Flexible Benefits: Too spoilt for choice?

If you read nothing else, read this…

• A number of UK employers offer more than 10 perks through flexible benefits schemes.

• Employers should structure and communicate their flexible benefits schemes around their employee demographics to maximise engagement.

• There is no harm in removing benefits that have very low employee take-up.


Case study: Carlsberg finds a refreshing brew to increase flex take-up

Carlsberg has offered around 10 benefits through its flex scheme since launching it five years ago. Julian Daley, reward manager, says: “We have added some benefits and taken some away, but we have always had about that number.”

Certain perks, such as a healthcare top-up scheme, have been removed after proving unpopular with the brewer’s 1,700 employees.

“We have never removed any benefits that had at least a small take-up, on the basis that the benefit is obviously important to someone,” says Daley. “Even if just two or three employees are taking the benefit up, the cost is minimal and we would rather continue to include it.”

Carlsberg’s diverse employee population, in terms of age, gender and job role, drives its commitment to offer a wide range of flexible benefits. Daley adds: “I agree that it can be a little overwhelming for people, but we have to strike a balance between providing the right sort of information that employees can quickly understand and provide something for everybody.”

Carlsberg uses staff feedback to determine which new benefits and services to add to its flex scheme. For example, some people requested help with the tax structure of the organisation’s car scheme. Daley says: “We saved that request and incorporated it into flexible benefits. We now offer a self-assessment tax service through the scheme.”

To help engage staff in the scheme, in 2010 Carlsberg replaced its 24-page flex booklet with an A5 sheet explaining each benefit in no more than two or three sentences. This resulted in a 22% year-on-year rise in take-up of its flexible benefits.

Carlsberg was shortlisted in the category for ‘Most effective use of a flexible benefits plan’ in the 2012 Employee Benefits Awards.

Case study: SJ Berwin expands flexible benefits offering online

Law firm SJ Berwin launched a flex scheme in June 2011 to streamline its benefits offering, to communicate the perks staff already received contractually and to attract new talent to its 550-strong workforce.

Peter Roberts, HR operations manager at SJ Berwin, says: “We have quite a range of employees. We have high earners and a lot of young people as well, so it was about trying to address our varied demographic.”

Before the launch, the firm offered employees a group personal pension (GPP), with matched employee contributions up to a maximum of 5%, childcare vouchers, a bikes-for-work scheme, group income protection (GIP) and life assurance at four-times salary. These were all provided as paper-based benefits.

The online flex scheme, provided by Bluefin, has brought these benefits together with a variety of new offerings, including private medical insurance (PMI) with flex options for family members, a health cash plan, dental insurance, health screening, travel insurance, holiday buy and sell (up to three days), a computer scheme and a car-sharing scheme with Zipcar. Life assurance was increased to 10-times salary.

SJ Berwin considered offering critical illness insurance, but Roberts says he did not want to overcrowd the flex package. “I am conscious that, when employees choose their benefits, they have got a page of things to pick from,” he says. “Already the screen looks quite full.”

The firm plans to tweak the categorisation of its flexible benefits when enrolment opens in 2013. “We might change the brand approach slightly, so we could pull together benefit types,” says Roberts.

SJ Berwin was shortlisted in the category for ‘Most effective use of a flexible benefits plan’ at the 2012 Employee Benefits Awards.

A flex scheme can offer a wide variety of perks, but it must be structured and communicated well, says Jennifer Paterson

Employee Benefits/Towers Watson Flexible benefits research 2012, published in April, found that the largest proportion of respondents offered between 11 and 15 perks through their flexible benefits schemes.

This has remained fairly consistent over the last three years, with 34% of respondents to our 2009 research offering between 11 and 15 perks. But is it possible to offer too much in flex?

Richard Morgan, director of consultancy services at Vebnet, says: “It absolutely is possible to offer too much, especially since a lot of benefits can have low take-up. It is particularly important [to consider volume] when first launching flex, because employees can become snow-blinded by the amount of choice. Much like investments in defined contribution (DC) [pension] schemes, many employees don’t even know where to begin, so they switch off.”

Scheme structure can help guide employers’ benefits choice, but Charlotte Godley, senior flex consultant at Mercer Marsh Benefits, warns: “It is important that the scheme is designed around objectives, so that the benefits included actually support the scheme’s structure. For example, it is becoming more common to allow employees to have a flex pot, but if they don’t use it, they lose it. If an employer is going to structure a scheme in that way, it needs to offer a wide range of benefits for employees to spend that money on, otherwise there is not really any flexibility.”

Categorisation can also help employers to determine the best mix of benefits to offer through their flex scheme.

Martha How, principal at Aon Hewitt, says: “One of our big retail clients groups its benefits under headings, such as lifestyle and health, so it has five sensible categories. If properly categorised, having a lot of benefits makes perfect sense.”

A comprehensive communications strategy is essential to help staff understand the benefits on offer to them, particularly if there is a wide range. Oliver Bence, principal consultant at Benefex, says: “If an employee gets a brochure with too much choice, sometimes the reaction can be: ‘There is too much to decipher; I’d rather not bother’. One of our schemes, with State Street Bank, has a large number of benefits, but take-up is really high across a lot of them. Employees react really well to a detailed brochure explaining all the benefits.”

Tailored communications

Communications must be tailored to the workforce, so employers need to understand their staff demographics.

Andrew Woolnough, head of flex at Enrich Reward, says: “Delivery staff could have access to a mobile phone or personal digital assistant (PDA) sign-up. Employers should think of any communication channel that could make employees aware that there is something in it for them.”

The retail client Aon Hewitt mentions above has divided its working population into 11 demographic groups and tailored its benefits accordingly. For the under-25 junior population, the organisation promotes lifestyle benefits, while group risk perks are promoted to the over-45s.

How says: “This organisation, which at its peak probably had about 35 benefits, has very high engagement and very positive feedback, but this is because of the way it is done.”

Employee engagement surveys can help determine the benefits of interest to staff. Bence says: “It is looking at it both ways: what is in the scheme, but also how relevant all the benefits are. Don’t just add things to an existing scheme without doing any homework, and if a benefit isn’t working, take it out. There is nothing wrong with taking a benefit away.”

Employee Benefits

But employers should assess take-up levels before deciding to remove a benefit. Vebnet’s Morgan says: “Don’t be afraid to experiment a bit and take things out that aren’t working. It can be a difficult message to deliver, because even if only one or two employees are taking up a particular benefit and it is taken away, those two people will be disappointed. But it’s not too difficult to present the right message.”

Similarly, employers should give proper consideration before adding any new benefits to their flex scheme. In particular, they should consider whether there is a tax saving to be made, whether there are any requests from staff for certain benefits, and the extent to which any additions will support other initiatives within the organisation, says Mercer Marsh Benefits’ Godley. She adds: “If it doesn’t tick those boxes, a benefit should not go in just for the sake of it.”

So, whether a flexible benefits scheme offers five or 25 perks, its success will depend on structure and communications, says How. “It is a combination of sensible groupings of attractive benefits, and segmented communications to groups of common demographics. I wouldn’t say lots of benefits is a bad thing; I’d just say do it properly.”

Winning plans: comment by John Puddephatt, principal at Aon Hewitt

A core set of four to 10 benefits are present in most UK [employers’] flexible benefits plans. There is a long list of other common benefits.

Most employers with successful mature plans that have been in place for five or more years add one to two benefits a year and, at some point, reach a steady state with between 18 and 20 benefits. Some plans have more than 25.

There are two potential issues here: do staff bother to view 25 benefits every year, and do plans become stale after a certain time? Our employer clients with more than 10 years of flex deployment feel these are real concerns. But they can be overcome.

The methods used to avoid staff becoming disengaged and plans becoming stale have been borrowed from business-to-consumer marketing thinking. They include:

• Employee segmentation. Some employers configure flex communications differently for different demographic groups. For example, deals on smart phones, discount dining cards and holiday trading are targeted at the under-30s, while savings, insurance and medical plans are aimed at older groups of employees.

• Part-year offers. Some employers use half-year enrolment opportunities for discounted and high-value offers, and communicate these with high-impact sales methods. This is different from the annual enrolment process, which may be more comprehensive and conservative.

• People like ‘me’ techniques, commonly used in online shopping. Deployed on flex sites, they let staff rate benefits and scheme content and see what people with similar profiles have chosen.

So, the most successful flex plans incorporate 15 or more benefits and deploy targeted communications. More benefits, properly targeted, can mean greater impact.

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