Employees must be told about the benefits of flexible benefits

This article is brought to you by Hewitt

Flex is thriving but poor employee communication is preventing the full benefits from being realised, says Martha How, head of reward at Hewitt Associates

Hewitt Associates has surveyed the flex market for 13 years in order to bring our clients the latest market intelligence and inform our own developing thinking. This year’s Flexible benefits in the UK: A definitive view survey had 180 responses – interestingly, 75% from organisations employing less than 5,000 people, and 50% from the 1,000-5,000 employees group. This is the market sector in which we have seen the most growth and most new implementations in the past couple of years. Of the companies surveyed, 45% have flexible benefits plans in place.

The survey shows that while the number of participants actively operating flex has increased, among the 55% who have decided against it at this stage, 46% made that decision without carrying out a business case analysis. The issues are implementation costs and ongoing administration costs. These are real concerns but it is important to note every business case and new implementation Hewitt has seen in the past five years has delivered a cost payback in less than two years.

Savings from pension and the other salary sacrifice benefits are delivering value to employers and employees in most flex plans, and this excludes the added advantages of enhanced employee engagement, and improved recruitment and retention. In our view there remains a compelling business case for flex for most firms. We only advise against flex if there are significant systems, data, business change or integration issues, or if pensions salary sacrifice is not relevant to the decision.

The survey also shows that electronic enrolment increased from 65% to 90% this year. This is coupled with a trend towards improving administration services, systems are now more efficient and employee-friendly and costs are beginning to come down for simple schemes that can be run on standardised packages. The market for providers is continuing to consolidate and some are investing to improve service levels and the user experience. Survey participants report improvements in administration – last year 44% reported concerns about administration but this year the figure is down to 25%.

Issues of concern for employers include administration, employee understanding of the full employment deal and benefits taxation. Meanwhile, several pieces of legislation have caused headaches for benefits professionals, including new maternity leave regulations, the health screening debate and guidance in respect of staff restaurants.

Finally, we have identified a trend which concerns us. Despite the increasing adoption of, and satisfaction with, flex, employers seem to be spending less on employee communications. Most employers with flex produce some kind of all-benefits communication (75%), but only 13% of these include salary and bonus. This is a missed opportunity to get across the full employment deal value to employees. In our experience, employers which operate a total reward philosophy achieve higher employee engagement, satisfaction and understanding of reward.

We have also tracked a correlation between effort on communication and the take-up and appreciation of flex. Again, it’s a missed opportunity if an employer decides to proceed with flex but misses out on great take-up through the false economy of saving on communication effort.

In conclusion, the survey shows flex is thriving in the UK but that in some instances the full advantages are not being leveraged.

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The views and opinions in this article are those of our sponsor Hewitt, and do not necessarily reflect those of www.employeebenefits.co.uk