FLEXIBLE BENEFITS
New flexible benefits survey
“It’s official, flexible benefits are now firmly part of the reward landscape,” according to consultants Towers Perrin, sponsors of a recent survey examining the approach by Employee Benefits magazine.
That view is based on the finding that currently, a third of organisations offer a flexible benefits plan and a further third are either implementing or planning to implement flex for employees.
The finding is particularly significant because for many years now, flexible benefits have been hailed as the next big thing but widespread growth has never seemed to materialise. Now the corner seems to have been turned, Towers Perrin goes on to say that it believes that the next step will be a stronger move towards total compensation with “flexible” pay embracing all elements of pay and benefits.
%ADVERT%
Why introduce flex?
According to those respondents with flexible benefits schemes, a main advantage is that it recognises the diverse needs and values of the workforce and enhances the image of the employer. In addition, it improves employee understanding and appreciation of benefits and aids recruitment.
Despite these advantages, however, there were still 7% of survey respondents that rejected the idea of flexible benefits.
On the whole, the survey says that employers are embracing flexible benefits with many reinvesting cost-savings from salary-sacrifice arrangements back into their schemes. It adds, however, that the government’s removal of tax breaks associated with home computers last year has made employers think carefully about using salary sacrifice in the future.
So why are there not more schemes?
Even though there is an overall widespread positive perception of flexible plans, the survey highlighted a number of barriers to introduction.
Over half of companies are concerned with the costs of implementation.
As many as 44% mentioned problems with getting approval for a business case for introduction.
In addition, other concerns included the complexity of administration and difficulties with updating existing technology.
Where next for flex?
According to a commentary appended to the report, written by Jacqueline Otten, principal at Towers Perrin, in the future the distinction between pay and benefits will diminish. Instead, employers will start to offer “real flexibility”, with additional salary provided when employees choose to drop benefits in favour of cash.
This approach, she adds, enhances the ability of employers to control future benefits costs and clearly communicates to employees the overall value of the package.
Otten cites the example of EDS as one company that has already introduced a combined flexible approach to pay and benefits. Rob Gerdes, EMEA director of compensation and benefits at EDS, explained that:
“While it has involved a substantial change for all, we have gained significantly through offering a really flexible and transparent package, and employees have appreciated the ability to structure their reward to meet their needs, giving EDS more value from our spend on pay and benefits."
Key survey results
Carried out in November 2006, 579 survey responses were received from readers of Employee Benefits magazine and users of www.employeebenefits.co.uk. The study concentrates on employers which offer a traditional flex plan that is communicated as a whole and run for a set period of time.
Advantages of flexible benefits
More than four-fifths of respondents said flex recognised the diverse needs/values of the workforce.
As many as three-fifths thought it improved the image of the employer.
More than half believed that it promotes understanding/appreciation of benefits, reinforces the concept of total reward and improves recruitment.
Barriers to introduction
The two main problems mentioned, both by 57% of survey respondents, was either the cost of implementation or the complexity of administration.
A further 53% were concerned with the ongoing costs of administration.
Other main points mentioned included getting approval for the business case for flex, problems with updating existing technology and the potential removal of tax breaks by the Treasury.
Usage of flexible benefits
Childcare vouchers were the most popular benefit to be included in a scheme, offered by 84% of companies with flex, closely followed by dental insurance and private medical insurance.
Almost all childcare vouchers are offered as part of a salary sacrifice approach while 16% of companies with flex offer pensions via salary sacrifice.
A quarter of organisations offer mobile phones through their schemes but none do so via salary sacrifice.
45% of companies that offer flexible benefits include between five and ten options to staff.
Flexible benefits administration
A half of schemes are done in-house, 23% are fully outsourced and 27% are partly outsourced.
Employers are increasingly using consultants for advice on their schemes with the most common reasons cited being provider selection and scheme design.
Over four-fifths of companies use some type of online method to administer their schemes while 28% use a call centre and 15% take a paper-based approach.
Want to know more?
Title: Employee Benefits/Towers Perrin Flexible Benefits Research, January 2007.
Methodology: Questionnaires were sent to readers of Employee Benefits and users of www.employeebenefits.co.uk in November 2006.
Sample size: Completed questionnaires were received from 579 organisations.
Availability: To download the 12-page report, free of charge, in PDF format visit the Employee Benefits magazine site at www.employeebenefits.co.uk and choose the “Research” section. Or jump to www.employeebenefits.co.uk/item/1993/23/5/3.
Employee Benefits Group consists of the UK's leading benefits publication, Employee Benefits. This magazine is published monthly and is written for benefits practitioners in large UK companies. To find out more visit www.employeebenefits.co.uk.
Towers Perrin is a global professional services firm that helps organisations around the world optimise performance through effective people, risk and financial management. The firm provides innovative solutions to client issues in the areas of human resource strategy, design and management; actuarial and management consulting to the financial services industry; and reinsurance intermediary services. To find out more visit www.towersperrin.com.