As the recession is replaced by the age of austerity, many employers are looking to flex as a cost-efficient way to keep employees motivated, says Jennifer Paterson
Once again, the most commonly cited advantage of running a flex scheme is that it enables staff to tailor benefits to suit their needs and lifestyles. This year 84% believe this to be the case, compared with 80% in 2010.
The other top reasons have changed little over the years. For example, recognising the diverse needs and values of the workforce has consistently ranked near the top. In 1998, 84% felt this to be the case, broadly in line with this year’s figure of 79%.
Flex is also more likely to be seen to help retention and recruitment. In 2009, when the economy was on the slide, flexible benefits schemes were seen as beneficial for retention (58%) and recruitment (55%) purposes. The figures slipped to 50% and 47%, respectively, in 2010, but crept up again this year.
For the past two years, the cost of implementing a flex scheme has been perceived as the main barrier to offering it. The cost and complexity of administration have also stayed near the top of the list. In 2008, 54% cited these reasons, while in 2011, cost and complexity scored 56% and 53%, respectively.
Another common barrier is getting †approval for the business case. This year, 48% say this is the major barrier to implementing flex – a similar level to the past three years. Perhaps these group are not able to prove the savings available from tax and/or national insurance savings.
Last year, 34% of respondents said they intended to review providers in the coming 12 months to obtain a better deal. Twelve months on, 45% of respondents said they actually did so. A further 40% intend to do so in the coming year.
Employers are also continuing to come under pressure to introduce tax-efficient benefits. In 2010, 41% said they anticipated this would be the case. This year, 37% said this actually occurred, while 39% predict they will experience this in the next 12 months. Such measures can help employers to justify the cost of their flexible benefits scheme. These may have contributed to the greater-than-expected proportion of respondents that found it easier to justify the cost of their scheme in the last year – 12% did so up from the 5% expecting this to be the case.
The percentage of respondents which feel that flexible benefits schemes have helped to reduce or contain the cost
of reward has returned to 2009’s level of 38%, down from 55% in 2010.
However, overall, what respondents believe flex has been effective in achieving in their organisation has changed
little in recent years. Plans are most commonly perceived as being effecting at promoting employee understanding or appreciation of benefits; recognising workers’ diverse needs; and promoting understanding of the cash value of benefits.
As the reward and benefits market expands, the standing of flexible benefits is uncertain. Will flex be around for years to come or will it go the way of the dinosaurs? One-third (38%) of respondents see flex integrating into wider reward platforms, while 35% see it remaining intact in its current form for the foreseeable future. Smaller percentages of respondents predict schemes’ integration into corporate wrap products or replacement by voluntary and tax-efficient benefits plans.
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Read more from Employee Benefits/Towers Watson Employee Benefits Research 2011