Employers’ responsibility for voluntary benefits

Alison Coleman discovers employers should communicate the voluntary benefits scheme well to ensure customer satisfaction, especially if it is run in-house

Case Study: Dixons

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Increasing numbers of employers are realising that offering a voluntary benefits plan can make their company appear more attractive to staff.

This market has grown in recent years, with an increased use of the internet and e-commerce providing a valuable tool through which retail and service sector organisations can exploit the potential offered by worksite marketing.

From an employer’s perspective, these schemes represent good value because of the positive impact they have on staff recruitment and retention, without incurring huge costs for the organisation. However, although employers may not believe that they have any affiliation with the products on offer, staff who use the company-promoted scheme are likely to perceive that they do. So if things go wrong, how much responsibility do employers have for the products and services available through such schemes?

Andy Lister, head of benefits services at Grass Roots Group, says: "It is widely accepted that the agreements or contracts relating to purchases made through such a scheme exist solely between the employee and the provider or supplier. However, I don’t believe their position has ever been tested in a legal sense, and, for that reason, most employers like to keep these things at arms length."

Regardless of this, employers must accept an element of responsibility for any programme they introduce into the workplace. The extent to which this is tested will depend on how well the scheme operates. Whether organisations are legally responsible or not, if a scheme proves unreliable, in the eyes of their workforce, the employer will bear the brunt of employees’ dissatisfaction and find themselves overwhelmed with complaints.

Martyn Phillips, a consultant at Towers Perrin and chair of the Benefits Alliance, believes employers can avoid such situations by ensuring voluntary benefits schemes deliver what is promised in terms of customer service in the communication of the scheme to employees: "The message they must get across to their staff is that the organisation is using its size and position to secure them better discounts on products than they would get from buying individually."

However, employers should avoid making claims that their scheme offers the best discounts. Prices change so quickly that voracious online shoppers are almost certain to find cheaper deals on products, such as holidays and electrical equipment elsewhere. And for some products, lower prices that result from bulk buying may not be the best deal for everyone in the workforce.

"Some of the very large third party providers that cater for several companies and thousands of employees can deliver impressive discounts on items that appeal to the masses. However the cost of things like health-related products and insurance are determined by the demographic of the workforce. As an organisation, you might get a better rate if you have a low risk group, but it will depend on the make up of your workforce," he adds.

Nevertheless, the ease of access through the internet or company intranet from the convenience of a desktop computer, plus the potential savings on goods, may be appreciated by staff, until they go wrong.

Mark Eaton, director of Personal Group, says: "To all intents and purposes, the employer is simply the housing for the scheme, with no responsibility for transactions between staff and supplier. But if they are operating the scheme in-house, they are responsible for sourcing the various suppliers, and the pressure on them to deliver consistent quality and competitive prices will be enormous."

Where employers take responsibility for negotiating contracts for each individual deal, staff will also assume their employer is responsible when things go wrong and look to them for support in resolving problems with suppliers.

It is because of this pressure that so many organisations now outsource the implementation and management of their voluntary benefit schemes to third party providers. These typically offer online portals through which staff can secure discounts on a range of lifestyle benefits.

But that doesn’t mean employers can rest on their laurels. Wendy Fleet, head of marketing at You at Work, says: "It is important that employees see their voluntary benefits plan as a company scheme that offers good value, and can resolve any problems that arise. As a scheme administrator, we operate a support infrastructure including a resolution policy. We do monitor suppliers, and although we can’t be responsible for reimbursing staff who are entitled to refunds, we can help to ensure suppliers fulfil their legal obligations."

Outsourcing to a third-party does take some of the heat off employers, but if they want staff to fully appreciate the benefits element of the scheme, choosing a good service provider is vital.

The best will have service level agreements in place, and will organise regular mystery shopping exercises to monitor quality and standards of customer service, as well as tracking benefits to monitor costs and contents.

So how do employers obtain maximum return on a benefits programme that they don’t appear to have any responsibility for? Lister says: "Employers do want to distance themselves from the purchasing relationship, but they also want the kudos for something they have invested time and money in setting the scheme up. The only way to do that is through good communication and a sound promotional strategy."

But can employers gain the same level of employee gratitude and loyalty from voluntary benefits schemes that require minimal investment on their part, as they could from other benefits? Eaton summarises: "Our advice to [employers] is to manage staff expectations. Sell the easy access, all-on-one-site features, keep the contents relevant to staff needs, and focus on the fact that they are getting a very good deal from their employer rather than simply the lowest price."

Case Study: Dixons

Electrical retailer Dixons launched its voluntary benefits scheme to 30,000 employees in February 2004.

Complaints and problems with orders and purchases have been few and far between, which it believes is partly due to the effective management of staff expectations.

Sally Ward, reward manager, says: "When we started promoting the scheme, the message was that while staff could access a terrific mix of high-quality, competitively-priced products, we weren’t guaranteeing that they would be the cheapest. In retail especially, things are changing constantly and very quickly. If you look hard enough, you will find lower prices."

Its scheme provider, You at Work, also allows Dixons to distance itself from the running of the plan. However, its scheme includes services and products on top of You at Work’s offerings, such as healthcare cashplans and a number of discounted products and services offered by local firms to employees.

Even so, very few staff complaints are focused at the reward department. Ward says: "I think it comes down to the way in which you communicate the scheme. Ours has been communicated via the intranet, posters, flyers and the employee newspaper in addition to the benefits booklet for new starters, which carry information on the various providers involved in the scheme. What they don’t include is specific advice that staff should use them."

Top tips:

Employers may not be legally responsible when purchases fail to appear, or holidays are not what staff were promised, but there are a number of things firms can do to help keep employees happy.

  • Communicate the quality of the various voluntary benefits providers rather than just the savings that are up for grabs.
  • Ensure that products and services are supplied by respectable suppliers – that way if a problem with delivery or poor condition of goods does arise, it will be properly dealt with.
  • If the scheme is outsourced to a third party, ensure they have adequate provision for dispute resolution and a clear policy for monitoring suppliers and providers.
  • Staff should have a copy of the scheme’s terms and conditions outlining the extent of the employer’s or operator’s liability.
  • Give staff clear instructions about the complaints procedure.
  • Ask for feedback from outsourced scheme administrators on the outcome of any staff complaints.
  • Review the contents of a voluntary benefits scheme on a regular basis to ensure it reflects the needs and preferences of staff.