2 in 5 employers say they spend over 20% of payroll on benefits: survey

But they believe they are undervalued.

Asia Pacific companies are seeing a major gap between the amount of money they spend on employee benefits and the value they get from them.

According to a release from Towers Watson, this is based on new research it conducted. A total of 1,145 organisations across 20 countries in Asia Pacific participated in the survey making it the most comprehensive benefits trends survey conducted in the region.

Findings from the Towers Watson’s 2015 Asia Pacific Benefit Trends survey illustrate the challenge for employers. Benefits are increasingly seen as an integral part of an Employee Value Proposition — a reward lever to help attract, retain and engage employees.

Two-thirds of employers surveyed said that attraction and retention of key talent is the major focus of their benefit strategies. According to the survey respondents, annual leave and health/medical care remain the most prevalent benefits, whilst risk benefits (life insurance, accident insurance) and retirement benefits are also popular.

At the same time, benefit costs, which already represent a significant percentage of payroll costs, continue to rise. More than four in 10 employers said they spend more than 20% of payroll on benefits. However, despite the material spend on benefits, only 16% think they are highly valued by employees.

Interestingly, for companies that feel they communicate their benefits effectively, the number of employers that said their benefits were highly valued is four times the percentage of those that do not (20% compared to 5%).

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A similar effect was seen among companies that take employee insights into account when determining which benefits to offer. The number of organisations that said their benefits were highly valued is three times more for companies that take employee insights into account (18%) compared to those that do not (6%).

“Employers across Asia Pacific spend significant amounts of money on their employee benefit programs. But many struggle to derive full value from that spend,” said Chris Mayes, Director — Benefits Optimisation Consulting, Asia Pacific at Towers Watson. “From our experience working with clients, we find that those employers who regularly engage their employees in their benefits – either through seeking employee feedback or communicating regularly – tend to see better value.”

Across Asia Pacific, 41% of employers said they spend more than 20% of payroll on benefits. Looking across countries, there is some variability across the region. Costs are particularly high in the Philippines and Indonesia, where generous medical and retirement benefits are prevalent, leading to 38% and 29% of employers respectively, spending upwards of 30% of payroll on benefits.

Worryingly, just over a fifth (22%) of employers across the region said they didn’t know how much they are spending on benefits.

“This apparent lack of awareness about their benefits spend suggests that employers are struggling with benefits governance, whilst juggling multiple systems, vendors and administrative platforms,” said Andrew Heard, Managing Director — Benefits, Asia Pacific at Towers Watson.

“If employers are finding it hard to put a number on their benefits spend, then it is perhaps no surprise that employees have low awareness of the value of their program. A benefits program that is aligned with employee needs, communicated clearly, and delivered on one platform, is likely to see better value attached from employees.”

Introducing more flexibility into the benefits program is one way that employers are looking to address the benefits value gap. Almost one-third (32%) are looking at increasing flexibility over the next 12 months, whilst more than one-quarter (26%) are planning to introduce flexible benefits.

For organisations that already offer flexible benefits, the majority felt that their programs had been successful in promoting employee understanding and/or appreciation of benefits (67%) and improving attraction and retention (59%).

“Flexible benefits continues to be an effective way of delivering benefits and improving their perceived value to employees,” said Heard. “Besides recognising the diverse needs of employees, offering flexible benefits necessitates regular communication to enable employees to make choices and puts values on the various benefit items included in the program. These aspects help increase the value employees attach to their benefits.”