The trend for employees to be able to trade their benefits up or down continues, and many staff are active in making changes to their package, says Nicola Sullivan

How flexible benefits schemes are structured has remained fairly consistent in recent years, although the definition of flex has changed quite a lot since it first arrived in the UK in the 1980s. When flex first emerged, it was run as a formal scheme for a set contract period, through which employees could opt in and out of a selection of employer-paid benefits, select employee-paid benefits, or take the cash.

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This has since evolved and the most common way of offering flex now is to enable staff to trade existing benefits up and down, as offered by 30% of employers. This figure has remained fairly static year on year, but is a slight
rise on the quarter of employers that structured their flex scheme in this way in 2009.

This year, enabling staff to take tax-efficient benefits through salary sacrifice arrangements is just as possible as allowing employees to trade benefits up and down, with 30% of respondents structuring plans in this way

Such arrangements are attractive because of the savings employers can make on national insurance (NI) contributions.

Some employers are beginning to offer flexible benefits plans internationally. This year, 11% offer a plan outside of the UK.

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Although employers are keen to offer choice through flex, some want to ensure staff are covered by particular benefits by specifying a core minimum level of cover on some benefits within flex. For the past two years, group risk benefits have been the perks for which employers have been most likely to stipulate a minimum requirement.Such benefits are useful for employees in times of crisis, so it is hardly surprising employers feel obliged to ensure staff have a minimum level of cover.

A smaller proportion (21%) of employers apply the same principle to pension contributions, which is perhaps surprising as we draw closer to the 2012 reforms, which will bring in minimum contributions for employers and
employees, as well as make auto-enrolment compulsory. We therefore expect this to change significantly over the next few years with the proportion ultimately rising to 100% to comply with the new pensions legislation.

This year, employers are also more likely to insist that employees take annual leave above the statutory minimum. This may be because of their desire to tackle workplace stress. This has doubtless been exacerbated by the economic downturn, which put a strain on resources and caused workforces to shrink due to redundancies and recruitment freezes.

However, in some cases employers offer staff greater flexibility by enabling them to trade down cover on certain benefits in return for cash. This can be particularly useful for employers wanting to cater for younger staff, those with fewer family commitments or those who are also covered under their partner’s employee benefits schemes. The most popular benefit employees can trade down on is holiday, followed by life assurance.

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Flexible benefits schemes tend to be offered to the entire workforce, although 28% of respondents structure their scheme differently for different groups of staff.

Employees in flexible benefits schemes are fairly active when it comes to making changes to their benefits. This year, 14% of employers said 61% to 70% of employees made active changes to their flexible benefits package during the scheme’s last enrolment period.

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Read more from Employee Benefits/Towers Watson Flexible Benefits Research 2011