By Ian Rummels

Companies should be encouraged to understand that people have different needs and many are surprised to learn that people are not purely motivated by money. Many employees would welcome a salary sacrifice whereby they exchange part of their salary for, say gym membership, childcare support or extra holiday. Others may appreciate flexible working hours, whether through completing core hours with flexible start and finish times, or a job share.

While a company’s core aims for introducing these benefits may be a happy workforce and increased productivity, they also need to understand that these initiatives may not necessarily increase costs — in fact they may even save money! For example, with a childcare voucher scheme, companies do not have to pay national insurance on the vouchers and so while their employee gets a voucher useful for their childcare needs, the company saves money.

Flexible benefits

Flexible benefits are an increasingly popular method of encouraging employee motivation via a reward package that can be tailored to an employee’s personal circumstances. A flexible benefits scheme is essentially a system which gives staff choice over the mix and level of cash and benefits they receive. Typically, a ‘menu’ of benefits is provided from which an employee can choose and they receive an amount or ‘credit’ which can be spent on their chosen benefits. These choices can include traditional benefits such as pension contributions or the more lifestyle-orientated benefits such as additional holiday or gym membership. The employer can again also save money through reduced or capped benefits savings and enhanced tax and National Insurance efficiency.

Larger organisations may already be considering or even running flex schemes, but small and medium-sized businesses are undoubtedly even more focused on their cost base, and as such many perceive that any kind of flexible benefit programme will be a cost they simply cannot afford.

However, a flexible approach need not be expensive or complex. By introducing an element of flexibility with, for example, childcare vouchers or extra holiday days, the positive impact on staff satisfaction and retention can help save money overall. While smaller and medium-sized businesses may not always be able to compete with larger companies in terms of salary and expensive benefits, by offering choice and using a bit of imagination less cash-rich organisations can become ‘employers of choice’. People will often choose the correct work life balance over a little extra cash.

Childcare Vouchers

Almost 40% of the UK workforce are parents, so employers should be sympathetic to the fact that childcare is an expensive service and a real concern for working parents. The childcare voucher scheme is a Government-backed initiative, introduced to help working parents cope with the spiraling cost of childcare. The scheme allows businesses to provide employees with up to £55 worth of vouchers per week (£243 a month or £2,916 a year), which can be used to pay for any type of registered or approved childcare for youngsters up to 16 year olds. These vouchers are advantageous for working parents because they are free of tax and National Insurance Contributions (NIC), and can save each parent up to £1,195 per annum.

Meanwhile, employers running childcare voucher schemes also reap the benefits, saving up to 12.8 per cent (£373 per employee, per annum), in NIC savings alone. Childcare vouchers are a simple, flexible and cost-effective means of offering a highly sought-after employee benefit. They can be introduced as a benefit-in-kind part of a flexible benefits package or, most popularly, as part of a salary sacrifice scheme.

Investors in People

No matter what their role, all employees should ideally understand their contribution to the business, and receive acknowledgement of their efforts (or otherwise). The Investors in People standard is about making sure that what employees are doing is aligned with the company strategy. If employees don’t have this awareness, they can feel left out and demotivated. The achievement of the Investors in People standard is a signal to potential employees that the company takes its commitment to its people seriously. But the whole process is a tremendously useful business tool for companies in its own right, even if they don’t go for the award itself.


Giving employees a stake in the company’s future growth by offering a share scheme / share option plan is often a good way of linking the interests of your business and your employees. Implemented effectively, they can be a long-term staff motivational and retention tool. There are many options available to companies wishing to introduce a share scheme. The Enterprise Management Incentive Schemes (EMI) and Approved Company Share Option Schemes are two of the most popular.

Other motivators

Often the intangible benefits of a workplace such as the general atmosphere can be equally as important as the tangibles. Managers must develop an open culture where feedback is constructive and trust is built between a team – an important but undervalued factor in team and individual motivation.

Evaluation is vital to understand exactly where the company is in terms of its provision for motivation and to get a feel for the people working there and the atmosphere. This can be done at every level to get a clear picture of the organisation as a whole. It could be that the management has a very different view of the business to the employees and an evaluation will highlight these discrepancies. If small businesses are going to spend money they need to know they are going to spend it in the right way. Based on this kind of initial ‘People Audit’ they will be able to identify the key issues, prioritise them and propose a plan of activity.

Ian Rummels is Managing Director of employment consultancy PES