What is flexible benefits technology?
This is a technology system, operating in-house or from cloud-based servers, that provides a platform to deliver a flexible benefits scheme. Increasingly, systems are designed to interface with other elements of benefits and reward, including pensions, and often have interactive and data-modelling tools that can be used by employees.
What are the origins of flexible benefits technology?
The first systems were put together over 25 years ago, but these were largely based on simple spreadsheets and in-house IT.
What are the costs involved?
This will depend on the number of employees and the degree of system sophistication required. Advisers estimate that for flex technology only, where an employer manages the back-end administration, costs can start from £4 per employee. Licence fees can rise to between £20 and £40 a year per employee, if admin management is included. A helpline will also add cost. Implementation costs can run into hundreds of thousands of pounds, although many providers are prepared to offer employee volume-based discounts.
What are the legal implications?
The system must comply with data protection regulations.
What are the tax issues?
HM Revenue and Customs’ rules around salary sacrifice arrangements will apply to any flexible benefits offered.
Where can employers get more information and advice?
There is no industry body for flexible benefits technology, so employers should speak to several providers and, if possible, other organisations that have already introduced a flexible benefits system.
What is the annual spend on flexible benefits technology?
Without a central body to collect this data it is impossible to evaluate the market.
Which flex technology providers have the biggest market share?
Leading providers include Aon Employee Benefits, Benefex, BHSF, Capita, Co-operative Flexible Benefits, Edenred, JLT, Mazars Employee Benefits, Mercer, NorthgateArinso, Personal Group, Staffcare, Thomsons Online Benefits, Willis Towers Watson and Vebnet.
Which providers have increased their share most in the past year?
There is no central organisation to provide specific market data, but consolidation through strategic partnering and acquisitions is likely to enable providers to increase market share.
Flexible benefits schemes enable employers to offer staff a wide range of benefits cost-effectively. One way of doing so, for example, is through salary sacrifice arrangements, which offer tax and national insurance savings for both employers and employees.
Technology has had to evolve considerably to respond to this demand, as well as to keep up with the increasing pace of life and employees’ desire to access their benefits from a wide range of devices, including their office computer, home computer, tablet and mobile devices.
The flexible benefits technology market continues to develop at pace; one of the key points of focus is currently on the integration of workplace savings technology and flexible benefits with more intuitive and customisable user interfaces. Examples include Mercer’s Harmonise platform and Aon’s Big Blue.
These use behavioural finance techniques such as ‘what ifs’, for example, what happens if an employee cannot continue working, and ‘people like me’ tools, which show what benefits colleagues are buying, to increase engagement with flexible benefits. Users can accumulate points by carrying out activities such as viewing videos and completing surveys. Gaining enough points unlocks other areas of the system. These tools increase system use and help drive employee engagement with benefits, thus increasing the employer’s return on its investment.
Workplace savings systems, which used to be known as corporate wraps, give employees the ability to invest in a pension, corporate individual savings account (Isa) and often a general investment account. They do not normally include the broad range of benefits found in flex schemes. However, flex systems are developing to include these options by integrating these technologies within the flex platform. Often they use aggregation technology to provide a consolidated view of all pensions and investments so employees can see an aggregated view of their total wealth. They can also record other information, such as the value of the properties an individual owns, which could be linked to online valuation services. These tools are designed to encourage employees to log on more often.
Most flex systems are software as a service (SaaS) so are now cloud-based rather than stored on employers’ servers.
Employers often look for flex technology to provide solutions to very specific problems. These include reduced administration, meaning the time taken to process benefits administration and reporting can be reduced or even removed with the implementation of an automated benefit administration system. Also, employers need to control costs and ensure they are manageable, which is a key driver for using a flex system.
Employers also look to technology to assist with risk mitigation and the need to ensure processes are in place that organise and structure requirements, and document history and audit trails. Having an integrated flex system can take care of this and ensure that all requirements are satisfied through robust processes, for example, automating medical underwriting for private medical insurance.
Flex technology can also help increase engagement. As employers spend vast sums on benefits and reward, communications are important to promote and educate staff on what is available. If employees are not engaged, the value perception of benefits may be low, or employees might not appreciate what they have in place.
Future of flex technology
One market development that provider Staffcare expects to see is different technologies being integrated in one common interface so employees do not have to use multiple systems to select their benefits, switch the funds they invest in within their pension scheme, take out an Isa, or switch assets from the employer sharesave scheme into a pension or Isa.
Also high on the agenda are innovations around personalising benefit selections and making platforms truly flexible. Thomsons Online Benefits has seen employers adopt new approaches to their flexible benefit strategy enabled by technology, using Thomsons’ flexible technology platform, Darwin.
Benefit selections that can only be made once a year and from a defined list of products are not as flexible as those that can be chosen at any time and are personal to the employee making them. As a result, many have predicted that the annual enrolment window is likely to erode in popularity.
The market is also expected to continue to develop to expand the range of benefits offered with more engaging tools to help employees appreciate what is provided for them.
- 89% of Callcredit employees logged onto the employer’s flex system over an 11-day enrolment period following a multimedia communications campaign.
- 71% of Callcredit employees made an active benefit selection in 2015, up from 10% in 2014.
- 62% of employers outsource their flex technology. (Source: Aon Employee Benefits, November 2015)
- 68% of employers cite communicating with employees as one of their top three flex challenges, followed by technology (34%) and integrating flex into wider benefit processes (34%). (Source: Aon Employee Benefits, November 2015)