By Daniel Hunter

Failing to tell staff about the employee benefits on offer, such as private health insurance and income protection, is costing UK small to medium-sized enterprises (SMEs) £591 million every year, through increased staff turnover and time off sick, according to new research from Cass Business School.

And companies who’ve invested in good employee benefits, but haven’t told staff what they are entitled to, are no better off than if they hadn’t provided the benefits in the first place.

Employees who are unaware of the benefits on offer, don’t appreciate them. They are less loyal and productive, and as a result are more likely to call in sick or leave the company altogether. And this has a significant impact on the bottom line.

While you might expect smaller businesses to be good at communications, the research identified a gap in understanding between what employee benefits are provided, and what employees think is available in more than two thirds (66.2%[iii]) of the SMEs providing a wide range of benefits. Importantly, companies with less than 50 employees are the most likely to fall into this ’communications chasm’ despite being the least able to cope with increased staff turnover and sickness absence costs — 83.5% of these fall into this category.

The research, Money Talks: Communicating Employee Benefits, was commissioned by Income Protection specialist, Unum, and identifies two types of company:

· Silent types — companies that invest in good employee benefits (such as private health insurance or income protection) but fail to tell their staff about them
· Communications champions — companies that have comparable benefits packages, but are good at communicating them — for example through employee attitude surveys, team briefings and consultation committees

An SME with 250 employees that offers good benefits but fails to communicate them (Silent Types) spends £245,125 a year more on staff turnover and sickness absence than those companies that have comparable benefits packages, but have good communications practices (Communications Champions), while an SME with 50 employee spends £35,113 more.

This is calculated by looking at the cost of replacing an employee that leaves, multiplied by the increased percentage staff turnover between Communication Champions and Silent Types, plus the additional cost of the higher rate of sickness absence amongst Silent Types than their Communication Champions counterparts.

The research uses data from the UK Government’s 2011 Workplace Employment Relations Survey (WERS), the most authoritative source of information on employment relations in Britain, and includes data collected from both employers and employees from 2,680 workplaces.

It demonstrates that the ‘communications chasm’ exists for managers, as well as non-managers. Strikingly, people that need employee benefits the most, such as working mums, remain equally unaware of what they are entitled to.

“Money Talks shows that simply offering a great employee benefits package isn’t enough to promote wellbeing and financial security amongst employees," Peter O’Donnell, CEO of Unum UK, said.

“Our experience shows that contrary to employers’ beliefs, communicating with staff about financial protection and well-being initiatives such as Income Protection and private health insurance, leads to lower absence rates and reduced time off sick.

"An open dialogue between employers and employees about benefits builds a more productive and loyal workforce, and the bottom line benefits are evident. However, this research shows that smaller businesses that we’d expect to be the strongest, are actually faring worst, and failing to highlight to staff the back-up plan they provide.

“This back-up plan — for both employees and employers - is especially important for these smaller businesses, which are naturally more vulnerable to economic uncertainty and can feel the pinch if just one sizeable invoice is paid late. This, and pressure on budgets more generally, means it can be very difficult for these companies to deal with additional costs, like the cost of sickness absence if employees fall ill.”

Professor Nick Bacon who conducted the research, commented: “With the cost of living rising more quickly than many peoples’ income, and small employers struggling for growth, staff retention is a vital issue. When smaller organisations can’t easily increase salaries, they need to identify other ways to build staff loyalty — and a good benefits package does this. However, our research shows that even when these companies are offering good benefits, if they fail to tell staff what’s available, it’s no better than not offering these benefits at all.”

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