The upsurge in voluntary benefits

Peter White finds the entry of more providers has increased the voluntary benefits market, bolstered by the attraction of the product as a cost-neutral bonus for staff. But savvy web crawlers might find a better deal on the high street

Case Study: Corus

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Do your employees dream of discounted health insurance or are they turned on by 2%-off travel deals? The answer to this may be a resounding "no", but ask if staff expect them and a wholehearted "yes" will resonate from employees.

So employers must stay on their toes and can no longer let voluntary benefits offers languish in the depths of an intranet site or a booklet. Instead they have to be seen as wanting what’s best for staff and making the effort to keep up with current pricing.

All this has contributed to an upsurge in the number of organisations that offer staff access to voluntary arrangements. And an often-highlighted skills shortage in the UK means that employers are expected to differentiate their employment package from competitors.

Martin Harris, senior customer manager at benefits provider Bringme, says: "There is a degree of keeping up with the competition. Ultimately, if competitors for staff are starting to provide benefits, then [employers] need to keep pace and look for something ideally more innovative [and] not get left behind."

The Chartered Institute of Personnel and Development’s Reward Management survey 2005 shows that 25% of organisations currently offer a voluntary benefits scheme. But it also highlights that 16% of all employers plan to introduce new plans, with 25% of employers in the voluntary sector hoping to launch such a package in the next 12 months.

This interest shown by charities in benefits marks a noticeable shift in their provision. Previously, voluntary organisations wouldn’t have been able to afford to subsidise products and services for staff for fear of incurring the wrath of donors and sponsors. However, many third sector employers can take advantage of arrangements that do not cost them anything, thanks to an increasing number of providers entering the market.

The growth of the internet has also helped to boost popularity. Voluntary benefits have been around in one form or another for many years. And while the internet has been commonly used over the past ten years, it has taken until now for these two to be inextricably linked.

Employee Benefits/Halifax Voluntary Benefits Research 2005 shows that 72% of employers use the internet to offer and communicate voluntary benefits. But for many, this just means putting a list of deals on a company website and letting employees take the plunge.

But as employees are becoming more aware of the internet as a purchasing portal for cheap goods, this will often not be enough. While most organisations claim that they can get staff the best deals, web-savvy workers are finding that they can often find the same deals, if not better, elsewhere. In many instances, a range of offers from a number of different benefits providers can be found through internet search engines, regardless of whether the company is a client of the provider.

Shopbots, otherwise known as shopping robots, are specially-designed websites, such as Kelkoo and Pricerunner, that will search for the cheapest deals on goods ranging from CDs and DVDs to vacuum cleaners. Shopbots make their money through their relationships with the retailers in much the same way as voluntary benefits providers do. Cashback websites can also make it very efficient to keep purchases independent of an employer. If you buy anything through such an e-retailer, they pay cashback once you have reached a certain threshold, usually around £25.

But many voluntary benefits providers accept that internet deals can be cheaper, and this is not always the only consideration. "You never say that every single thing on our site is the cheapest, there’s always going to be some company that will do some loss leader that we won’t be able to match. If you want to sit there for half your life on the internet going through search engines, you will find the occasional thing that is cheaper, but a lot of times you won’t," says Harris.

Mike Morgan, managing director of benefits provider People Value, adds that the average consumer is still afraid of shopping on the internet because of "disreputable web traders" and if a package is endorsed by an employer, staff will place more trust in it.

This is true for train firm GNER. John Hayhurst, HR consultancy and business services manager, says that not all organisations look for the cheapest deals for staff when setting up a voluntary benefits scheme. "We look for a portfolio of benefits that will be around for 12 months, not necessarily the cheapest. We look for quality with a reputable firm. It will be a decent deal but you can usually get something 10% cheaper locally, but will it stand the test of time?"

And as this shows, local deals, which may have been in place for decades, are usually made redundant when an online arrangement is introduced. Staff at one of GNER’s depots, for example, used to be offered a deal that meant every purchase at a local fish and chip shop was supplemented by a free portion of mushy peas. But, the firm had to consider whether it could keep this when it launched its voluntary benefits plan nationwide. "We’re spread from Scotland to King’s Cross in London so it makes no sense to have a company-wide benefits portfolio with just local benefits," adds Hayhurst.

For employers that are based in multiple locations, it is essential to keep all deals the same, but others with a more compact staff base can often get the best deals for employees by striking up relationships with local suppliers.

And this is where the type of deal is important. If they are looked after locally, employers are often liable themselves to sort out any mess between purchaser and provider. But if a third party administrator is securing the deals, they should be able to sort out any confusion. Bringme’s Harris tells a tale of a man who wrongly measured his fridge space. "We had a guy who ordered a completely wrong-sized fridge; it was completely his fault because he gave the company the wrong dimensions. But we sorted it out without question." Another solution would be to suggest staff are taught how to procure white goods properly to ensure problems don’t occur in the first place.

There is also a dark side to the voluntary benefits force that is not often seen. Some organisations use increased perk packages to hide business changes, for example, using them to disguise pay cuts, pension changes or the effect of staff redundancies.

HSBC was recently accused by trade union Amicus of introducing childcare vouchers to mislead staff into thinking that it equated to a pay rise. While the union welcomed the introduction of the benefit itself, it was cynical of the timing of the launch during an ongoing pay dispute.

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development, warns employers against using the introduction of such benefits packages to cover up a move from a defined benefit (DB) pension scheme to a defined contribution (DC) plan. "You have to be careful because if the DB to DC shift is handled badly then offering a voluntary benefits scheme isn’t going to make matters much better, it might make matters worse with a cynical and disillusioned workforce."

Salary sacrifice arrangements, such as childcare vouchers, home computing schemes and bikes, have also played a part in the upsurge of voluntary schemes. While these benefits can fit in to a traditional flexible benefits scheme, where the employer pays for them, most firms are offering such perks on a voluntary basis with staff picking up the bill. However, the media attention that surrounds these benefits has also encouraged organisations to introduce further discounted deals at the same time. Many are implementing an online system, inclusive of other offers, as a portal to place all of its perks. And this can be done using the savings that the organisations will make through lowered National Insurance contributions.

This is something that will doubtlessly encourage more organisations to look at offering such arrangements, as well as enabling more groundbreaking organisations to develop existing policies even further over the next few years.

Case Study: Corus

Corus introduced an online voluntary benefits package to replace its many local arrangements.The steel manufacturer’s scheme now offers deals on products such as holidays and gym membership as well as financial and legal advice through specialist provider People Value.

Employee relations officer Dan Hutchinson, says: "We’ve got three or four large [employee] populations and we have got a few agreements with local suppliers. We are massively extending that to something we can roll out to the whole of the UK base."

The firm, of which 18,000 of its 24,500 staff are blue collar workers, will monitor which benefits are chosen so that it can focus on improving the most popular deals.

"We’re a large employer, [so we said] ‘let’s approach these suppliers and [then] they’ve got 24,500 potential customers. So what can they offer us?’" says Hutchinson.