A decline in the number of active defined benefit pension schemes has fuelled a reduction in the cost of workplace benefits.
According to Towers Watson research, the average spend on employee benefits packages for companies with between 500 and 2,000 staff dropped below 15% of salary this year.
The survey also found that the gap between spending on benefits by firms with defined benefit (DB) schemes continued to close over those with defined contribution (DC) arrangements.
The annual Benefits HealthCheck survey found the percentage of companies spending over 20% of employee salary costs on workplace benefits had dropped from a third in 2014 to a quarter this year. And almost a third (29%) of companies spent between 11% and 15%. (see graph)
Despite the majority of the 82 firms surveyed saying they had a consistent strategy across their workplace benefits which was aligned to their business priorities, only a minority were able to adequately measure the success of their benefit plans.
In addition, only around a third of the companies surveyed were planning to review and change their existing plans to accommodate the needs of their multi-generational workforce.
Retaining existing employees and attracting new talent were the prime reasons for having a benefits package, followed by staying competitive when compared to their peers and managing costs.
Will Aitken senior consultant at Towers Watson said: "There has been a significant reduction in the average cost of benefits as a percentage of salaries, in the past year.
"This is mostly due to the continued trend in mid-sized companies towards DB pension plan closure and plan design changes. We expect this trend to continue as we get closer to the end of contracting-out, as more DB pension schemes start to redesign ahead of the new legislation.
"The main workplace benefit priorities for employers are driven by competition, either explicitly benchmarking themselves against competitors or in order to establish themselves as the employer of choice for existing and prospective employees. Managing costs is also a priority area in benefit design and it appears that companies have been successful in this area over the past 12 months as costs per employee have come down as a proportion of salary," he added.
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