How to cut the cost of flex without cutting corners

If you read nothing else, read this…

  • It can be tricky for employers to find the balance between overspending on flex and not offering suitable benefits.
  • Employers can utilise technology to enhance their flexible benefits.
  • Flexible benefits reviews can help organisations ensure their benefits package remains competitive.

Toblerone-flex benefits-2015Cost is often cited as one of the biggest barriers to implementing a flexible benefits scheme, but employers have some options available to them to offer their workforce a cost-effective flex package.

Review providers and schemes

To keep costs low, employers need to assess the flexible benefits they provide to make sure that these are attractive and advantageous to staff. If employers fail to achieve this, they risk overspending on packages in which there is little interest or low take-up. There is also little value in providing a benefit that an employee could source more cheaply themselves on the open market.

Anouk Agussol, head of people at Holiday Extras, believes that this is a step more employers should take to ensure they bridge the gap between cost and employee appeal. “We regularly review our benefits by directly asking staff what they want and carrying out engagement surveys [on an] ad-hoc [basis],” she explains.

She also highlights the importance of offering staff benefits that appeal to them and suit their lifestyle and interests. For instance, the most popular flexible benefits at Holiday Extras include those that are most valued by staff and their family, such as critical illness cover, private medical insurance [PMI] and death in service.

Some benefits can also prove financially advantageous. Offering tax-efficient benefits, such as childcare vouchers, pension contributions and bikes for work, via salary sacrifice arrangements, for example, results in national insurance (NI) savings for employers, as well as tax and NI savings for employees. Some organisations reinvest this NI saving into their benefits schemes or communications around these.

Reviewing the value and cost-effectiveness offered by the flexible benefits provider is also key, for example, looking to see if any hidden costs are incurred. Employers should always be clear from the outset about the costs that will be involved when implementing a flex scheme, whether these are one-off set-up costs or ongoing scheme management payments.

The time of renewal of a flex contract, meanwhile, provides employers with the opportunity to review whether the scheme they have in place is still the best fit for the organisation, or look at what other options are available in the market. “It’s important to check how the market is changing to keep [the] benefits up to speed and make sure [the] provider is right for [the organisation], or people will become less engaged with the [organisation] and [the] benefits,” says Agussol.

Utilise technology

Promoting the latest flexible benefits platforms to staff allows employers to boost employees’ engagement with their offering and maximise opportunities for benefits take-up.

As it stands, 82% of workers believe their benefits should change as their circumstances and priorities do, according to Davidson Asset Management’s Employee benefits: 2035 report, published in September 2015. Through the use of technology, employers can update their flex offering to reflect their workforce’s needs. Matt Nelson, head of flex management and development at Helm Godfrey, believes that technology can allow employers to run flex packages cost-effectively and offer benefits employees want. “Employees need to see exactly what their benefits are costing, which is when technology really comes into its own. With an easy-to-use platform and engagement surveys employers will not be cutting corners,” he says.

Julie Osman, director, pensions and benefits at Eli Lilly and Company, adds: “Leveraging technology that’s now available is a great way to make a flex package more cost-effective, but the market does change, so it’s important to constantly review to keep it fresh.”

Technology is a cornerstone of cost-effective flex, as long as it is simple and user-friendly. Employers should also consider how employees prefer to access their benefits. David Walker, chief commercial officer at Personal Group, says: “Employees are more likely to make choices around their flexible benefits through mobile devices rather than computers.”

Constantly communicate

To ensure employees make the most of the benefits provided to them, employers must engage them regularly through targeted and relevant communications.

However, 63% of employers say that communicating with staff is a key challenge when implementing flexible benefits, according to the Aon Benefits and trends survey, published in November 2014. This suggests that many employees may be missing out on key messages about their flexible benefits.

Getting communications right for a workforce, however, is crucial to improving employees’ understanding of the scheme on offer, which can go a long way towards bridging the gap between offering an engaging flexible benefits cost-effectively without scrimping on what is available for staff. Kelly Mitchell, head of people services at Home Group, says: “If staff aren’t aware of their flex package, [return on investment] won’t be particularly good. Communication really needs to reflect the organisation’s values; that is so important.”

Home Group, for example, communicates its flexible benefits through its 70 ‘value ambassadors’, who volunteer to highlight the value of its benefits, alongside corporate communications such as emails and desk drops.

As a not-for-profit organisation, Home Group does not have extensive budgets, so it uses the NI savings made from offering tax-efficient benefits via salary sacrifice arrangements to fund employee reward and communications.

Osman also believes that communication is important when it comes to striking the balance between benefits packages that are perceived as lacklustre and those that are seen to be of more value to staff. She explains: “We use personalised emails and webinars, which are great if employees are working in different places. Employers should also leverage engagement statistics with click-through rates to stretch their flex spend.”

So, to deliver a cost-effective and engaging flexible benefits scheme, employers should strongly communicate their package to employees, make full use of technology and keep one eye on the ever-changing market.

Interfleet-flex case studyCase study: Interfleet keeps flex costs low with increased staff engagement

International rail consultancy Interfleet keeps the cost of providing flexible benefits low by ensuring that it gives staff what they want.

The organisation, a member of the SNC-Lavalin Group, benchmarks its flex package and its 480 UK employees’ engagement with this, using the Great Places to Work questionnaire. In 2014 responses to the questionnaire revealed that just 35% of the workforce felt engaged, which is something the organisation wanted to improve through its benefits programme.

Kieran Grundy, interim human resources director, Europe, at SNC-Lavalin, explains: “The most important thing for us is offering the benefits that staff really want; not only does that keep our costs down, but it also motivates [staff]. We also had hands-on communications campaigns with posters and banners, and lunchtime presentations from our provider explaining what the portal means for employees.”

Interfleet keeps its flexible benefits window constantly open to help improve that staff engagement with benefits. “We don’t want staff to miss out on benefits because a window closed, and keeping these open constantly avoids that problem,” says Grundy.

Its flex portal, provided by Reward Gateway, initially enticed employees with straightforward retail discounts, which were then integrated with its flexible benefits, such as bikes for work, childcare vouchers and £20 off the price of joining any UK gym.

Interfleet also believes that benefits help improve staff motivation, which is why it incentivised employees who signed up to its flex portal. Between its launch on 1 September 2014 and 31 October 2015, staff were given £10 to spend through the portal free of charge if they logged in to use it.

The organisation also ensures it captures younger employees’ attention by making effective use of technology around its flex package. Grundy says: “Technology is absolutely key to engaging employees, but it needs to be fit for purpose and suit millennials particularly. This is why it’s available to staff anywhere on a 24/7 basis.

Peter Roberts-King and Wood Mallesons-2015Viewpoint: Cutting costs not corners

Flexible benefits have long been seen as playing a vital role in employee engagement. It is arguably one of the keys to unlocking productivity, as well as attracting and retaining talent.

The reduction in pension commission is coupled with continuing pressure on health insurance costs, an increasingly competitive market for talent and a growing sense that employers need to do more to support employees in understanding their options in retirement. Given the ever-increasing costs of employee benefits, organisations of all sizes are now looking for smart ways to reduce benefits costs.

There are a number of savvy steps to tackle some of these issues without forgoing quality, including delivering innovative and efficient flexible benefits.

Additionally, each organisation is different and assessing employees’ absolute needs is essential. This will help identify which benefits the workforce really values. Focus groups and surveys can help with this too.

Even if an employer uses a technology provider to support the administration of its flex scheme, many of the value-add aspects can be delivered in-house. For example, owning communications, marketing materials and basic education will help the provider reduce its costs.

Organisations that have employees in different locations around the world should review what is in place to see where they can identify economies of scale.

Peter Roberts is head of reward and operations at the London office of law firm King and Wood Mallesons