How to add value without cost to the benefits package

If you read nothing else, read this…

• Employers can use a range of low-cost or zero-cost benefits to enhance the value of their employee benefits package.

• Many product providers bundle value-added services into their standard offering, such as employee assistance programmes (EAPs) with group income protection products.

• Discounts on everyday expenses, at high-street retailers and on own-company products are highly valued by employees.

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Case study: FirstGroup staff take fast track to savings

FirstGroup offers its 38,000 staff a range of money-saving perks through a discount scheme it launched with Asperity Employee Benefits in March.

The scheme offers discounts on 3,000 products and retailers, as well as cashback.

Lisa Proctor, group reward manager at FirstGroup, says: “In these tough economic times, we wanted to help staff make their money go further, especially when wage increases are not equal to inflation. This benefit helps everyone make savings.”

The scheme, called First Xclusives, fits alongside FirstGroup’s in-house discount scheme, which offers staff, their families and friends discounted travel on the firm’s bus and rail network. Employees can get a return rail trip or a week’s unlimited travel on buses for £5, as long as they travel outside peak hours. Each discount can be used up to 25 times a year.

The discounts show staff how different parts of the benefits package can work together. Proctor explains: “Staff can take a £5 journey somewhere. They can go into First Exclusives to see what hotel discounts they can get, exchange money or get 10% off suncream at Boots.”

FirstGroup’s current communications campaign also involves a partnership with the Money Advice Service to offer employees an online budget-balancing plan. “The campaign around the new scheme is ‘Summer for less’,” says Proctor. “We want to get employees more savvy with their money and encourage them to take ownership of their finances. If we can help through discounts and making it more enjoyable, they will engage much more.”

Lisa Proctor will be speaking at Employee Benefits Live on 25 September

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Case study: Positive signals for BT broadband scheme

BT offers its 75,000 UK employees free broadband from the day they join the company. Employees who are already locked into a contract with another provider can give the free broadband to a friend or family member.

This benefit equates to a monthly saving of £15 per employee. Paul Wilkinson, head of reward at BT, says: “Obviously, we get a very high take-up on that. It is a thing we can offer at no real cost to BT.”

Employees can also purchase the company’s BT Vision package, which includes Freeview and on-demand films, TV shows, music, sports and children’s programmes, for a flat-rate £1 joining fee. This package normally costs £4 a month on top of to a BT broadband bill.

BT also offers employees access to an online discount scheme, which has been in place for more than two years. The scheme offers a range of discounts on fashion, travel, electronics, home and garden, health and other products, and includes vouchers for major retailers as well.

“It was introduced to increase engagement,” says Wilkinson. “It has been really successful in that. The amounts of money being spent through it are quite considerable, and people are saving around 25% on what they would otherwise be paying.”

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Special offers are the order of the day for employers that are trying to add value, but not cost, to their benefits packages, says Jennifer Paterson

Since the UK returned to recession in the first half of this year, employers have been struggling to find low-cost or even zero-cost ways to boost the value of their employee benefits packages.

According to the Employee Benefits/Alexander Forbes Benefits research 2012, published in May, the top two key challenges for employers’ benefits packages this year are to improve the perceived value of their benefits package (61%) and control costs across the organisation (53%).

The research also found that the third key employer challenge is to match benefits to employees’ needs, demonstrating the juggling act facing HR and reward professionals.

Leveraging relationships with existing providers is one option for employers to consider. Andrew Erhardt-Lewis, senior manager at Deloitte, says: “[When the recession started] there was a lot of renegotiating outsourced contracts with providers’ terms to try to drive down costs. As we go into the double-dip, I am not seeing employers going back to providers and saying ‘We’ve been paying £125,000, but can now only pay £115,000’. It is more like ‘We have already got it down to £115,000; what more can you give us for our money?’ It is still under the cost-savings banner, but it is a slightly different approach.”

Ascertaining which benefits offer value-added services should be part of all employers’ conversations with providers. For example, group income protection products can include free access to an employee assistance programme (EAP). Erhardt-Lewis says: “From the provider’s side, it does not reduce its profits because the bundle is a more profitable approach than a standalone product. From a business model perspective, a longer-term guaranteed revenue stream is worth more in this unstable environment than a short-term quick sale.”

Employers should also consider negotiating better contract terms to further enhance the value of employee benefits such as company cars, bikes-for-work schemes and childcare vouchers. For example, with many fleet providers, the longer the contract, the better its value, as is now also the case with most mobile phone providers.

Employee savings boosted

Similarly, bikes-for-work schemes and childcare voucher providers often offer discounts to boost employees’ savings. Paul Bartlett, head of reward at Grass Roots, says: “Employees in our childcare voucher scheme can also access our portal to order discount vouchers. This is an added-value service that can be useful, especially when people are trying to save on childcare costs.”

However, employer size will often determine the range of discounts and value-added extras available. Peter Reilly, director of HR research and consultancy at the Institute for Employment Studies, says: “If an employer has 100,000 staff and asks a provider for a deal, it will be a much better deal than a smaller organisation will get. But I am surprised smaller organisations don’t come together to get improved buying power through associations or trade unions. This is where a sector could do something to mutual advantage.”

Alastair Denton, managing director of employee benefits at Edenred, says employers should consider working with providers that offer a wide range of benefits, to help increase their bargaining power. “They can challenge the provider on what would be offered if they were to choose two or three benefits instead of one,” he says.

Employee discount schemes are an increasingly popular way of offering staff a wide range of benefits in the form of savings at high-street retailers and restaurants, and on travel and insurance. Providing a scheme that includes a wide range of discounts on everyday expenses, such as grocery shopping, broadband services or utility bills, is an effective way for an employer to show staff that it understands the challenges they are facing in the current economic climate.

“If employers can save employees £10 here and £20 there, then that would be something worth doing,” says Reilly. “This is not the time for fancy concierge services, but the essentials of life, which may be childcare, utility bills or medical insurance.”

Employers can also offer staff discounts on their own products and services. For example, telecommunications providers can offer mobile phone discounts and utility firms can give discounts on gas and water bills.

Own products on offer

“Employers should be making their own products a prominent part of the benefits package,” says Grass Roots’ Bartlett. “For instance, in financial services, promoting things like mortgage and insurance products, often at preferential terms. The classic example is airlines, which typically offer flights to employees because the plane is already flying and the cost of that seat is fairly marginal. For the employer, it is an audience to market its products to, at little or no cost.”

On a community level, employers could leverage their corporate profile to secure deals and discounts with local businesses such as restaurants, retailers and gyms. Julie Vile, senior consultant in Towers Watson’s flexible benefits team, says: “Employers can provide a flex plan that covers everything employees expect to be there, but also includes things that help get the work-life balance right without increasing the cost to the employer.”

Voluntary work is a great way for employers to offer a benefit that carries little or no cost while meeting their corporate social responsibility obligations. Edenred holds an annual volunteer day for employees, which helps boosts their wellbeing. Denton explains: “One year we dug a garden for a children’s area; another year we painted a community centre. Organisations that support their community make employees feel positive about the way the organisation is run.”

Recognition programmes

Finally, recognition programmes are a low-cost way to increase employee engagement but not the organisation’s bottom line. Michael Rose, director at Rewards Consulting, suggests employers take a minimal percentage of their bonus or payroll spend, say 0.2% of bonus or 0.01% of payroll, and inject it into a recognition programme. He says: “Employers are saying ‘I am spending a lot of money on bonuses, benefits and salary, there isn’t much money in the pot, so what else can I do?’ They are asking whether they can use non-cash and recognition as an alternative, or at least leverage value around engagement on things like recognition, rather than spending money on bonuses.”

Rose says effective forms of recognition, such as handwritten notes, can help boost employee engagement and wellbeing.

But Kuljit Kaur, head of business development at P&MM, warns against using a recognition scheme to replace a bonus plan. “A recognition scheme is put into place to allow the organisation to encourage a certain set of values and behaviours, and show staff they are valued as part of the business because they are living and breathing what that organisation is all about,” she says. “It’s the feel-good, soft cuddly side, whereas a bonus is a hard-and-fast monetary reward that is given once a year. To compare the two devalues it.”

The IES’s Reilly adds: “The difficulty is in taking away real money and giving something that is not real money in exchange, and trying to suggest they are the same.”

As with any benefits strategy, communication is key. Rose says: “I would consider, when looking at leveraging best value, it is about the efficiency component [of saving money] and the effectiveness component, which is around communications and presentations to ensure staff understand it.”

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Bundled benefits

• Group risk benefits with extras such as a free employee assistance programme.
• Company car schemes offering greater discounts and value-added service the longer the contract. Bikes-for-work schemes offering discounted clothing and equipment.
• Childcare voucher schemes offering retail discounts.

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Read more on voluntary benefits