This article is brought to you by our sponsor Hewitt Associates.
In terms of both market penetration and the variety of items on offer, flex has plenty of room to grow, as employers consider using it as a vehicle to help staff generate wealth and save for retirement, says Darren Smith, Reward Consultant, Hewitt Associates
The prevalence of new flexible benefits plans among UK employers continues to rise with Hewitt’s latest flexible benefits survey indicating that 34% of employers are either working towards implementing a flex plan or considering introducing one. More than 30% of organisations surveyed already have a flex plan. Many organisations introducing a flex plan are medium sized with fewer than 5,000 employees. The availability of a wider range of more efficient delivery and administration solutions has made the implementation of flex in this market more feasible. This is reflected in the significant increase in the use of web based methods used to present flex choices to employees - over 89% of employers surveyed now use the web for enrolment and election of individual employee choices.
While the prevalence of new flexible benefit schemes continues to increase, Hewitt’s Flexible Benefits Survey 2007 also indicates that 45% of existing flex plans have been operational for four or more years. The challenge faced by employers with established flex plans is how to keep the flex plan fresh, relevant and engaging for staff. Consequently, the area where employers would like to see the most improvements from their flex provider is in introducing new ideas to further develop the flex plan.
Although there are a number of new benefits that can help to increase interest in a flex scheme, targeted communication aimed at specific groups of employees is the most likely way to achieve increased engagement with the flex plan and improved take up of the benefits offered. This segmented approach to communication also helps employers to understand employee preferences.
Another new area of significant interest and discussion is the concept of “total wealth” opportunity that goes beyond traditional pension planning to look at all aspects of possible wealth generation while in employment. Most employers offer a corporate sponsored pension plan as the primary mechanism for providing income for employees after retirement. The concept of wealth generation involves building wealth for retirement through a number of alternative vehicles, such as company ISAs, investment “products”, employee share plans, property investments and debt repayment.
The Performance and Reward Centre (PARC), a thought leadership forum of HR professionals, is currently engaged in a major piece of work looking at the future of reward. The thrust of the work makes it probable that, at best, pensions will be downgraded to a mere part of an employee wealth creation strategy and, at worst, will be deemed irrelevant for large sectors of the workforce where other wealth creation vehicles, facilitated by their employer, are more likely to help recruitment and retention. The emphasis appears to be shifting to holistic ‘wealth’ and away from ‘pensions’.
Flexible reward is a vehicle that may support this process of wealth creation by providing a number of different options for employees to structure their reward deal with their employer. This concept could be expanded to other areas of the total reward package, such as, working hours and career development. This will enable “lifestyle” and wealth choices to reflect employees’ needs at all stages of their working life.
The views and opinions in this article are those of our sponsor, Hewitt Associates, and do not necessarily reflect those of www.employeebenefits.co.uk.