Voluntary benefits are increasing as the main precursor to flex, while childcare vouchers and bikes for work continue their rise in popularity, says Jennifer Paterson
Making the transition to flexible benefits requires a change in how staff think about their perks. The manner in which benefits are offered or communicated before flex is introduced will have a huge impact in preparing the workforce for that change.
In last year's research, 30% of respondents offered voluntary benefits as a precursor to flex. This year, that number has grown to 44%. Offering standalone tax-efficient benefits through salary sacrifice and total reward statements are also common means of preparing employees for a flexible benefits scheme, because they introduce choice and help staff understand the value of the package.
Getting the balance right when offering a flexible benefits scheme can be quite complicated. Employers will want to provide an ample amount of choice, while also keeping the plan well structured so employees do not become overwhelmed by options.
Back in 2008, the most common number of benefits offered was between five and 10, with 38% providing this amount. This year, most respondents (39%) offer between 11 and 15 benefits in their flex scheme, illustrating an increased emphasis on choice. However, 31% still offer between five and ten benefits.
The proportion of employers which offer more than 20 benefits has always ranked the lowest, and 2011 is no exception, with only 7% including that many perks in their flex scheme. Meanwhile, the percentage of respondents offering a small selection of fewer than five benefits has stayed relatively static in the past few years - 12% in 2008, 11% in 2009, 7% in 2010 and 10% in 2011.
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Benefits employers offer through flexible benefits schemes. Benefits offered through flex have changed little over the years. Dental insurance and critical illness insurance have been popular since 2002 and are still near the top, but childcare vouchers and bikes for work have been the big climbers, both typically offered through salary sacrifice.
In 2002, 24% of employers offered childcare vouchers through flex. In 2007 the figure was 38%, and the following year it shot up to 93%. In 2011, these vouchers are nudging towards 100%. From 6 April, the income tax and national insurance relief will be restricted to the lower income tax rate. Employees already in a scheme will be unaffected.
Bikes for work have become common in flex schemes, but HM Revenue and Customs has said the benefit must be available to all staff to qualify and redefined the term "fair market value" to clarify the terms at the end of the hire period. In 2007, bike schemes were offered by 20% of employers, rising to 63% in 2009 and 83% in 2010 and 2011.
Read more from Employee Benefits/Towers Watson Flexible Benefits Research 2011
