Businesses are adjusting their operations and services to better reflect society’s rapidly evolving expectations regarding environmental, social, and governance (ESG) standards. Alongside these changes, it is critical that employee benefits reflect these values to improve the company’s image and reputation to attract and retain talent.
In today’s competitive labour market, the decision to join or stay with an employer is increasingly influenced by the organisation’s ESG stance — making employee benefits a critical area of focus.
Depending on each business’ ambitions, there is a wide range of options available to enable your organisation to successfully address all three ESG components.
The “E” in ESG
The increased concern about the consequences of climate change means that employees and applicants expect an employer to prioritise workforce sustainability. Both millennials and ‘Gen Z’ generations are showing (opens a new window) more mindfulness of the world and their impact on it. Promoting benefits in this space can have a real impact on the image and reputation of a company.
—Cycle to work
Perhaps the most obvious tool in the environmental component, cycle to work schemes — via salary sacrifice initiatives — can save an employee more than 25% on a bike and accessories. Employees do not need to pay anything upfront, with payments taken tax efficiently from the salary by the employer. While the emphasis lies on the environmental aspect, employees taking advantage of this offering may also benefit from a health and wellbeing perspective.
—Electric cars
Electric vehicles can be offered on a salary sacrifice basis, and help to reduce one’s carbon footprint, improve air quality, and reduce noise pollution. The salary sacrifice scheme allows employees to pay for an electric car each month from their gross salary — creating a tax efficient way to fund greener vehicles. With the increase in employer National Insurance contributions scheduled for April 2025, electric vehicles schemes will also be particularly advantageous for employer cost mitigation.
—Pensions
Many employers are looking to help their employees with their financial wellbeing, and education on their pension fund investments can be an opportunity to align both financial and environmental strategies. Offering a green or ESG focused investment option for the pensions scheme can be a great opportunity for businesses to show their commitment to these goals. Excluding investments in sectors and industries that harm the environment may also offer better returns in the future as economies worldwide shift towards sustainability.
Other options to explore the “E” in ESG may include travel loans, car-pooling, carbon offsetting and sourcing from local suppliers.
The “S” in ESG
Arguably the most innovative area in employee benefits, a variety of new solutions are addressing rapidly changing societal needs and expectations.
—Fertility
Couples have been postponing having children, in many cases to allow women to focus on their careers. In England and Wales, the average age (opens a new window) of women giving birth for the first time is now 29.1 years, up from 23.7 in the early 1970s. This has created a growing number of couples struggling to bear a child when they feel ready for it — creating significant stress not only in the couple’s relationship, but also potentially affecting their wider social and professional relationships. Therefore, businesses are increasingly exploring opportunities to support their employees. Companies can start by offering clinical advice, financing, and benefits for fertility, family forming, sexual and hormonal health, menopause, and reproductive health. Insurers have responded by developing fertility-specific benefits and support solutions for employers to provide to their employees.
—Gender reassignment
Issues around transgender rights and gender reassignment have risen the corporate agenda. In March 2021, there were 262,000 people living in England and Wales who identified with a gender different from their sex registered at birth, according to the latest Census 2021 (opens a new window) figures. The number of gender identity clinics available on the NHS is limited and there is currently a long waiting list for support. Furthermore, procedures such as facial surgery aren’t usually available through the NHS.
To address the needs of this group and display the company’s commitment to diversity, equity, and inclusion (DE&I) values, businesses can consider offering specialist mental health support and benefits which align with the support offered through the NHS. Furthermore, there may be options to extend medical coverage to include support not readily available from the NHS, such as surgeries to masculinise or feminise the face and hair transplantation.
—Parental support
A level of enhanced maternity is commonplace within corporate organisations, with employers opting to extend the leave length, increase periods of full-pay, and remove service length and return to work requirements. However, companies can go beyond this, and further enhanced parental support options can include: enhanced paternity, enhanced shared parental leave, and mirroring of maternity and paternity policies. When parents return to work, companies can also work to support them. Policies that corporations could introduce are, reduced days/hours for a set period with full pay, hybrid working, flexible leave, and coaching and mentoring for parental return to work. Paid leave and flexible working can also extend for family-based scenarios, such as fertility, pregnancy loss, caring responsibilities, and child/eldercare emergencies. Guidance and resources can be made available to employees via intranet, workshops, mailers, or specific support through vendor solutions.
—Neurodiversity
Neurodiversity refers to the diversity of thought of all people, but it is often used in the context of autism spectrum disorder (ASD) and attention-deficit/hyperactivity disorder (ADHD) or learning disabilities. Businesses can support these employees (opens a new window) as part of their DE&I initiatives by adjusting their group income protection set-up, by promoting financial support and education around basic budgeting and savings or by extending workplace benefits to dependants. This is particularly crucial as the neurodiverse diagnosis waiting lists on the NHS can be very long (opens a new window).
Other options to enhance support within the ‘social’ pillar may include considering gender specific healthcare, wellbeing initiatives, introducing both flexible and trading annual leave, initiatives around corporate social responsibility (CSR), activities with charitable associations and fund raising, and engaging with internal and external networks.
The “G” in ESG
A higher level of transparency required by regulators through corporate disclosures has increased public interest in governance issues, particularly at medium and larger companies. This has driven companies to pay more attention to their diversity and inclusion policies and their ambitions in this area.
—Gender pay gap
In the UK, any employer with 250 or more employees must report their gender pay gap data. A large or even increasing gender pay gap may cause unease among staff and potentially also trigger uncomfortable questions from applicants or investors. Specific goals and a robust strategy are necessary to address the issue and convince stakeholders that the business is heading in the right direction.
—Board diversity
Some companies are complying with mandated minimum requirements for board diversity from regulators, while others are designing and implementing such policies on a voluntary basis. The benefits of a diverse board include, improved decision-making, access to a wider pool of talent, enhanced investor relations, and stronger corporate reputation. A strategy to create a diverse board should consider factors like age, race, gender, educational background, and professional qualifications.
—DE&I initiatives
Employers use DE&I initiatives for both compliance obligations and to make the company culture more attractive to a wider talent pool. Developing a DE&I initiative should include the following steps:
Data collection and analysis to target where change is needed
Strategy design to match business objectives
Implementation of initiatives and policies
Evaluation and continuing audit of the plan
Other initiatives to strengthen the “G” in ESG may include considering your remuneration policy, identifying young or rising stars, and policy management.
Lockton People Solutions help businesses of all sizes define their benefits strategy and design their programmes to reflect their business needs. For more details on our products and services, please visit our ESG and People Strategy Support (opens a new window) page. If you would like to speak with us about your benefits and how to ensure they’re aligned to your corporate ESG agenda, please get in touch:
Andrew Simpson
Vice President Employee Benefits
