Navigating the new political landscape: Key changes for UK reward and benefits leaders

With a new political party in power in the UK, significant changes are on the horizon for reward and benefits leaders. The new Labour government has introduced policies aimed at transforming the workplace, so we’ve put together a briefing to help HR and benefits professionals effectively navigate the evolving reward landscape. 

Our recent webinar on the post-election view of the UK reward and benefits landscape shed light on what we can expect from this new government, several key areas that we feel employers should prioritise, and how best to prepare for the changes ahead.  

Here are six changes and considerations we think HR and benefits professionals need to be aware of as they evolve their strategies over the coming months… 

An overview of key commitments the Labour government have agreed to  

 The new government has committed to: 

• ‘Making work pay’ and enhancing employment rights
• Getting people back into employment
• Establishing day-one rights for employees
• Supporting working parents
• Strengthening equality laws  
• Bringing forth a new Pensions Schemes Bill 

What are the implications for employers?  

The impact of merging the Real Living Wage and National Minimum Wage 

The potential merging of the Real Living Wage with the National Minimum Wage will impact many employers. Currently, around 15,000 UK employers have signed up to the Real Living Wage, agreeing to pay £12 or more an hour. This move benefits hundreds of thousands of employees by offering higher wages. However, if the government merges these two wage policies, many employees might lose out on the valuable salary sacrifice schemes that reduce taxable income and national insurance contributions. 

This change could necessitate a shift in how benefits costs are deducted from employees’ pay, possibly making net pay deductions more popular. Working with a benefits platform provider can be highly advantageous in managing these transitions, as the changes proposed could quickly become complex for some employers. 

While increasing the minimum wage is broadly seen as positive, it could affect employees’ access to important benefits. Employers can take action by engaging with policy discussions to ensure the government understands the implications of such changes on both employers and employees. 

Increased complexity in benefits administration 

Employers will likely face more complex benefits administration as a result of the policies outlined above. While it’s great these changes will benefit employees, they often come with additional costs for employers. Expect a busy period for HR, reward, and benefits teams as these new regulations take effect. The increased complexity and associated costs will require a strategic approach to manage the transition effectively. 

One significant change is the move to a single status of worker. Currently, UK employment law recognises three types of employment status: employees, self-employed contractors, and workers. Employees enjoy a wide range of rights and protections, while workers have some, but not all, statutory rights. The new single status means that anyone who isn’t self-employed will gain the same rights as employees from their first day of employment. 

This shift will necessitate audits to determine the ratio of employees, workers, and self-employed contractors within organisations – identifying these ratios will help employers understand where changes need to be made. Employee benefit schemes, payroll systems, and risk and compliance procedures will likely all need reassessments. 

With workloads increasing and many companies still implementing manual processes to deal with all things employee benefits, focussing on getting benefits administration right will be key. Indeed, more than one-third of the fines HMRC issued to organisations this year were due to the underpayment of minimum wage, owing to incorrect benefit calculations. With the expected changes to the National Minimum Wage looming, the likelihood of human errors is set to increase. Effective benefits technology can prevent errors like these, providing automatic updates to reflect changes in local laws and regulations and ensuring compliance without manual intervention.    

Benefits technology will become even more important in delivering an exceptional employee experience 

The pandemic was a watershed moment for employee benefits, sparking unprecedented interest and investment. While engagement has slightly levelled off, investment in reward and benefits remains higher than pre-pandemic levels. Modernising benefits technology is a key focus area for many organisations. In fact, 78% of UK employers plan to implement benefits tech in the next 12 months, up from 72% last year. 

Despite these efforts, there remains a significant gap in employee satisfaction with workplace technology. Currently, 61% of employees feel that the technology they use at work lags behind what they have access to at home, such as Netflix, Amazon, and Spotify. Only 23% of employees rate their benefits technology as excellent, and 24% of UK employees believe their benefits could be improved with better technology to find and choose benefits and perks. As a result, employers are increasingly looking to level up their employee benefits experience. 

Increased focus on employee wellbeing 

The Labour government’s agenda strongly emphasises employee wellbeing, making it a critical area for employers to focus on. The pandemic has already shown the importance of benefits in supporting employee wellbeing, and this trend is expected to continue. Indeed, 84% of employers said that wellbeing support was a very important pillar in providing a great employee experience in their organisation. 

To align with the government’s agenda, employers can integrate comprehensive wellbeing programmes into their benefits packages. This could include mental health support, physical wellness programmes, and flexible working arrangements. With waiting times for NHS services increasing, growing pressure is being put on employers to better support their employees’ health and wellbeing; organisations that significantly invest in employee wellbeing are likely to yield substantial returns in terms of productivity and employee satisfaction, while helping employees to live better. 

Preparing for upcoming regulatory changes 

The new regulatory changes the government is making will mean HR and Reward leaders need to proactively prepare for their implementation; this might involve revisiting current benefits strategies, streamlining their benefits administration, and ensuring that their benefits technology is equipped to handle new requirements. 

To help give employers the chance to shape these new government policies aimed at transforming the workplace, I will be chairing the new Policy Liaison Group (PLG) for workplace wellbeing. This group unites large UK employers and benefit providers to discuss wellbeing, reward, and benefits. By joining the PLG, employers can influence policy, ensure their perspectives are heard (especially concerning tax efficiencies and health benefits), and stay ahead of regulatory changes. 

As we move forward, employee benefits will play a crucial role in shaping the future of work – employers who adapt to these changes and invest in their workforce will be well positioned to thrive in this evolving environment. 

For more insights on the key changes UK reward and benefits leaders should be aware of, watch the full on demand webinar, A post-election view of the UK reward and benefits landscape.