Unlocking employee benefits ROI in a cost-conscious world

As budgets tighten, businesses must rethink how they design and demonstrate the value of employee benefits.

With National Insurance (NI) increases on the horizon, companies face growing pressure to prove return on investment (ROI), while balancing cost control with talent retention.

The shifting economics of workplace benefits

From 6 April 2025:

Employer NI contributions will rise from 13.8% to 15%.
The earnings threshold for employer NICs will drop from £9,100 to £5,000 per year.

These changes will significantly raise employment costs, making every pound spent on benefits even more critical.

For business leaders, the question is clear – how can they ensure employee benefits deliver maximum value for both the business and its workforce?

Higher NI costs mean traditional salary-based compensation structures may become more expensive, making tax-efficient benefits an increasingly attractive alternative.

Employees, meanwhile, may become more aware of non-cash benefits, especially those that ease financial pressures or enhance overall wellbeing.

To navigate these changes, businesses should focus on benefits that drive engagement and retention, while delivering tangible financial advantages.

Enhanced pension contributions, for example, provide tax relief and remain a cost-effective way for businesses to support employees without increasing taxable salary costs.

Salary sacrifice schemes (also known as salary exchange) can also prove cost-effective, enabling employees to make pension contributions or participate in initiatives, such as cycle to work schemes and electric vehicle leasing.

Private medical insurance (PMI) adds additional value by supporting employee health while reducing sickness absence.

Furthermore, perks such as discounted gym memberships and childcare vouchers contribute to financial wellbeing, making employees feel more supported.

Justifying benefits investment

Given these rising costs, businesses must not only choose the right benefits but also demonstrate their impact. With growing budget constraints and increasing employment costs, every benefits-related expense must be justified.

A key consideration is how benefits align with wider corporate goals. Organisations focusing on sustainability, for example, can integrate benefits such as eco-friendly commuting incentives to align with environmental goals, while offering tax-efficient advantages.

Businesses prioritising employee wellbeing can enhance their offering with mental health support, flexible working arrangements and wellness programmes.

When benefits reflect corporate strategy, their broader value becomes clearer, beyond financial metrics.

Demonstrating a return in a competitive market

Beyond selecting tax-efficient benefits, companies need to measure and communicate their impact to remain competitive.

One effective method is benchmarking against industry standards. By analysing data from a wide range of businesses, Towergate can provide insights into how an organisation’s benefits package compares to competitors.

This enables employers to identify gaps, align offerings with market trends and enhance their talent attraction and retention strategies.

Another key component is leveraging technology to track engagement. Digital benefits platforms allow HR teams to monitor uptake rates, employee feedback and usage trends over time.

Understanding which benefits employees actively use and value can help businesses refine their packages and ensure they remain relevant and cost-effective.

Quantifying the financial value of benefits is also essential. Salary exchange pension schemes, for example, not only reduce employer NI contributions but also increase employees’ pension pots in a tax-efficient manner.

Healthcare benefits, such as PMI and employee assistance programmes (EAPs), support mental and physical wellbeing. Group income protection policies can provide early absence management and rehabilitation support. All these benefits can reduce absenteeism and boost productivity.

The long-term impact of a well-structured benefits package extends beyond cost savings – it strengthens employee satisfaction and loyalty, reducing the recruitment and training costs associated with high turnover.

Practical strategies for maximising benefits value

To ensure benefits deliver the greatest impact, businesses must take a proactive approach.

Conduct regular benefits audits to assess whether current offerings meet workforce needs.
Engage employees through surveys and feedback sessions to identify the most valued benefits and areas for improvement.
Offer cost-effective solutions, such as voluntary benefits schemes, which allow employees to access perks such as gym memberships or shopping vouchers at reduced rates.
Implement flexible benefits models that allow employees to tailor their benefits to suit their personal needs, enhancing engagement and perceived value.

Communicating the value of benefits

Even the best-designed benefits package loses value if employees don’t fully understand or appreciate it.

Effective communication is key.

Provide total reward statements to help employees see the full value of their package, including tax-efficient savings.
Use multi-channel communication, from benefits portals and email campaigns to manager briefings, to ensure employees are informed.
Offer personalised benefits education through workshops, webinars or one-on-one consultations.
Ensure leadership advocacy – when senior executives actively promote and use benefits, employees are more likely to follow suit.

A cost-conscious approach

With upcoming tax and NI changes, businesses must adopt a proactive approach to benefits planning.

In a world where every decision is scrutinised, employee benefits should be viewed as a strategic tool.

By prioritising tax-efficient benefits, leveraging data to track engagement and communicating their value effectively, companies can ensure that their benefits strategies remains both cost-effective and competitive.