Jenny Keefe finds out what benefits managers really think of flexible benefits schemes.
Steve Mansfield is head of HR at Vanco. The IT firm claims to be the first organisation to roll its flexible benefits scheme out across eight different countries.
Q. What are the possible pitfalls?
Take-up can be poor on some benefits and it can be inefficient to offer those that are not required. Also, think carefully about the amount of time you give people to make their choices: a balance must be found between giving employees sufficient time to customise their package, and the need to manage and maintain a viable scheme.
Q. Is there such a thing as too much choice?
We believe that, as a responsible employer, there is a moral obligation to ensure that our employees are adequately protected against certain risks. At this stage, employees cannot drop the following core benefits: 12 days holiday, a minimum 2.5% pension contribution, life cover, and income protection.
Q. Do you offer any unusual benefits?
Nothing too out of the ordinary, although we do have a car pool that includes a number of high-performance sports cars. What is unusual about Vanco is that we offer this scheme globally – we believe we were the first company to do so. While the range of benefits differs between countries according to local demand and employment laws, the scheme effectively runs uniformly around the world.
Kelly Newboult is compensation and benefits manager at IT systems firm Gedas. The company’s flex scheme, launched last year, includes a pension, income protection, life assurance and a minimum of 24 days holiday.
Q. What is your top tip for employers considering flex?
I would suggest choosing a really good, supportive provider and making sure there is adequate time for administration before, during and after the scheme’s implementation.
Q. Do you offer any unusual benefits?
For the first year, we have mainly targeted core benefits, however, the medical screening covers items such as full health checks including wellbeing checks and mammograms. This is our first launch so we are currently looking forward to adding new benefits for 2006 and are open to some unusual ideas to entice employees.
Q. How do you make sure staff don’t buy or sell too much holiday?
Buying and selling holiday is our most popular benefit. We allow staff to buy five more days holiday but only sell back three days. This is to ensure that they take adequate holidays.
Diana Clayton is rewards and benefits manager for Centrica, the group that owns the AA and British Gas. Its flexible benefits scheme has been up and running since 2002.
Q. How do you keep flex fresh?
Centrica reviews the scheme content on an annual basis, taking factors such the previous year’s take-up, employee feedback and suggestions into account. As a result, we remove items with the lowest take-up, and expand the more popular benefits. A recent example of this is the purchase of discounted retail vouchers. This is Centrica employees’ number one benefit choice, so we review the mix of retailers each year to ensure that it is a good fit with our employee base and that we offer national coverage.
Q. Is there such a thing as too much choice?
In Centrica, we believe that choice is an essential element of the flex offering, however, there is a balance on the amount of choice available. On one hand, too much choice could confuse employees, and, on the other, could potentially dissatisfy employees who cannot afford to buy what they perceive to be the full range of offerings. There are other benefits that are outside of the flex scheme.
Q. How do you make sure employees don’t buy or sell too much holiday?
Within Centrica’s flex scheme, employees are able to purchase up to five additional days. Centrica encourages employees to take their holiday because we believe that work-life balance is important so we do not include the ability to sell holiday in the scheme. Holiday purchase is a very popular benefit, and of those employees selecting it, the majority opt for the full five additional days
Claire Parkinson is Smith & Nephew’s compensation and benefits manager. The medical supplies firm launched its flexible benefits scheme in May this year. The plan includes home computing schemes, private medical insurance (PMI) and holiday trading.
Q. Why did you choose flexible benefits?
It was completely employee driven. We have a biannual employee survey and what came out of that was that people wanted more choice. Following on from that, we held focus groups to find out what kind of benefits people wanted. Private medical insurance was popular for instance. And, of course, ultimately we wanted to attract more staff to the business.
Q. Have you learnt from any mistakes?
The main mistake that we made this time around was not getting full agreement from all the directors in each business area before we started the project. We have several different areas of the business and some of the directors didn’t want to be able to sell three days holiday or things like that. You need to make sure that all the different departments want to be included. So that’s been the main learning curve.
Q. How do you plan to keep flex fresh?
We launched the scheme in May so the excitement is still ongoing, but we are thinking about increasing the number of benefits we offer. We are looking to introduce tax-free bikes by the end of this year. We hope to refresh the scheme by the end of the year and then add some new things to it on a biannual basis. We have poster campaigns and employee briefings. When we first launched the scheme, we entered everyone who logged on into a free prize draw and drew names out of a hat.
Lorraine Kaloczi is payroll and benefits manager at structural engineers Faber Maunsell. The most popular benefit in its six-year-old flexible benefits scheme is private medical insurance, followed by travel insurance.
Q. What are the possible pitfalls?
Flexible benefit schemes, which allow employees to choose as many benefits as they like without restriction and are operated as a salary sacrifice arrangement are in danger of allowing some employees to drop below the national minimum wage (NMW). Where this happens, the employees affected need to be contacted to review their benefits options so that their cash pay is not less than the NMW. It is also worth remembering that statutory payments are based on pay subject to National Insurance, and if a salary sacrifice scheme is offered, this will affect the level of benefits received.
Q. Have you learnt from any mistakes?
When we launched our scheme in 1999, our available benefits were predominately security benefits, aimed largely at the middle aged or married person market. We encourage feedback from staff and, as a result of this, we found that our flexible benefits scheme was not hitting the right chord with our younger employees and graduates. In order to redress the balance, we launched a wider range of retail vouchers, including HMV, Gap, Asda and lifestyle vouchers, and we introduced travel insurance.
Q. What is your most unusual benefit?
Several years ago, we introduced a concierge service for our employees. Despite being good value for money, we had only two employees who opted for the service. As the interest wasn’t what we had expected, we dropped this from our scheme after one year.