Research: how flexible benefits is administered

Efficient, cost-effective administration is key to a flex scheme’s success, but there is a lot for employers to consider, says Nicola Sullivan

The most popular way for employers to administer their flex schemes is using a combination of in-house resources and outsourced services. This is a change from four years ago, when 51% fully administered their schemes in-house.

Most employers now use a third-party provider for some aspect of flex. Just under half (46%) employ a flexible benefits provider, while others look for assistance with specialist areas, such as technology systems or consultancy.

Over the past four years, one of the main reasons for employers to employ a consultant – to help select a provider – has remained fairly constant. Some 62% used a consultant for this reason in 2005, compared with 71% this year.

Given the current economic climate and the pressure on employers to justify their expenditure on benefits or cut costs, it is surprising 40% of respondents do not know how much their flex scheme costs to run per employee.

Where employers have got a handle on the running cost of their flexible benefits plan, 13% spend £30 or more per employee (excluding the cost of the benefits themselves). A further 12% do not spend anything at all on running their scheme. It is possible to offer a flexible benefits scheme on a cost-neutral basis, using the savings on employers’ national insurance contributions (NICs) that can be gained from offering tax-efficient benefits.

When it comes to what employers pay for, the majority said the cost of running flex covered technology (83%) and admin (82%).

Employers may not always know what their flexible benefits scheme costs to run, but 64% actively measure its success. This is vital in the current economic climate to determine whether a scheme is giving value for money. This figure has risen from the 53% that did so in 2005.

Unless a scheme is valued by staff, it can be a waste of an employer’s time and money, which may be why 72% of respondents monitor employee satisfaction as a determinant of their plan’s success. This can be relatively easy to measure using methods such as employee satisfactions surveys.

Many employers use the national insurance (NI) savings from offering tax-efficient benefits via salary sacrifice within flex to fund either the scheme itself or other initiatives. This saving level is used as a measure of success by 54% of respondents. To a lesser extent, the level of NI savings achieved by employees is also measured, by 41% of respondents.

It is often easier to measure success by setting objectives against costs, such as the NI savings achieved, rather than trying to prove the direct impact of flex on factors such as recruitment and retention, or broader business objectives. At best, in these cases, employers may often only be able to show a correlation.

This may be part of the reason for the fall in the number of respondents that measure flex’s impact on recruitment to determine its success. Just 18% of respondents said they did so, compared with 42% in 2005.

More than one-third (35%) of the respondents that do not currently measure the success of their flex scheme intend to begin doing so within the next year.

This can be quite a time-consuming process, depending on what they choose to measure and how, which may explain the 31% of respondents that said they did not measure the success of their scheme because of a lack of resources. A further 25% did not feel they had enough time to do so.

Measuring the success of a scheme does not always have to be costly, which may account for the fact that only 8% of those that did not do so said this was because of a lack of available budget.

Click on the links below for more sections:

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