Three months before the annual talks, the focus is on purchasing power. 90% of employees believe they deserve a raise before the end of 2023 (OpinionWay & Benefiz 2023).
In a year particularly marked by inflation, employees expect, often precisely, that the company supports them in terms of purchasing power. HR and managers will have to act, but they are faced with the same problem: proposing a salary increase has never been more expensive with limited impact on the purchasing power of employees, moreover, in a gloomy economic context and difficult for companies.
So how can you help your employees without ruining your company’s finances?
When you talk to a compensation specialist, he always answers you in the same way: “have you implemented social benefits?”. Indeed, this alternative to a net salary increase offers many possibilities and is significantly less burdensome – if not at all – compared to a salary increase.
Social benefits, the large groups that generally have compensation and benefits managers in their HR departments, know them well. These “package fee” pioneers quickly realized their interest. Unfortunately, this is not yet the case for VSE/SMEs: they don’t have dedicated teams, tools or less time to implement an optimized reward policy. This is a real handicap for competitiveness, unanimously recognized by all VSE/SME employees (who according to INSEE represent 50% of employees in France) who are perfectly aware that they do not enjoy the same advantages as their fellow employees in large groups.
Simplifying and encouraging these tools is clearly the desire of the state through reforms (value sharing law, with the upcoming mandatory implementation of profit sharing for VSEs/SMEs between 11 and 49 employees, or even the dematerialization of meal vouchers to make the system more attractive), but progress is slow despite the economic situation.
So, how can social benefits become an ally of employees by helping them gain purchasing power, but also employers by guaranteeing them a cheaper option? Salary increase yes, but at what cost?
Better understand the gross salary increase trap
A salary increase is often favored by employees. It is quite logical, the total amount of fixed salary is a synonym for social status or key information in the construction of a real estate project. However, the latter is rarely the most interesting for its purchasing power. It is also the most expensive option for the employer and his teams.
The numbers are instructive. When we add employer and employee contributions to income tax,Total costs can be up to 68% of the amount spent by the employer. For the sake of illustration, for every EUR 1,000 increase paid by the employer, the employee will receive only EUR 320. An important fact, but often not present in the minds of those involved in salary negotiations.
The pitfall of fixed wages (and also individual variable wages) is this evaporation of enterprise effort. And this is a trap that small and medium-sized enterprises with limited options must not fall into. The latter must maximize the impact of their wage expenditure (which is often their first cost). Otherwise, it will be increasingly difficult to recruit, motivate and retain talent. Fortunately, there are other ways to increase the number of employees without losing money.
Social benefits, knockout winners
Available to everyone, social benefits are still undervalued and they use relatively little VSE/SME. In 2022, less than 10% of them offered restaurant vouchers. Only 13% of them offered employee savings compared to almost all large groups.
As mechanisms intended to directly improve the position of employees, bonus payments are not as burdensome as gross salary. For every euro invested, the rate of evaporation is much lowerup to 3 times lower than the salary.
Perks like meal stamps, mutual insurance, or even employee savings can help significantly improve an employee’s quality of life. Many other useful measures for the daily life of the French and without any social security burden for the employer exist, but are mostly unused in VSEs/SMEs (gift vouchers, mobility vouchers, CESU, etc.). While reducing out-of-pocket costs, all of these benefits add value to the overall employee benefits package.
By paying less, the employer can satisfy the demands of its employees, which are even more legitimate in this period of declining purchasing power. The employer has a more credible approach to concrete solutions on salary increases. From the opposition, often sterile, on the net salary, we move on co-construction of a tailor-made reward package.
A win-win solution for both the employee and the employer
Social benefits can then become a fantastic talent retention tool and a real point of differentiation for a company willing to put in the effort to put these mechanisms in place. Without a doubt, social benefits represent the perfect tool for the best combination of optimizing the social impact of VSE – SMEs, while preserving their economic efficiency.
Therefore, in a difficult and inflationary context, it is even more important that VSE, MSP or a fast-growing startup act differently from traditional remuneration and that social benefits be their priority HR project for the beginning of 2024, with the aim of offering greater purchasing power to employees.