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Jacqueline Otten, Principal at Towers Perrin, explains the advantages a flexible benefits plan can bring in difficult economic times

Flexible benefits plans continue to gain in popularity, with over 40% of employers offering a full flex plan, and a further 21% either considering one or in the process of designing one. A further 20% of employers offer tax-efficient benefits on a standalone basis. The main reasons for introducing a flexible benefits plan continue to be attracting and retaining staff, recognising the diverse needs of the workforce, tax savings, and promoting employee understanding of benefits.

In the current environment of cost reduction, how will this impact on flexible benefits and what part can flex play in saving costs for employers and their employees? While organisations seem divided over whether it would be harder or easier to justify the cost of their flex plan (17% of those with a flex scheme said it would be harder to justify the cost, while 14% said it would be easier), more than one-third of employers (36%) said there would be more pressure to introduce tax-efficient benefits via salary sacrifice.

Given that over 57% of employers do not include their defined contribution pension scheme in their flex plan and over 68% do not include their defined benefit pension within flex, it appears there is still significant opportunity to realise national insurance (NI) savings by integrating pensions into flex plans. Such savings will increase as a result of the 0.5% rise in NI announced in last November’s Pre-Budget Report. Almost half (46%) of employers said perks with tax and NI efficiencies would encourage them to introduce flex.

With future cost management at the forefront of our minds, it is also worthwhile remembering that flexible benefits plans can be designed to help employers share the rising costs of benefits, such as private medical insurance, with employees. Flex schemes can also help organisations soften the impact of other harder changes they may be planning to make, such as closing or reducing defined benefit pension arrangements.

In the current difficult economic landscape, where employee redundancy programmes are taking place and staff generally are worried about their future job prospects, organisations need to renew their efforts to engage their employees and maximise their input into the organisation’s performance.

Employers can increase the impact of their flex plan by communicating the value it can give to employees, through group rates and discounts, as well as through tax and national insurance savings. More than one-third of employers intend to communicate this information in the current environment. This extends beyond communicating the value of the flex plan to include the overall employee ‘deal’. Almost 40% of organisations without flexible benefits intend to introduce total reward statements.

So, whether employers offer flexible benefits or not, in the current environment of cost-cutting, there are ways in which they can increase the value of their employment proposition that can have a positive impact on their employees’ attitudes and engagement.

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Click on the links below for more sections:

Who are the respondents; key findings
Attitudes to flexible benefits
Structure of flexible benefits schemes
How flexible benefits schemes are administered
Salary sacrifice in flexible benefits
Alternatives to flex plans
Pensions and flex
Crucial communications