Why does benefits benchmarking matter more than ever?

Lately, across a lot of HR workshops, regardless of sector one theme keeps coming up again and again: benefits are under review. Not just casually, either. Organisations are actively questioning what they offer, why, and whether it’s actually doing anything useful. It’s not surprising.

Costs are rising, expectations are shifting, legislation is changing and HR teams are being asked to make more strategic, evidence-based reward decisions. Benefits can’t just sit in the background anymore. They’re moving front and centre as part of attraction, retention and employee experience conversations. But what’s also clear is that many organisations are trying to review benefits without the right foundations in place; without good data, without consistent systems and sometimes without clear communication to employees about what’s actually available.

So, the conversation isn’t just “should we review benefits?” It’s how we review them properly and what we do differently afterwards.

The shift from reactive to strategic benefits

Historically, benefits evolved in a fairly piecemeal way. Something might have been added during recruitment pressure, and another during COVID, or a new policy introduced after a leadership request. Over time, the benefits package becomes a collection of good intentions rather than a coherent strategy. That’s now changing.

Organisations are starting to ask more structured questions:

• Are our benefits aligned with workforce demographics?
• Are they supporting retention in key areas?
• Are we spending money where employees actually see value?
• Are we competitive externally?
• Are we consistent internally?

This is where benefits benchmarking is becoming more important. Not as a tick-box exercise, but as a way to anchor decisions in real data. Without benchmarking, it’s very easy to either overspend in the wrong places or fall behind market expectations without realising. And in a tighter cost environment, both are risks.

Early careers churn is forcing the issue

One of the drivers behind these reviews is early careers turnover. There’s growing concern about how quickly younger employees move roles, often within 12-18 months. Pay progression, career clarity and benefits all play a role. Recent reporting from Personnel Today highlights how entry-level opportunities have dropped to their lowest level since 2021, while organisations simultaneously worry about talent pipelines and retention.

At the same time, discussions around AI and job disruption, compared by the Bank of England to the industrial revolution, are reinforcing the need to invest in internal mobility and development. Put those together and the message is pretty clear. Organisations need structured career pathways, transparent pay progression and benefits that support development, wellbeing and flexibility. Otherwise, early-career employees will simply move elsewhere.

Benefits strategy is increasingly being used as part of that retention toolkit. Things like:

• Learning allowances
• Career coaching
• Financial wellbeing support
• Flexible benefits
• Lifestyle benefits aligned to younger demographics

But again, these only work if they’re deliberately designed, not just added in response to pressure.

PMI costs are prompting difficult conversations

Private medical insurance is another area under scrutiny. Premiums have increased significantly in recent renewals, and organisations are having to make decisions they may have avoided previously.

Common review areas include:

• Excess levels
• Referral pathways
• Scheme eligibility
• Dependant cover
• Funding models

Some organisations are moving to tiered access. Others are introducing higher excesses to control costs. Some are widening access but reducing coverage. There’s no single right answer, which is where benefits benchmarking becomes useful.

It is helpful to understanding what comparable employers are doing, and how changes might affect attraction and retention.

At the same time, there’s a noticeable shift towards broader wellbeing support. Employers are looking at:

• Mental health resources
• Digital GP access
• Preventative health support
• Employee assistance programmes
• Financial wellbeing tools

This reflects a wider move from purely medical benefits to more holistic wellbeing strategies.

Total reward communication is still the missing piece

One of the more frustrating themes coming out of our HR workshops is that many organisations already offer competitive benefits - employees just don’t realise it.

That’s where benefits platforms and total reward statements are gaining traction. They’re being used as:

• Communication hubs
• Benefit enrolment tools
• Total reward dashboards
• Engagement touchpoints

When employees can see salary, pension, bonus, benefits and wellbeing support in one place, take-up improves and the perceived value often increases significantly. It sounds obvious, but it’s still not consistently implemented.

Transparent communication is becoming just as important as the benefits themselves. Without it, even strong packages can fail to deliver engagement or retention impact.

April compliance changes add another layer

This year’s April updates are also pushing organisations to review policies and benefits together. The Employment Rights Act 2025 introduces several changes, alongside the usual increases to national minimum wage and gender pay gap reporting obligations.

Ben Willmott from the CIPD has already highlighted that employers will need to devote significant time and resource to compliance, updating policies and ensuring managers understand new obligations.

Some of the key areas affecting benefits and people policies include:

• Day-one statutory sick pay eligibility
• Day-one paternity leave rights
• Day-one parental leave
• Whistleblowing protection for sexual harassment disclosures
• Fair Work Agency enforcement changes
• Holiday record-keeping requirements
• Increased redundancy consultation penalties

These changes don’t just require policy updates, they also prompt broader questions around wellbeing, absence management and family-friendly benefits.

For example, day-one statutory sick pay may increase short-term absence levels. That pushes organisations to strengthen wellbeing support and absence management tools. Which in turn connects back to benefits strategy. Everything starts to link together.

Family-friendly benefits moving up the agenda

The removal of qualifying periods for paternity leave and parental leave is particularly significant. It reinforces the expectation that employers should support working families from day one.

Forward-thinking organisations are using this as an opportunity to review:

• Enhanced parental leave
• Fertility support
• Pregnancy loss policies
• Childcare support
• Flexible working arrangements
• Return-to-work support

These aren’t just compliance considerations. They are also increasingly important for attraction and retention, especially in competitive talent markets.

And again, benchmarking helps. Organisations want to understand what “good” looks like, not just what is legally required.

The push for better data and systems

A consistent theme across all these discussions is the need for better data. Many organisations simply don’t know:

• Which benefits are used
• Which are valued
• Which influence retention
• Where costs are increasing
• How they compare to the market

Without this information, decisions become subjective. Or driven by anecdote. Or based on what leadership personally values.

Better HR systems, benefits platforms and analytics tools are helping close that gap. Organisations are starting to track:

• Benefit utilisation
• Cost per employee
• Engagement by demographic
• Retention correlations
• Absence trends
• Turnover patterns

That’s when reward decisions become more strategic and evidence-based.

Absence and turnover data reinforces stability, but not complacency

Recent reward survey data from our UK Reward Management Survey suggests absence and turnover levels remain broadly consistent. Median sickness absence sits around 3.04 days, and employee turnover around 14 per cent. On the surface, that looks stable.

But stability doesn’t mean there’s no risk. It may simply mean organisations are maintaining equilibrium while costs rise and expectations shift.

The day-one sick pay rules might be an opportunity. If a benefits strategy can improve engagement, wellbeing and retention even slightly, the impact could be meaningful. Some hope for less presenteeism and a reduced spread of illness. Plus reduced turnover, especially when labour costs are increasing elsewhere.

Transparency is becoming non-negotiable

Another takeaway from workshop conversations is that employees increasingly expect transparency. Not just in pay, but in benefits too. They want to understand:

• What’s available
• How it compares externally
• How decisions are made
• How benefits evolve
• How they can influence change

This doesn’t mean publishing everything. But clearer communication builds trust, particularly when changes are necessary, like PMI redesign or eligibility updates.

When employees understand the rationale, they’re more likely to accept change. Without that context, benefits changes can feel like cuts, even when they are strategic adjustments.

Reviewing benefits isn’t just a cost exercise

There’s sometimes a concern that benefit reviews are just about reducing spend. In reality, most organisations are trying to rebalance rather than cut. That might mean:

• Reducing low-value benefits
• Enhancing wellbeing support
• Improving family-friendly policies
• Investing in flexible benefits
• Improving communication
• Aligning with D&I goals

It’s about making benefits work harder, not necessarily spending less.

The direction of travel is clear

Across sectors, the same priorities are emerging:

• Better data and systems
• More transparent communication
• More strategic and evidence-based reward decisions

Benefit reviews sit at the centre of all three. Organisations that take a structured approach, using benchmarking, improving communication and aligning benefits to workforce needs, are more likely to see real impact.

Benefits are no longer a background HR activity. They’re becoming a strategic lever. And for many organisations, this is the moment they’re finally being treated that way.