If you read nothing else, read this…
• Flexible benefits, as currently known, are evolving and changing shape.
• The line is blurring between what has been traditionally known as flexible and voluntary benefits schemes.
• Flexible benefits schemes are covering a wider range of perks, such as pensions and financial education.
• Flex is also used to promote core issues, such as health and wellbeing.
Case study: David Lloyd Leisure gets perks in shape
When David Lloyd Leisure (DLL) introduced a flexible benefits plan in June 2010, it incorporated its existing voluntary benefits scheme into the new offering. The flex scheme includes a health cash plan, bikes for
work, childcare vouchers, critical illness insurance, private medical insurance, a discount scheme, salary sacrifice company cars, holiday buying and a group personal pension plan.
The scheme, which is provided by Lorica Consulting, caters for all of the leisure club’s 6,000 employees, including receptionists, catering, gym and head office staff. It also aimed to harmonise benefit safter DLL changed ownership several times in recent years.
Joyce Linehan, DLL’s HR director, says: “The flex programme needed to work for all employees, regardless of age or role. This is quite a feat considering the diversity of the employee base and the large percentage of younger staff, who generally do not easily engage with benefits such as pension.
“The DLL benefits scheme is a radical step for this industry sector.”
Continuing changes in the way flexible benefits are categorised, interpreted and implemented have left the future of flex unclear, says Jennifer Paterson
Flex or not flex - that is the question. Employers’ uncertainty about the future of flexible benefits schemes was highlighted in the Employee Benefits/Towers Watson Flexible Benefits Research 2011. Of the respondents that offer flex plans, only 35% think flex will remain as it is for the foreseeable future, while 38% see it being integrated into wider reward platforms. One thing is certain - flexible benefits are evolving, changing shape and being interpreted in a variety of ways.
As the market develops, flex has become associated with other types of scheme, such as total reward and voluntary benefits. Martha How, reward principal at Aon Hewitt, says: “Parts of the market are confused about what flex actually is. Some organisations have bikes for work and childcare vouchers under voluntary benefits, and they call that flex. There is nothing wrong with that, but it is not pure flex. Pure flex is much more about looking at an employee’s total package value and asking how they would like to take it. It is more holistic.”
As flex grows to incorporate a wider range of benefits, including those traditionally grouped under voluntary benefits, the line between these schemes will continue to blur. Kim Honess, head of flexible benefits at Mercer, says: “The change in terms and conditions is what makes flex different from voluntary benefits. There is always a balancing act when it comes to deciding which benefits should be done on a true flex basis and which are best done as voluntary.”
Traditionally, flexible benefits schemes have offered staff a specific allowance or budget to spend on the perks they want. Schemes have run for a set contract period, with staff able to opt in or out of employer-paid benefits, select employee-paid benefits or take cash.
Voluntary benefits, meanwhile, have traditionally been classed as employee-funded perks. Some such as bikes for work and childcare vouchers, which were previously offered in a voluntary basis are being offered via salary sacrifice in a flex plan. Richard Morgan, director of consultancy services at Vebnet, says: “What is important is to look at which method provides the most efficient, cost-beneficial delivery route. As far as an employee is concerned, they want to go into one portal to access all their benefits. Some, technically, will be flex and some will be voluntary benefits. But the employee does not care, they just want it all in one place.”
Could voluntary benefits lose relevance?
But if voluntary benefits are swallowed up by flex, they could gradually lose their relevance, says Aon Hewitt’s How. “The added value voluntary benefits will offer staff will gradually diminish as web-based buying decisions and marketing becomes bigger. Currently, voluntary benefits are still quite prevalent, but five years from now I suspect they will have changed a lot.”
The way in which flex plans are offered will change as the current economic environment forces employers to seek cost savings. Lisa Gregory, chief executive at Stormchild Ventures, says: “Demand for traditional flex engines and platforms looks to be diminishing. When employers look at their budget lines, they will have to make tough decisions. That means flex itself is going to change.”
Dipa Mistry Kandola, consulting and communication manager, flexible benefits, at Lorica Consulting, adds: “More employers are not able to fund benefits any more, so they are offering voluntary benefits in the guise of flex, where employees give up salary to buy dental or critical illness insurance.”
The annual enrolment period traditionally built into flexible benefits plans also appears to be changing. Andrew Woolnough, head of flex at Enrich, says: “Flex only allows staff to make choices once a year and we should be thinking of the 12-month period rather than three-week enrolment window.”
Formal flex plans are constrained by that annual enrolment, adds Vebnet’s Morgan. “What we will see is a de-linking of some benefits from annual enrolment. [For example] dental, critical illness insurance and bikes-for-work schemes being opened up to more frequent intervals during the year.”
As flex evolves, employers are looking at workplace savings and corporate wraps. Morgan adds: “It is not the end of flex, but it is the end of flex as we know it. It is starting to encompass a broader range of savings and investment opportunities, plus a huge number of educational materials and modelling tools. Technology is moving forward to make it easier to combine all these things.”
Move towards corporate wraps
But Jonathan Bruce, sales director at Portus Online, says the move towards corporate wraps should not replace flex. “A lot of technology providers are trying to promote that the two should go together,” he says.
Access to pensions through flex is also growing as pensions migrate from finance and payroll to the HR arena. Lorica’s Kandola says: “Employers are starting to do it in time for the 2012 reforms to get staff more engaged with benefits as a whole, as opposed to standalone flex or standalone pensions.”
Flex plans are also being used to promote specific issues. For instance, instead of just offering private medical insurance or a health cash plan, some employers use flex to promote health and wellness by offering online information on bikes and exercise, gym discounts, anti-smoking, and health and fitness campaigns.
But despite all these changes, the industry does not predict the demise of flex: it seems voluntary benefits are more likely to disappear first. How says: “We are seeing, in well-established flex plans, new and interesting benefits coming along every year. Ultimately, pure voluntary benefits plans will wither on the vine, but flexible benefits will continue to grow.”
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