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- Changing flexible benefits provider could take three to six months to complete.
- Employers should shortlist around six providers and invite them to pitch their flex products and services.
- Employers should choose a provider that can adapt to their needs cost-effectively over time.
An employer considering switching flexible benefits provider must take many factors into account, says Tom Washington
Changing flexible benefits provider is often sparked by an employer’s desire to optimise employee engagement, but it is often a necessity because an organisation’s needs change over time.
Service issues, the expiry of an existing contract, technical quality and professional relationships are also catalysts for a change of provider.
The process of switching should take three months, but can take six in some circumstances.
But Martha How, principal consultant at Aon Hewitt, says employers should not take the decision to change provider lightly. “Frankly, if the service is good and the price is right, employers should not waste time going to market,” she says. “They should have an upfront conversation with their provider and agree renewal terms.”
The first step is to draw up a shortlist of suitable contenders to invite to pitch, which can be a daunting experience when faced with a plethora of companies claiming to offer the best, most efficient offering on the market.
Employers typically invite around six suppliers to tender, then whittle this number down to three at presentation stage.
To sort out the wheat from the chaff, there are certain criteria each prospective supplier should be required to meet. These include quality of product, track record, client list, technology functionality, stability, development and support continuity, service standards, terms and price.
But some employers may favour a best-of-breed approach, appointing specialist providers for different aspects of their flexible benefits platform. However, a one-stop-shop covering all aspects of flex service is more common.
Matt Waller, chief executive officer at Benefex, says using a supplier that relies on third parties can result in a low-quality solution for employers. Providers that own their own technology are more reliable, he says.†
But Julia Turney, head of benefits management at Jelf Employee Benefits, suggests employers should consider suppliers that have clients of a similar size and nature to themselves, because they will be used to catering for similar employee numbers and requirements.
But, ultimately, a provider’s client retention records are key. Waller says: “This is so often overlooked, but [employers] don’t want to work with a business that churns its clients every two or three years because of poor service. There are some sharks in our market. Unfortunately, there are sales people who will promise the earth and deliver very little. Beware hollow promises: if it sounds too good or too cheap, it probably is.”
The cost of switching provider is difficult to calculate because it depends on the scope of the service being delivered. An administration fee normally applies as part of the cost of implementation and launch, but with a five-year contract, for example, administrators are often prepared to negotiate prices.
Costs can be minimised if an employer’s HR and payroll teams can brief the new provider fully about their previous scheme, rather than the new provider having to liaise directly with the outgoing business.
As with all benefits, it is vital to take a long-term view of any investment, which means selecting a flex provider that can make improvements and changes to its offering as and when the employer requires.
Jelf’s Turney says: “From our experience, [employers] move mostly because of a perceived lack of value. They are paying for a service they are not getting or feel the provider cannot develop the system to meet their needs now and in the future.”
Read more from the flexible benefits supplement