Review HR policies prior to flex

When looking to introduce a flexible benefits scheme, employers may need to review their wider human resources policies. When doing so, it is particularly important to ensure that what they introduce doesn’t work against any policies they already have in place.

Adrian Houlihan, flexible benefits manager at Origen, believes such a review is important because introducing flex will generally impact upon most of an organisation’s HR policies.

The first thing to consider is the employee’s contract of employment, and their terms and conditions. When doing so, employers should be looking for all specific references to benefits, which may need to be changed. Phillip Hutchinson, head of corporate Sipp sales at Pointon York Sipp Solutions, says: “For example, if the company says that employees are entitled to full family private medical insurance but the flex scheme says they can trade down to single cover, then the employee has to agree to a change in their terms and conditions of employment [stating] that, if they take the single cover, the company is no longer obliged to give them full cover.”

Charles Cotton, adviser, reward and employment conditions at the Chartered Institute of Personnel and Development, adds: “In one extreme you can actually terminate everyone’s contract of employment and say ‘here is the new one with a flexible benefits scheme’.”

Most organisations, however, are more likely to take the alternative route and obtain mutual or implied consent to the changes. “If an employee continues to work for the employer after the changes have taken place, and is aware of the changes and has not objected they are giving implied consent,” says Cotton.

Communicating any change to employees’ benefits packages , however, is essential. Rachel Brown, senior flex consultant at Watson Wyatt, explains: “What is usually involved is a very clear message in the communications material that goes out with a flex programme, that it will constitute a change to the employee’s terms and conditions. The most important part is the declaration at the end of the enrolment process, which shows that once the employee has made all their choices they are comfortable those choices are going to result in a lower salary [if using salary sacrifice mechanisms] and receipt of their chosen benefits.”

Employers will also need to consider the impact that participating in a flexible benefits scheme will have on employees, particularly if they also participate in salary sacrifice arrangements. This may mean that organisations need to alter how they calculate the amount of some other benefits they offer such as bonuses and pension contributions. “By partaking in flex and salary sacrifice you don’t want people to lose out by doing that. So any policies that refer to salary such as pensions, bonuses, [for example] will now in a flex environment need to refer to notional salary, purely to say ‘if you have chosen ten benefits with flex and your salary has been reduced to half its previous level, you still want all of those things to be based on your pre-change salary’,” says Brown.

But introducing a flex scheme does not mean employers have to throw away their existing benefits package and start again from scratch. One option is to start a flex scheme with their current package and then explain to staff they can make other choices in addition to this. If the employee were to do nothing, they would automatically default to the options they received prior to flex.

However, employers must ensure they continue to provide any healthcare benefits that they wish to offer. “The other big policy that needs to be reviewed is absence policy whether that be permanent leaver policy or temporary absentee, such as paternity leave, sick leave, adoption leave, [and so on]. Some benefits will cease, so all of that will need to be reviewed. At the other end of the spectrum will be the joining policy, [for example] what staff are entitled to when they first come into the business,” says Brown.

Organisations must also review discrimination policies so their new flex scheme does not fall foul of the law. Such reviews may seem onerous, but carrying out a feasibility study prior to flex will flush out any potential issues ahead of a plan’s design and implementation.

The employee experience

When introducing a flexible benefits scheme, it is important that employers bear their employees’ experience in mind. One of the first steps is ensuring that staff fully understand what perks they are entitled to.

Matt Waller, chief executive officer at Benefex, says: “Employers should look at their HR policy on communications. Quite often, perks are not really valued because staff don’t understand what they have.

“Policies must support staff understanding the true value of their employment. These are the softer things that make flexible benefits work.”

If the administration of a flexible benefits scheme is outsourced, employers should also ensure they have policies and procedures in place so they can be sure that employees’ queries are being handled professionally and that staff receive a consistent response.