25 JAN 2024

One-off bonus payments. A potential solution to the cost of living crisis?

In the wake of the festive season, employees often face financial strain, making the allure of annual bonuses particularly strong. Bonuses, serving as a recognition of hard work, are crucial in sectors like financial services, where they significantly impact talent retention, as highlighted by recent ONS figures.

During a cost-of-living crisis, bonuses undoubtedly offer relief. Our research shows that 50% of employees depend on them financially, a figure that rises to 58% among younger workers. However, is this approach the most effective for financial support?

Interestingly, many employees prefer consistent, year-round support over one-off bonuses. For instance, 61% of younger workers would rather have benefits like savings schemes or discount vouchers. Additionally, the majority favour a pay rise over a bonus, but with 29% of businesses unable to increase salaries, alternative solutions are needed.

Enter comprehensive benefits packages. These can include varied support, from retail vouchers aiding in food costs to financial education workshops. A well-tailored benefits package, encompassing both financial and lifestyle perks, is becoming increasingly valued by employees, with over 40% considering it a top employment criterion.

The challenge for employers extends beyond offering these benefits. They must ensure that employees understand the full value of their packages, which can be more complex than a straightforward bonus. Tools like Total Reward Statements are becoming popular for this reason, as they clearly outline the worth of these benefits.

However, developing platforms to showcase these statements can be resource-intensive. The key lies in effective communication with employees to understand and meet their needs, leading to better engagement and value from these packages.

In conclusion, while bonuses remain important, employers are recognising the need for more holistic approaches to employee remuneration. As we move through 2024, it will be interesting to see how businesses adapt to these changing demands.