This first in an exclusive 4-part series focused on the support needs of smaller companies, by Colin Fitzgerald, Distribution Director – Group Protection, Legal & General
Faced with an underlying economic catastrophe, the narrative for businesses across the UK has quickly shifted towards business recovery. This is all about survival. And organisations are going to have to get back on track quickly during the ongoing return-to-work phase. Never more so than for SMEs, for whom the impact of the pandemic will be more keenly felt than their larger counterparts - in terms of revenue as well as the health, wealth and happiness of their people.
With 80% of the UK's SMEs reporting their revenues are currently in decline right now and 24% concerned about their ability to retain employees, the shape of the sector could change considerably over the coming year.1
It could, of course, also bring opportunity: for those with the support in place to help ensure engaged and productive employees, but also for new players. While it's difficult to make comparison, it's interesting to note that the SME sector saw significant growth after the 2008 financial crisis: primarily with regard to one-man bands but also across employers of all sizes.2
SMEs that have group income protection in place are often more focused on the embedded value than they are on the claim
Right now, there is a real need to balance the short-term need to reduce outgoings and the long-term impact these decisions can have.
Consider this. Only 1.14% of eligible UK SMEs (2 - 250 staff) have group income protection in place.3 This is obviously just one in a range of group risks products that would be relevant to them, all of which afford not only valuable financial peace of mind, but also come with an embedded range - to varying extents - of physical and psychological support services. For an average cost of around £650 per employee per year, they could have life insurance, income protection and critical illness cover.4
Yet SMEs spend a seemingly disproportionate amount on one-off rewards, such as celebrations and vouchers. Research by GRiD5 found that SMEs (50-249 employees) spend an average £1,078 per employee per year on such items.
There seems a huge opportunity for the industry to help get the country's small to medium sized businesses get back on their feet with the help of a robust wellbeing strategy, delivered at cost structures that are sustainable. And the best news is that the majority of employers don't even need convincing of this fact. They're already on the same page.
The top priority for 99% of companies now is to engage employees with benefits. Yet only 43% have a strategy.6
Build on lessons learnt
The desire for strategic change was arguably there before the pandemic. But lockdown helped release it from the boardroom. Overnight, organisations had to think on their feet. Leaders became more visible than ever before and the trust that such open communication instilled in employees helped ensure that productivity, on the whole, didn't take a huge dip.
In short, the pandemic has shone a light on employee wellbeing like never before and made leaders realise the crucial link between people, productivity and profitability.
The key now is to build on those lessons learnt. To help SMEs realise the value of benefit programmes that support the full spectrum of wellbeing and that are altogether more ‘engaging' by ensuring they are flexible enough to meet individual needs.
Research by L&G shows an appetite by employees to be able to tailor group risk levels to need - for example, life stages. We found that flexing group risk benefits is most likely among those aged 25 - 44 in intermediate or mid management roles. We also found that 4 in 5 employees would even be prepared to contribute something towards a top-up.
It's not all about demographics though. The need for tailored benefits also extends to employment status. Consider the rise of the contractor and gig worker economy, which has seen growth of 25% in the last decade.7 This trend looks set to continue as working practices shift again in response to the pandemic.
Of course, employers could have the best benefits package in the world and still not see any return on investment (ROI). In line with the current appetite to engage employees with benefits, alongside flexibility, employers also need a robust - ideally employee-insight led - communication programme. A programme that helps conveys relevance and, ultimately, encourages usage.
Design a needs-driven programme
Those SMEs that have group income protection in place are often more focused on the embedded value than they are on the claim. While this no doubt has much to do with the fact that they are statistically less likely to claim, it also shows that they view the product as a key tool in supporting the wellness of staff and their families.
For example, research by GRiD8 asked employers about their reasons for providing group income protection. Interestingly, for those with under 250 employees the ‘financial support to people unable to work' aspect came secondary to: "We feel obliged to look after our staff and their families and this benefit helps us accomplish that".
And even where employers with over 250 employees are concerned, the financial aspect again comes secondary but this time to: "This benefit helps to recruit and retain key personnel / helps to differentiate our package".
The ‘value' of immediate access wellbeing services has been keenly felt over recent months, with the mass roll out of virtual GPs and mental wellness support services in particular, including Employee Assistance Programmes (EAPs).
There's arguably also an, as yet, relatively unmet need to help employees manage debt and save for the short- to medium-term future, in addition to their long-term future retirement savings. After all, finance-related stress often hinges on employees' current financial situation and ability to save for now. In fact, the situation is critical for many: research indicates that an estimated 10.7 million adults rarely or never save - that is 21% of the population and, as a consequence, 11.5 million (or 22%) have less than £100 in savings.9
Those SME employers that are given the help and support they need to take note of all of this, with a view to offering more options to support the wellbeing of their people on all levels could benefit greatly from improved engagement, productivity and profitability over the coming year and beyond.
1 How the Covid-19 crisis is affecting UK small and medium-sized enterprises, Mckinsey, June 2020 https://www.mckinsey.com/industries/public-and-social-sector/our-insights/how-the-covid-19-crisis-is-affecting-uk-small-and-medium-size-enterprises
2 UK SME Data, Stats and Charts, Merchant Savvy, Feb 2020 https://www.merchantsavvy.co.uk/uk-sme-data-stats-charts/
3 Calculated using Swiss Re Group Watch 2020 statistics
4 Swiss Re Group Watch 2020 (average per employee cost of providing group risk: £133 for group life, £313 for group income protection and £200 for group critical illness)
5 GRiD 2019 Employer Research
6 Aon UK Benefits and Trends 2020 survey https://www.aon.com/unitedkingdom/employee-benefits/resources/benefits-and-trends/default.jsp
7 Future workforce, The Telegraph [Accessed August 2020] https://www.telegraph.co.uk/business/tips-for-the-future/workforce/
8 GRiD / SMUK / Opinium Group Risk research 2017
9 Adult financial capability - building the financial capability of UK adults survey, Feb 2019 https://moneyandpensionsservice.org.uk/research/
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