Employers are spending on benefits without a clear strategy, CIPD warns

Company benefits are important because they help attract the best talent, improve employee retention, and build a good organisational culture.

However, businesses shouldn’t offer benefits for the sake of it. Throwing in trendy perks just to look competitive often leads to wasted money and frustration on both sides.

Instead, benefits should solve real problems for employees and support the company’s goals, such as reducing turnover, improving productivity, or lowering absenteeism.

Yet, a new report by CIPD reveals that one-fifth of UK employers lack clear objectives for their benefits – showing that many organisations are struggling to understand how to make these investments truly effective.

What are the most popular company benefits?

Employee expectations around benefits have changed in recent years. What was once considered a “nice to have” is now often a deciding factor in whether someone accepts or stays in a role.

A survey by Totaljobs revealed that flexible working is the most sought-after benefit for 41% of candidates, with 66% of respondents saying they would forgo a pay rise in favour of this benefit. This was followed by sick pay (26%), hybrid and remote working options (24%) and health insurance (21%).

It’s clear that employers are aware of the fluid nature of benefits in the current employment landscape. According to Aon, 71% of employers are expecting to change their benefits for future generations, with 50% adopting an online benefits platform to meet these expectations.

The survey also found that while work-life balance and flexible working were cited as the top priorities, better awareness and handling of mental health also remained a high priority for 74% of respondents.

The benefits gap and why objectives matter

While most companies understand the importance of benefits, a lot are still figuring out how to actually make them work.

According to CIPD’s Reward survey: Focus on employee benefits, the most common objectives for benefits are to support retention (44%) or employee engagement (37%). However, it also reports that 22% of businesses are spending on benefits without a defined purpose.

But even for those with a clear objective, just 31% link their benefits to improving productivity or business performance. And despite the evident demand for mental health support, only 23% correlate their benefits with employee health and wellbeing.

Additionally, despite flexible working being seen as a key objective-driver for 75% of respondents, just 40% of employers actually provide this benefit.

“Employers should be acting on employee feedback, or using data such as turnover and team performance, and tracking progress against defined success measures.” Charles Cotton, Senior Reward and Benefits Adviser at CIPD, comments.

“Without this discipline, employers are fumbling in the dark when it comes to knowing if their benefits are truly delivering for both the business and its people.”

How businesses can make benefits work

CIPD’s latest research suggests that many companies are treating benefits as routine offerings rather than actual investments.

Therefore, businesses should start by aligning benefits with specific goals – whether that be improving retention, reducing absenteeism, attracting new talent, or boosting engagement.

Next, it’s key to audit current offerings, which can be done through gathering employee feedback and setting clear success metrics such as uptake, retention rates, and wellbeing indicators (like absence rates, employee engagement scores, staff turnover, etc.).

Additionally, with CIPD’s data revealing that 15% of employers don’t assess their benefits, it’s a missed opportunity to understand what’s working and what’s not.

“Employee benefits are no longer peripheral to the employment deal, they are a central lever for shaping culture, strengthening resilience and enabling people to thrive in an environment where expectations are evolving rapidly.” Iain Laws, Chief Executive Officer for Health and Benefits at Everywhen, told Employee Benefits.

“Organisations with a coherent wellbeing strategy consistently deliver more meaningful benefits, and that adds real value to both their employees and their organisation. A workforce that is well looked after is likely to be more engaged and more productive.”