Confidence is a critical factor in business. A positive outlook can encourage companies to invest in both their operations and their people with a view to driving growth.

Conversely, when confidence is low, companies can apply more caution, scaling back their spending in expectation of incoming cost pressures.

Right now, the reality is that many businesses are experiencing a serious shortfall in optimism. In September, the IoD Directors’ Economic Confidence Index, which gauges business leaders’ views on the UK’s economic prospects, fell to -74, putting it at the lowest level since the scale was introduced in July 2016.

Clearly, this is a broad measure that does not reflect the outlook for all individual businesses. It does, however, underline the challenging conditions that many companies are experiencing, with particular concerns highlighted around the area of employment costs in the wake of the April rise in National Insurance rates and the National Living Wage.

These changes have disproportionately affected certain sectors, with data suggesting that staff in hospitality businesses have borne the brunt of the impact.

Evaluating offerings

As a result, companies are having to make difficult decisions when it comes to their people and the benefits that are afforded to them. Indeed, research from Scottish Widows indicates that just over a third (36%) of UK businesses have cut back on the level of workplace benefits available to employees over the past 12 months. The areas most frequently subject to cuts were found to be bonus schemes (for 72% of businesses) followed by remote/flexible working (39%) and healthcare plans (31%).

Such decisions are not taken lightly. Employers will be intensely aware of striking a careful balance between the imperative to manage rising costs and the need to provide a benefits offering that is highly valued by their existing teams and prospective hires.

And there is evidence that getting this balance wrong can have damaging results. One global study revealed that more than half (55%) of employees would put in less effort at work if a needed benefit was taken away. An even higher proportion (60%) said such a move would lead to them being less loyal to their employer.

Gauging the true value

In this context, gauging the perceived value of different benefits among staff is a crucial part of the decision-making process. Employers conducting these evaluations can be helped by turning to objective data on historic engagement levels as well as the subjective views of managers and employees themselves.

However, it is also worth considering measures of value that might not be so immediately apparent. The availability of healthcare benefits and support for mental wellbeing, for example, can demonstrate an employer’s duty of care towards their staff, and these services can become even more treasured by employees when times are difficult, helping individuals address personal problems that might otherwise lead to illness, absenteeism and lost productivity.

For employers keen to continue providing support in this area, healthcare cash plans are a cost-effective option. While the level of cover is comparatively lower than with private medical insurance (PMI), cash plans provide valuable financial support for more routine aspects of healthcare, and some policies can be extended to include non-cash benefits including virtual GP services, wellbeing apps and on-demand mental health support.

Cost-effective options

Outside of healthcare, employers are presented with other opportunities to deliver benefits for employees that are also cost-effective for the business. An example is salary sacrifice, where workers agree to exchange – or ‘sacrifice’ – a proportion of their gross salary for a non-cash benefit, such as pension contributions, a bike or car lease, or childcare vouchers. Because the employee’s taxable income is reduced, employers save on National Insurance contributions.

Flexible working arrangements and educational programmes focused on topics such as financial wellbeing are further examples of benefits that can be highly valued by staff, but do not necessarily require significant levels of investment on behalf of an employer – and have even been found to deliver savings while improving productivity and loyalty.

However employers choose to approach the challenge of recalibrating their benefits offering, one thing is clear: the importance of communication. Change can be unsettling, but good communication helps avoid misunderstandings and confusion while reinforcing trust and maintaining levels of morale.

This is crucial for promoting greater engagement, boosting uptake, and maximising the opportunities for employees to feel valued and supported in their work, however challenging the broader economic conditions might be.

This is our understanding of the proposals so far and these may be liable to change as further regulations are introduced. The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Corporate or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.