Learning, wellbeing and leisure accounts are one of the newer additions to flexible benefits plans, but the concept is still developing, says Kate Donovan
Flower arranging, driving lessons, language skills and acupuncture may not be activities that immediately spring to the top of the list of those that employers are willing to pay for. Yet many now recognise that offering such choice is key to enhancing employees’ perceived value of their package, so they may want to consider sharing the cost of such activities with employees via wellbeing, learning and leisure accounts that are also increasingly cropping up in flexible benefits schemes.
Such accounts have been on the UK market for around 10 years, and are a form of notional account whereby employees accumulate funds on a monthly basis which can then be matched by their employer. Staff can use these accounts to cover the cost of treatments, courses or services of their choice, although these must sit within boundaries set by employers. How these accounts look, however, may vary between providers.
Few account designs are likely to be the same because employers have a number of choices to make about how their scheme is implemented and run. Most employers, for example, tend to produce a list setting out what employees’ funds can and can’t be used for, with some setting stricter criteria than others. This means that they are able to ensure funds are used in a way that is valuable to the business, while still offering employees flexibility.
Jacqueline Otten, principal at Towers Perrin, says: “For example, employers could focus learning courses on skills they feel are appropriate and that they are happy to support, such as language skills, driving [lessons], sports [or] parenting courses, but they could exclude courses such as dog training which are not developing the individual.”
Accounts typically allow employees to draw funds at any time throughout the year, although employers can limit the number of times staff can do so. It is also up to employers as to whether employees need to have enough funds to cover the full cost of the service they wish to use. And employer contributions can vary. “Mostly it has been a 50% match but there is no magic to this number, simply what the employer wants to offer,” says Otten.
But while the concept of learning and wellbeing accounts has been around for a while, it is only recently that they have entered the flexible benefits arena and take up is not yet widespread. Philip Hutchinson, principal at Mercer Human Resource Consulting, says: “I’ve come across these accounts in principle, but very few in practice.”
Towers Perrin, which has been largely responsible for the development of the concept, has, to date, implemented schemes for five or six clients which have included accounts in their flex offerings. “We were [initially] trying to come up with ways to take advantage of tax-free learning associated with work. In practice, operating it on a tax-effective basis was found to be too complicated,” explains Otten.
One of the organisations offering the benefit is the Bank of America. Its Associate Benefit Choices (ABC) flexible benefits scheme was launched in 2005 and initially incorporated both a learning and a health account. Based on the popularity of these options, a leisure account was launched in 2006, which covers areas such as gym membership and family days out. The bank matches employees’ contributions in order to encourage staff to improve their health, wellbeing and personal development.
Although these accounts are not eligible for tax or national insurance (NI) savings, if an organisation can prove that individual training elements purchased by the funds have a bona-fide business purpose, then this will not be taxed as a benefit-in-kind. “It all depends on the individual tax situation of the employer and employee,” says Hutchinson.
Martha How, head of reward at Hewitt Associates, says: “Mostly, these schemes are put in place without any tax planning or NIC breaks.”
However, salary sacrifice versions of such accounts have started to creep into the market where employers cover the costs of the activities or services, and employees’ contributions are deducted via salary sacrifice, so saving on tax and NIC.
Even where schemes do not qualify for tax savings, they have a number of potential advantages for employers. The nature of the accounts, for example, means they can be used to enhance staff motivation and, via health and training, general productivity. Marcus Underhill, head of flexible benefits at Vebnet, says: “The more health-related products an individual buys, the greater the potential that the workforce is healthier and there would be an improvement in absence.”
Staff training is also an area that business sense dictates is in an employer’s best interest to accommodate. An MBA, which is half funded by an employer, for example, could take three years to complete so can be a valuable retention tool. “The employer has that person locked in for a couple of years and you tend to find that they might want to practice the MBA on the company. You’ve then also got networking now [with] whoever they meet through the MBA and obviously, the more someone trains and learns, the more value they are to an organisation,” explains Hutchinson.
Refreshing flex schemes
Introducing these accounts can also be a good way of rejuvenating a flexible benefits scheme that has been in place for some time and needs to be refreshed.
But opinions over how payments should be made for services funded by the accounts vary. “Generally, it is best if the supplier invoices the employer direct – there may be some corporate discount,” says How.
But some employers may prefer to operate schemes with a looser structure whereby employees initially pay out for their course or activity, and are then reimbursed by their employer.
However, Otten explains that, in her experience, employees often pay for the course, treatment or service and then reclaim it from their flexible benefits scheme administrator by sending in a copy of the invoice. Once the administrator has confirmed that the employee’s use of the money is within the employer’s requirements, they will then arrange for the employee to be reimbursed along with their next salary payment.
This reimbursement will typically have had both tax and national insurance deducted from it. However, Otten adds that it is possible for employers to structure their plan’s rules to allow for the amount that is being reimbursed to be approximately grossed up if they wish so that the final figure broadly covers the employee’s cost of the course or treatment or service.
With these type of accounts gradually being extended to include leisure activities and potentially the funding of financial advice, employers have a greater opportunity than ever to encourage staff to take more responsibility for their own personal development.
Accounts provide employers with the opportunity to allow their staff to partake in activities that have not traditionally come under the benefits remit but that will prove good for business, whether in terms of staff health, training or motivation. There are currently three main types of accounts, which broadly cover the following activities or services:
- Learning accounts: parenting courses, computer skills, first aid and cookery lessons, basket weaving.
- Leisure accounts: gym and sports club membership, theatre tickets and entry to theme parks.
- Wellbeing accounts: aromatherapy, acupuncture, physiotherapy, osteotherapy and homeopathy.
CASE STUDY: Danone offers staff brain food
Danone UK, the dairy arm of the company’s food and drink business offers a learning and development account, alongside a wellbeing account, through its flexible benefits scheme.
The accounts, which receive half-matched employer funding, were introduced this January.
So far, a quarter of the 90 employees in the Danone Dairies division have chosen to take part in the wellbeing accounts, with at least 50% of these contributing the full amount. Just 10%, however, have signed up to the learning account.
The accounts allow staff to draw on their funds up to four times a year and to use them to pay for an extensive range of activities such as night classes, gym membership, acupuncture and aromatherapy. Liz Ellis, HR director, said: “We wanted to encourage a learning environment.” Employees must get the company providing their chosen service signed off by their employer and then hand in the receipt allowing them to be reimbursed.