The late 60s saw swift advancement in the world of employee benefits, with private healthcare schemes provided by employers covering nearly 1.5m people. It was at this point that we welcomed formal employment contracts that coincided with individual roles along with a peak in defined benefit pension schemes with around 8m members.
Moreover, this period saw the emergence of a two-tiered pension scenario, giving some employees access to occupational pension schemes, with others forced to rely on the state pension. In the late 70s, the Thatcher government attempted to rectify this by introducing compulsory private workplace pensions by reducing the appeal of state earnings-related pension schemes and incentivising employees to move into an occupational scheme. This move saw 5m people opt out of Serps compared with the 500,000 forecast and is thought to be one of the reasons for the shortfalls in employees’ pension pots.
Permitted tax relief takes employee benefits mainstream
The 80s saw employee benefits become mainstream, perhaps because of permitted tax relief. Critical illness insurance – initially named ‘dread disease insurance’, which was introduced to the UK by a cardiac surgeon in South Africa called Marius Barnard – and private healthcare continued to grow.
Despite advancement and growth, intervention by the government has been pivotal in framing the way employee benefits packages have been structured over the decades. The minimum wage was introduced in 1999, putting pressure on employers and their benefits offerings, and the removal of the default retirement age introduced the conundrum of implementing a benefits package to coincide with the needs of an older workforce.
Fast-forward to today and it is clear to see that the world of employee benefits has greatly evolved from that of 70 years ago. However, according to a study in 2019, the average British worker earned less than they did a decade ago after inflation, and the average duration of employment at a company is between 2-5 years.
On these bases, employers have been required more than ever before to innovate their employee propositions to differentiate themselves from the rest of the market.
In addition, we are seeing a shift in employee benefits, with employees now having the option to elect for flexible and voluntary benefits over fixed benefits, creating the concept of ‘total reward’, whereby benefits packages are tailored to individual employees’ circumstances to align the needs of the business with those of its employees.
