The future of flex

Looking to the future, flex is likely to evolve so that employees are not given a pot of money to spend but instead use their salary to buy perks, says Vicki Taylor

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The number of flexible benefits schemes in the UK is anticipated to continue increasing as employers without plans consider introducing them for the first time, while those with established schemes look for ways to keep them fresh. According to Mike Ashton, a senior consultant at Watson Wyatt, and Phillip Hutchinson, principal at Mercer Human Resource Consulting, over the next few years organisations with flex will move towards the concept of total reward. "New schemes are going to be based on flexible reward. In a flexible benefits scheme you are given a pot of money that you can go and spend, but in flexible reward you won’t have a pot of money," explains Hutchinson.

This means that instead of having a set amount that staff must spend on perks, they can spend as little or as much of their salary as they wish. Employees will be able to use their salary to purchase the benefits they want. This should help them to see the whole picture, rather than viewing flexible benefits as separate to other elements of their package. "What you see happening in companies is that they have maybe a share plan, a car plan [and] a pension plan but they never actually get a handle on the whole picture," says Ashton. With this move from flexible benefits to flexible reward, Hutchinson anticipates that employees will be able to make changes to their package whenever they feel like it, rather than once a year as typically happens now.

This approach may not be suitable for all benefits, such as private medical insurance for example, because the risk profile and the cost of cover would change each time new members join and leave. But it could work well for items like travel insurance. "Most people buy travel insurance about a day before they go [away]. If it is in a flex scheme and on 1 January I need to think about what kind of travel insurance I need for August, it is a bit off-putting," says Hutchinson. In the future, fewer employers may also reinvest National Insurance (NI) savings into their flex scheme. Instead, they are likely to use it to help mitigate the risk of employees who leave, but still have payments outstanding on items purchased through schemes such as bikes for work and the previously available Home Computing Initiative. "[Organisations] are doing it to protect themselves against any risk. If [an employee] buys a computer over three years, what happens if [they] leave before then? What if the employee doesn’t have enough money in their payslip at the end of the month to pay that back?

The company would then rely on this NI slush fund to bail them out,"says Hutchinson. Employers are also moving towards electoral flex. Put simply, this means they have a group of employees who help them to make decisions about the scheme. This is likely to achieve better employee buy-in, but can be risky if staff are given the impression that everything they suggest will be implemented. Moving forward, however, employers are unlikely to see any major changes in the cost of flex. "The big change in the cost of implementing [flex] came when some of the technology organisations came with purpose-built technology to help administer flexible benefits. I don’t think you will see [further] vast reductions in costs," says Ashton.

Flex: future directions

Large organisations without flexible benefits plans are considered likely to introduce schemes. Employers with well-established schemes are moving towards flexible reward, where employees are just given salary and can allocate money towards benefits as they wish. Many organisations are setting up employee forums to advise on the development of their scheme. Fewer employers are reinvesting National Insurance savings into their flex scheme and instead are using them to manage risks.