Improving fringe benefit schemes for low earners

This research has sought to understand the role of fringe benefits in driving a better reward package for low earners, and alleviating in-work poverty. The market for employee benefits has changed dramatically in recent years and continues to evolve quickly. From their inception in the mid-1800s through their evolution in the 1970s and 1980s, employers have long used benefits to support, retain and reward staff, outside of adjustments to their fixed pay that incur high rates of marginal taxation. Today, employers increasingly recognise the value of benefits in multiple ways. This includes as: a key facet in the race for global talent; an integral part of the total reward package for employees; and an important component of high performance working practices that promotes a happy and healthy workforce, and enhances employee engagement, retention and performance. But, at the same time, fringe benefits are not consistently defined, and, as an umbrella term that includes many different categories of benefits, this can inhibit their effective take up and use. 

The research explores the potential to improve the take-up and value of fringe benefit schemes. It has sought to explore how to maximise the value of fringe benefits, as an important but under-researched component of good work, by focusing on two sectors in depth - retail and social care. This work is part of JRF’s wider programme of research, policy and solutions development, exploring measures to improve the quality of work, support productivity improvements in low-wage sectors, and help solve poverty in the UK. The project seeks to offer additional insight to businesses committed to improving the quality of jobs and to catalyse industry-wide action on this issue. 

Despite a broad and growing array of employee benefits available in the market, the research found a more limited number of benefits that low earners may in fact prefer and use. The research suggests that low earners attach greater value to those benefits that mitigate their highest living costs: such as food and leisure, travel, childcare, and housing and utilities; as well as those that provide financial education and support. The research also found that paid breaks, paid sick leave/compassionate leave/parental leave, as well as training, matter a lot. Such benefits might be better considered as ‘fundamental and hence integral to a reward package, rather than ‘fringe benefits’.

However, we found both employers and employees face several barriers that serve to undermine take-up and value, which means there is no ‘silver bullet’ that will dramatically shift the reach or impact of employee benefits for low earners living in low-income households. Rather, we identify a framework of good practice for employers looking to maximise the value of fringe benefits for low earners: 

1. Securing commitment among business leaders to support the needs of low earners, using research, stories and case studies to illuminate the challenges they face, and the impact employee benefits can have on their living standards. 

2. Building a business case that fully reflects the impact of employee benefits, including acknowledging tangible and intangible benefits and recognising the role employee benefits can play in supporting wider organisational priorities. 

3. Recognising the distinct needs and preferences of low earners, and the varied circumstances of those within this group, in the design, implementation and evaluation of fringe benefit schemes. 

4. Providing additional support to inform choice, enable access and demonstrate value, striking the right balance between offering flexibility, while also providing support to enable take-up of those benefits of greatest value. 

5. Working collaboratively with third-party suppliers to tailor off-the-shelf products so that they are more closely aligned to the needs and challenges of low earners. 

6. Promoting benefits in a way that reaches and resonates with low earners, recognising and helping to tackle digital exclusion and a lack of digital skills among some of this group. 

7. Monitoring and measuring take-up and impact, to assess how successfully they are meeting their objectives, to refine the approach to improve impact, and to demonstrate their value in driving business performance and supporting low earners. 

The research suggests that to embed these actions within business practices, there is a need for new resources to support each stage of the decision pathway, and other forms of support including business advice services, mentoring, professional membership organisations or networks that enable businesses to connect with others in their ecosystem. 

Finally, the research highlights the need to ‘raise the bar’ of job quality in low-paid roles, establishing a new baseline for the minimum level of benefits employers are expected to offer low earners. This should be supported by new incentives that recognise and reward businesses that offer ‘good work’, including greater transparency in financial reporting and stronger kite-marking to catalyse a new model for corporate governance: one centred around ‘responsible business’.