Flexible benefits schemes for SMEs

The growing availability of flexible benefits products for small- and medium-sized employers means they can better tailor perks to suit their workforce, says Alison Coleman

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In the war for talent, it is no longer just larger organisations that use flexible benefits plans to attract and retain the best candidates.

Until recently, flex schemes exceeded the budgets of smaller companies, however, these can now increasingly be found across the small- and medium-sized enterprise (SME) sector. To be clear, the definition of an SME is a company with up to 250 employees.

The main drivers behind the trend for flex among SMEs are falling costs and simpler web-based administration systems that allow relatively small workforces to access a self-service menu of benefits, including pensions, private medical insurance and income protection.

Smaller organisations generally have two main options to choose from when implementing a flex scheme: an off-the-shelf package with standard pre-selected benefits and providers, or a bespoke scheme which can be tailored to the requirements of their staff.

Marcus Underhill, head of flexible benefits consulting at flex technology provider Vebnet, says: ""Some small firms may be tempted to go for the cheaper ready-made package, but that is a false economy. What it won’t do is allow them to differentiate themselves as employers as they will simply be offering the same [package] as their competitors.""

However, developments in technology and implementation processes have given rise to a hybrid product, which allows SMEs to implement a basic, standard platform on which employers can place the benefits options that will best meet their workforce’s needs.

Tobin Coles, head of flexible benefits at the Jelf Group, says: "With a system like this, the intermediary can still negotiate discounts on an umbrella package of products on behalf of all of their clients, while individually, small firms, some with no HR function whatsoever, can still offer a tailored flex package."

Some employers in the SME market may worry that the size of their workforce and the cost of implementing a flexible benefits scheme may prevent them from doing so. Coles, however, believes this is unnecessary.

""The smallest client we have with a full flex scheme has 80 employees, but the smallest with any single component, has just five [staff] at a cost of £3 per person per year,"" he says.

But for many organisations, regardless of their size, the focus is moving from financial issues to the impact of flexible benefits schemes on employee engagement.

Jason Taylor, business development director at Ceridian, believes that this move has levelled the playing field for SMEs. "Smaller firms often have highly-effective communication methods and can therefore identify what their employees want very easily, convey to them the advantages, for example, of using salary sacrifice and, as a result, boost levels of employee engagement," he explains.

Smaller firms are also thought to find it easier to survey staff in order to discover which perks they would most value. This then makes it easier to tailor their flex package accordingly and avoid making the mistake of offering too many benefits that staff may not take up

Case study: Cedar Communications

Contract publishing firm, Cedar Communications introduced a flex scheme for its 90 employees in 2003.

The scheme offers a range of benefits, including life cover, income protection, pension scheme, medical and dental cover, and lifestyle benefits.

Tracey Jakimovski, HR manager, says: "A favourite is the option to buy and sell holiday. We get 25 days’ annual leave, but if your partner only gets, say 20 [days], you can exchange some of your surplus days for cash."

Childcare vouchers are also popular, due to the company’s high proportion of working parents. Jakimovski adds that staff particularly value the opportunity to have their say about what benefits are included in the plan. "They feel it is their scheme, and in a highly competitive sector like this, delivering the benefits that your best people really want is crucial to attracting and retaining them."