providing some firm indicators as to the likely direction of travel.
It is also worth remembering that one of the early acts of the previous coalition government was to impose guaranteed five-year parliamentary terms, so this new course is likely to be maintained until at least 2020.
So, in general terms, what should employers expect over the next five years?
This can be summed up in three points:
- More employer costs
- Fewer tax reliefs
- More employer duties
We appreciate that this is not necessarily what employers (or indeed the benefits industry) wants to hear, but it seems likely that this is the path that recent changes and announcements will lead to. In the short term it is to be expected that the majority of such changes will focus on pension and workplace savings provision, and it should be remembered that providing some is now a legal requirement on employers (so these increased duties and responsibilities cannot easily be avoided).
And once the future of workplace savings has been defined, it’s likely that the government will turn their attention to some other benefit areas as well.
So it could be a difficult few years ahead as we all adjust to this new world.
Yet employers should not lose sight of the significant silver-lining to this particular cloud. A good and relevant employee benefits package should (if regularly and well communicated):
- Improve staff retention and lower recruitment costs
- Reduce employee absence
- Boost employee engagement (and therefore productivity)
And, despite the changes mentioned above, it is likely that benefits will still be significantly more tax efficient for both employers and employees than a corresponding salary payment.
The bottom line is that employers will have little choice other than to follow the lead of legislation in this space until 2020, but the savvy organisation will seek to ensure that the return on such costs is maximised by really good governance and employee communications.