This article is brought to you by Towers Perrin.
It’s official: flexible benefits schemes are now firmly part of the reward landscape.
Currently, one-third of organisations surveyed offer a flexible benefits plan and a further third are either implementing or planning to implement a flexible benefits package for employees.
So what are the advantages of running a flexible benefits scheme? The research shows that a flex strategy recognises the diverse needs and values of the workforce. Furthermore, two-thirds believe it enhances the image of the employer. Ranked in third and fourth place respectively, flex improves employee understanding and appreciation of benefits and improves the recruitment drive. Organisations are demonstrating that flexible benefits packages are positioning them more competitively in the marketplace, not only as an employer of choice but improving staff motivation and reinforcing culture. Quite simply, flexible benefits are adding value to the employer brand.
Just a small minority (7%) of organisations have rejected the idea of a flexible benefits programme. However, more than half of those surveyed are concerned about the cost of implementation, with 44% stating problems with getting approval for a business case for flex. Other concerns are over the complexity of administration and updating existing technology (such as HR, IT or payroll systems).
However, on the whole, we are seeing organisations embrace flexible benefits with employers reinvesting the cost savings from salary sacrifice arrangements back into the flexible benefits scheme for employees. Some are also trying to tailor their flexible benefits packages to an increasingly diverse workforce – at different stages in their lives, from different cultures and with different financial statuses.
So where to next with flexible benefits? I believe the next step will be a stronger move towards total compensation, with flexible pay embracing all elements of pay and benefits. The distinction between pay and benefits will diminish and employers will start to offer real flexibility, with additional cash salary provided when employees choose to drop benefits in favour of cash. We have settled in a comfort zone where only limited flexibility of existing benefits is offered and the typical “salary plus flex fund” does not truly allow employees to shape their reward package. The benefits from a flexible pay or total compensation approach are significant. Research has shown that organisations gain significantly by improving employee appreciation of their package without necessarily changing its value. This approach also enhances the ability of employers to control future benefits costs and clearly communicates to employees the overall value of the package.
This year, business and technology solutions firm EDS introduced a flexible approach to pay and benefits. Rob Gerdes, EMEA director, compensation and benefits at EDS, explains that “while it has involved a substantial change for all, we have gained significantly through offering a really flexible and transparent package, and employees have appreciated the ability to structure their reward to meet their needs, giving EDS more value from our spend on pay and benefits.”
Whether organisations have an existing flexible benefits plan or are thinking about introducing one, they should think about the opportunities available from embracing a more modern deal on flexibility. If organisations are investing in flex, are looking for the return on that investment and measuring the impact on the bottom line, then this approach could provide a firm foundation for delivering results.
The views and opinions in this article are those of our sponsor, Towers Perrin, and do not necessarily reflect those of www.employeebenefits.co.uk.