Recent research has shown that 80% of organisations believe that the main advantage of running a flexible benefits scheme is that it recognises the diverse needs and values of staff and that it is important to realise that ensuring staff remain motivated, it may even help increase productivity, loyalty and levels of engagement.
However, a study compiled by Mercer showed that only 14% of UK employers offered flexible benefits – a low figure considering that 80% of organisations believe that Flex is a key retainer and motivator of staff.
Mercer polled 1,700 worldwide organisations (which included 135 in the UK) and according to this research 14% of UK respondents offer a considerable amount of flexible benefits in their employee benefits provision, whilst 28% provide some flexible benefits. The most common benefit at 84% was childcare vouchers followed closely by PMI at 75%.
How is flexible benefits defined? It appears that this term has been blurred over the last few years. Historically, flexible benefits referring to salary sacrifice, meant an employee would give up the right to ‘cash’ pay in return for the employer’s contributions to an approved retirement benefits scheme. The term ‘salary sacrifice’ has now increased to meaning where an employee gives up some of their salary to receive a benefit in kind.
Flexible benefits is a ‘formal plan run for a set contract period whereby staff can opt into or out of employer paid benefits, select employee paid benefits or take cash’. Flexible benefits are also known as Cafeteria benefits. There are three main types of benefit plan; core benefits, flexible benefits and voluntary benefits. These describe the way the benefits are offered, as opposed to the types of benefits. What has become confusing, is the interchanging and blending of flexible benefits with voluntary benefits. This means that people have used the term voluntary benefits in the past to describe benefits that are voluntarily selected.
According to Towers Watson research ‘2010; Flexible Benefits’, they found that there was an increase in the amount of employers who do not think that their organisation offered enough flexible benefits. This has risen from 5% in 2009 to 15%. They also noted the time and administration work involved and whether flexible benefits were right for all companies. Towers Watson also noted that in some cases, the reason may be that employers had reduced the ‘perks’ available during the recession and that this had not been communicated to staff members.
Although we have seen some confusion in the way flexible benefits is described and marketed and additional uncertainty in the market place following certain government plans (the decision to withdraw the tax break available on childcare vouchers) the interest in flexible benefits schemes shows little sign of diminishing. Paul Bartlett, head of product development for benefits at Grass Roots has said that “fewer organisations are now offering flex to gain market leadership; instead, some employers are having to offer flexible benefits because their competitors are doing so”.
So what are the cases for Flex?
Flex offers employees a wide range of benefits than they may receive in a core package and accommodates the diverse needs of staff. It also allows employers to offer ‘new’ benefits so they can be seen as ‘leading’. Employers can control the cost which ensures they can manage this. Flex has also been seen as a great way to help merge company’s packages and integrate them. We have seen this recently in the news with Philips.
With the modern online systems and consultancies available, admin is simpler and can help bring costs down. 74% of companies use online systems to help with administration and 67% use consultancies.
• 57% organisations said flex improves retention
• 35% organisations said it makes the most of tax breaks
It is important however to keep Flex fresh, learn from employers that have already implemented flex plans and keep up to speed with HMRC and government plans.
Flex…it’s a no brainer!
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