Thought leaders 2010: The year ahead: Changing times will bring flexible benefits to the fore

Key Points

  • In the absence of pay rises and bonuses, flexible benefits can act as a mechanism to engage staff through difficult times
  • Flex enables staff to choose benefits relevant and valuable to them, but this needs to be considered in conjunction with their overall employment deal
  • Employers need to consider how greater workplace flexibility relates to their reward and benefits strategies

Flex has a vital role to play in both the short and long term, says Marianne Huggett, associate director at The Work Foundation

This is not going to be an easy year and the right choices in reward and benefits strategy have never been more crucial. Flexible benefits will be a key driver, offering potential cost savings for some employers, while others, in the absence of pay rises and bonuses, will put their faith in flex to keep staff engaged through difficult times.

This will be the year of making do. While 2010 may not be a year for chasing the latest innovation in benefits, organisations should reflect on the deal they are offering their staff in exchange for their work contributions.

In Deal or no deal? An exploration of the modern workplace (December 2009), The Work Foundation’s second working paper from its two-year research programme into the future of HR, we explore the key factors behind a healthy employment relationship. We identify the importance of establishing reciprocity between employer and employee in terms of their expectations, promises and obligations to each other.

Reward packages are an important part of this, but organisations need to take a step back and think more broadly about the total deal they are offering their employees.

Purpose of flex schemes

The ultimate purpose of flex schemes is for employees to be able to choose the benefits that are relevant and valuable to them, but this must be considered in conjunction with other elements of their employment deal.

Including learning opportunities and development funds as benefits in flex plans demonstrates a move towards this. Rather than continuing to extend flex plans to include more and more components, organisations should look to integrate these benefits with other aspects of the package.

Transparency, fairness and equity have been brought into sharp focus in the banking sector in the past year, but even those outside the financial sector can ask themselves to what extent their reward strategy demonstrates these values. This is not simply about looking good publicly, it is about recognising the important role fairness plays in motivation.

This year is also the time to think much longer term about the socio-political context and what a reward strategy might need to accommodate this. As globalisation and rapid technological advances continue, Britain might need to move towards a model of ‘flexicurity’, already adopted in countries such as Denmark. This model aims to simultaneously strengthen organisations’ flexibility to allow greater adaptability, while offering employees increased work security. Such a shift would require significant structural changes in social security and the education and skills sector, but other EU countries are showing how it can be done.

Support employers’ goals

With greater flexibility in organisations, and employees acting more as autonomous agents in the labour market, the important question would be how reward and benefit strategies would need to change to continue to support employers’ goals. This offers exciting possibilities that will challenge many current assumptions about reward and benefit strategies, as well as the employment relationship in general. For example, increased flexibility in the workforce could mean it is no longer practical to offer complete benefits packages, on the assumption that benefits such as private medical insurance and pension assume ongoing tenure. It is possible we will move to a pure-salary approach.

Learning and development could play a much stronger role in reward and benefits, given that the flexicurity model places an important emphasis on them, and employees will constantly have to learn new skills to maintain and enhance their employability.

Read more articles from Thought leaders: The year ahead