Employee benefits undervalued, say APAC companies: Towers Watson research

By Digital News Asia April 22, 2015

More than four in 10 employers spend over 20% of payroll on benefits
Only 16% of employers believe their benefits are highly valued by employees

Employee benefits undervalued, say APAC companies: Towers Watson research

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 new research by global professional services company Towers Watson.

Benefits are increasingly seen as an integral part of an Employee Value Proposition, a reward lever to help attract, retain and engage employees, Towers Watson said in a statement on its 2015 Asia Pacific Benefit Trends survey.

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 and 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.

A total of 1,145 organisations across 20 countries in Asia Pacific participated in the survey.

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 with 5%), Towers Watson said.

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 with those that do not (6%).

“Employers across Asia Pacific spend significant amounts of money on their employee benefit programmes,” said Chris Mayes, director of Benefits Optimisation Consulting, Asia Pacific at Towers Watson. “But many struggle to derive full value from that spend.”

“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,” he added.

Benefit spend continues to rise

Across Asia Pacific, 41% of employers said they spend more than 20% of payroll on benefits, Towers Watson said.

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 programme.

“A benefits programme that is aligned with employee needs, communicated clearly, and delivered on one platform, is likely to see better value attached from employees,” he added.

Introducing more flexibility into the benefits programme 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, Towers Watson said in its statement.

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

“Flexible benefits continue 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 programme.

“These aspects help increase the value employees attach to their benefits,” he added.