A PwC survey of 2,400 UK employees ahead of the new pension flexibilities from April reveals that most respondents say that when it comes to employee benefits they place greatest value on tax efficient savings such as pensions and share plans. Interestingly, however, while many would use a one off windfall to fund such benefits, surprisingly few would give up current salary for them.
Which are the most highly valued benefits?
When asked which are their two most highly valued employee benefits, 65% of respondents opted for contributions to their pension pots, while around one half of respondents (49%) said they would participate in a company share scheme. Company cars and medical insurance were chosen by over a quarter of those surveyed (28%).
There is a marked difference in the relative popularity of benefits depending on gender, age and the industry in which employees work.
Perhaps not surprisingly the number of respondents showing a preference for workplace pensions increases with age, with 70% of those aged 40 and older choosing to invest in company pension schemes, compared to 56% of respondents in their 20s.
Pensions are deemed to be of far higher value within the public sector (73%) than within the manufacturing sector (57%), and they are also 5% more popular with men than with women.
Share schemes are 9% more popular with men than women and also tend to be more highly valued by older workers. More than half of respondents aged 40 and older opted for company share schemes (55%) compared to just 40% of those in their twenties, perhaps suggesting that cash is of greatest value to those workers in their 20s.
How would employees spend a £500 windfall?
When it comes to using a one-off extra £500 to spend on existing workplace benefits, pensions are the most popular choice again (although only 26% choose this), while 20% would choose to add to their holiday leave and a smaller number (17%) choose to take the £500 as additional pay. Despite being one the second most valued benefit, only 8% would elect to take the additional cash and invest it in their share plan.
This suggests that while employees say that they value pensions and share plans most highly, when they are offered a discretionary one-off payment to fund additional benefits or take as cash, the picture is more finally balanced. In addition many employees chose more time off work, showing that most respondents are balancing short-term consumption with longer term financial planning.
Would employees give up salary for greater benefits?
The importance of cash over benefits increases still further when employees are offered the opportunity to exchange 5% of their pay for a new employee benefit. In this scenario two thirds say they would not sacrifice their existing salary for any benefits but would prefer to maintain their cash.
The findings suggest that people recognise the need to save for the long-term and when asked say that they value pensions and share plans over immediate consumption. However, most people would not give up a portion of their existing salary for any other benefit, suggesting that they have little room for manoeuvre within their existing reward packages. The extent to which they value benefits also varies by gender, age, the region in which they live, and industry in which they work.
John Harding, pay, performance and risk partner at PwC, said:
“Our research highlights that people recognise the importance of benefits that help with long term savings, however, cash is still king and employees are unlikely to give up cash for tax efficient benefits.
"Reward is by no means a one size fits all and preferences vary considerably between employee demographics. Employers should target their benefits spend accordingly, otherwise they risk spending valuable resources on benefits that are not valued appropriately by certain segments of their workforce.
"Employers should also communicate the benefits they offer and allow employees the opportunity to use bonuses, variable pay elements and pay awards towards their benefits package rather than simply giving up existing pay under Flexible Benefit schemes."
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