Need to know:
- Benefit professionals need to conduct feasibility studies to assess the implications of new benefit options.
- Cost, tax and legal issues should be considered.
- Consultants, providers and advisers can all provide information.
- Speaking to employees is also a good idea.
Any employer looking to introduce a new benefits package will need to build up a realistic picture of just what is involved. Ultimately, this will have to be collated by the business itself, but it will also require support from providers, advisers and consultants.
Where this is for a suite of benefits rather than a single product, the direct relationship is likely to be with a benefits provider. Cost is likely to be a major factor, says Ed Smithson, head of flex at Xerox HR Services. Potential charges include the design of the scheme, building the requisite technology, an ongoing licensing cost and administration charge, as well as any future consultancy fees. “The last bit of cost is additional fees in the broking and renewal, so looking after these benefits behind the scenes,” says Smithson.
Tax implications
Other considerations relate to the tax and legal implications of implementing new benefits. Jeff Fox, head of strategic benefit consultancy at Aon Employee Benefits, says: “Compliance is vital on all projects like this. Assessing the legal and tax environment is fundamental; there may be major developments underway that could affect the project.”
The potential removal of salary sacrifice is one such consideration, he adds.
Providers can help here too, but employers would also be well advised to get in touch with tax and legal experts, says Smithson. “An employer will usually have in place a tax adviser or one [it] goes to with questions and [it] should be going to it to make sure [its] salary sacrifice arrangements are relevant,” he explains. “A decent consultant will always help, but ultimately it’s down to the representative of the business to do that.”
There are a number of legal issues that need to be considered too. This includes the matter of employee handbooks, and how benefit entitlement is expressed, says Jonathan Maude, a partner at law firm Vedder Price. “Unwary drafting may give employees express contractual rights to receive such benefits,” he says. “Drafting should usually give the employer some flexibility around the benefits offered, not only in terms of which are offered but also in connection with the provider of such benefits and flexibility to change such provider, the level of benefit, and sometimes to remove the benefit completely.”
The employer also needs to ensure the language used does not put them in the position of becoming liable as the provider of the benefit, or being denoted as an adviser, adds Maude.
Experienced providers
Suppliers also have a responsibility to help with feasibility studies, and this in itself should be a factor when weighing up which to work with, says James Kelly, head of sales at P&MM Employee Benefits. “Ultimate responsibility would sit with the employer, but suppliers should be able to provide the necessary experience, expertise and independent advice to help steer the [employer] in the right direction,” he says.
A final group of people to seek input from is employees because this can help to determine the likely take-up of any benefits offered, says Ian Bird, director at Secondsight. “We’d always encourage an employer to survey staff about any existing benefits and to find out what they value about them,” he says. “[The employer] should then go on to ask the employee what would appeal most to them if they were offered more.”
Some employers may feel it makes sense to outsource a feasibility study to a third party. Jack Curzon, senior consultant at Thomsons Online Benefits, says: “Not all organisations will have the time or resources to collate all the data required. While some might have in-house teams to help, others might employ a consultancy service, approach existing providers or install software to collect data. The critical point, however, is that employers have access to this data and use it to inform the decision-making process.”
