Employer / Salary Sacrifice

How employee benefits help you retain staff and save £30K per new hire

£30,500 is the average cost of replacing an employee. For a business of 500 people with an annual turnover rate of 19% that’s £2.85m in lost productivity and logistical costs each year.

Reducing turnover is the key to minimising these costs. And employee benefits play a central role in creating an environment where staff feel happy to stay but also secure, rewarded and willing to go the extra mile.

But how can you work out whether your benefit scheme is delivering the goods? We set out a three-step plan to help you measure assess and adjust your benefits package.


According to Herzberg and motivational theory, employee benefits aren’t just a nice to have. They’re an essential hygiene factor – part of the foundation that makes employee satisfaction possible. Without benefits employees will be dissatisfied; with them, your staff are more likely to be engaged and willing to stay.

Of course, that depends on the benefits your organisation offers. Provide perks that nobody wants and you’ll struggle to achieve satisfaction, much less motivation and retention. Get them right and you’ll position your organisation to motivate and retain.

With huge sums invested in employee benefits each year, our three-step plan helps ensure your money is being well spent.


Step 1 – Really understand what your employees want

Employee engagement surveys – with just one or two questions on benefits – only go a short way to understanding what your benefit programmes are missing.

They can’t be solely relied on for feedback, so instead try measuring:

  • Benefit take up levels and usage stats – ask your providers to compare your take up rates to others in your sector to understand if all your benefits are working well
  • Feedback from recruitment teams – look out for anyone negotiating a pay increase to offset missing benefits on offer from competitors
  • Exit interview information – try including a question about your total reward offering to see if there’s anything people feel is missing or a benefit that has helped to lure them away
  • Employee benefit surveys or focus groups – these are best for getting into the detail of which benefits employees really need
  • Benefit market data – to ensure your package hasn’t drifted too far from where you want to be in the market

Once you’ve got an idea of where the market is headed and what your employees want, you can consider ways to plug any gaps in your benefit provision.


Step 2 – Identify gaps and remove blockers

Depending on the comprehensiveness of your offering you’ll find that employees want:

  1. More or different benefits
  2. Benefits you’ve already got but they’re not aware of
  3. A mixture of the two

If point two is an issue for your business, this signifies a need for improved communication. You could reach out to your benefit providers to see how they can support you. Or ask your internal comms or marketing team for help if your HR team doesn’t have capacity.

Where staff are requesting particular benefits, check with your market data to identify the potential costs and your reward strategy to see whether they will be a good fit with your overall plans.

Should your employees raise any blockers to taking up benefits, you’ll need to invest time, and potentially money, removing them.

For example, if your online benefit portal is difficult to use it could be preventing people from signing up. Or if cost is an issue for self-funded benefits (and you’re lagging the market and you want to be a median payer), you might need to up your benefit spend. These kinds of fixes could require budget so be prepared to spend a little to save a lot.

Adding new benefits to your offering doesn’t always mean they need to be company paid. Keep an eye out for opportunities to add to your programme with self-paid and/or salary sacrifice benefits that save employer national insurance contributions. These can be used to fund other parts of your scheme while remaining within budget.


Step 3 – Re-run the numbers and make the case for more change

Once you’ve updated your benefit programmes, re-run the analysis you carried out at the start. This will help you understand whether your changes have made any impact on your employees’ benefit perspectives and any wider measures like retention.

Only one in four employers assess the value that their benefits programmes bring to their organisations. But with advanced HR and provider systems, there’s no reason not to measure the impact of your efforts.

Being able to demonstrate positive change – and put a number to it – will help you make the business case for continuing to listen to employee needs and for further investment in your benefit offering.



An effective employee benefit package is an essential building block in the road to employee engagement and retention. The happier your employees are with their benefits, the better your chance of retaining them. Follow the guidance in this article and you’ll be able to identify what’s working well and if there are any issues with your offering. Then take corrective measures, make sure you’ve met your employees needs and take stock of your success.

Interested in finding out more?