Flexible benefits forum September 2011
Posted date: 1 September 2011
The flexible benefits market has come a long way in the past decade. Pay & Benefits invited industry experts to discuss the next 10 years.
Flexible benefits provide employees with choice. They offer them the opportunity to choose the most suitable benefits by “buying” what they want from their own flexible benefits fund, whether it is a season ticket loan or childcare vouchers.
This type of package is often popular with employees because they can cherry-pick what appeals and leave out the benefits which are not relevant to them. It can help meet their needs over the years, evolving to suit their lifestyle.
For businesses, offering flexible benefits is a chance to market themselves as a leading employer. It shows they care about individual employees’ needs, rather than treating them all as being the same, and also about helping their staff achieve work–life balance. It also enables them to control the cost of employee benefits because employees will pay more if prices increase. Flexible benefits allow them to introduce new options quickly and are easy to integrate when it comes to mergers and acquisitions.
Pay & Benefits invited benefits experts to discuss the topic further, looking at how the flexible benefits market has changed over the years and what to expect in the future.
Kavitha Sivasubramaniam (KS)
Editor, Pay & Benefits (chair)
Editor, Pay & Benefits (chair)
Paul Jackson (PJ)
Trainer, Payroll Alliance
Trainer, Payroll Alliance
Charles Cotton (CC)
Public Policy Adviser, Reward, CIPD
Public Policy Adviser, Reward, CIPD
Jonathan Watts-Lay (JW)
Director, WEALTH at Work
Director, WEALTH at Work
Philip Curtis (PC)
Managing Director, Fair Care Employee Benefits
Managing Director, Fair Care Employee Benefits
Terry Gostelow (TG)
Consultant, Gallagher Heath
Consultant, Gallagher Heath
Sam Plampin (SP)
Pay & Reward Manager, Debenhams
Pay & Reward Manager, Debenhams
Nanda Scott (NS)
Head of HR, LexisNexis UK
Head of HR, LexisNexis UK
KS: What are the current trends around flexible benefits?
JW: There’s a growing trend to get more value from benefits. Companies are making sure that they’re not spending money where they don’t need to, thus ensuring they have the right benefits provision.
PC: We’re starting to see smaller businesses take a keen interest in flexible benefits, although it may be in a cut-down form.
TG: They are also looking at shorter-term savings vehicles to be included in flexible benefit plans. Organisations are talking about corporate Individual Savings Accounts (ISAs) and other short-term savings vehicles for employees.
CC: Flex originally came over to the UK from the United States around 15 to 20 years ago. Originally, its appeal was that it was a way of containing and controlling benefit costs. However, as an idea it really took off around 10 years ago at the height of the war for talent as employer sought to try and set themselves apart from their competitors in the labour market. However, at that time, you sometimes got the impression that flex was a reward bolt-on. Nowadays, flex is far more likely to be aligned with business objectives, as well as trying to meet employee needs.
Quality over quantity
TG: You go back a few years and larger organisations might have had a flexible benefits plan that consisted of 20 to 25 benefits. The trend has been that, in an effort to make these schemes more efficient, this number of benefits has been reduced and become more focussed on what employees want.
SP: We’ve certainly done that. A few years ago we were offering a bigger choice with some low take-up rates, so we looked at what people wanted and were using and then reduced the number on offer.
NS: It’s more about the quality than the quantity offered with regards to flexible benefits. Employers should offer a smaller number of benefits that add value and are relevant to employees.
JW: Benefits are now much more coordinated, with pensions, share schemes and flexible benefits coming under the remit of reward. This coordinated approach can help to drive more value.
SP: In the current climate everyone is trying to make their money go further.
JW: We do quite a bit with ways to save money. Take an employee benefit like salary sacrifice and childcare vouchers (CCVs). If someone, for example, is effectively saving £500 on tax and National Insurance (NI) on those vouchers, then if as part of the benefits provision that firm is also offering a share incentive plan, the employee can increase the value of that saving by putting the £500 saving into the scheme. The £500 saving is then eligible for further tax and NI relief. In addition, a lot of employers offer share matching which will further enhance the value. Then ultimately you can put it into your pension and it will get grossed up again. So actually using the tax system in the workplace to the benefit of the employee can drive a lot of value.
Recruit and retain
KS: What role do flexible benefits play in recruitment and retention?
PC: If an employee comes from a previous organisation where they have the experience of a flexible benefits system they would certainly be keen to see it within a new employer.
TG: We work with a couple of firms that try to get on The Times top 100 employers – for them it’s a very important part of their employer brand.
JW: Right now we have clients in certain industries who can’t recruit the people they need, so they need to find some kind of competitive advantage.
NS: It links in with what we said earlier about making sure that organisations offer quality and not quantity. Companies need to have a clear understanding of what they want their flexible benefits to achieve. Do they want behaviours such as loyalty and productivity from existing staff or do they want to attract new talent or both? They need to come up with innovative ways of offering flexible benefits.
JW: Increasingly companies are segmenting their staff so you get a range of benefits that need to be right for the profile of the staff.
SP: We’ve had a flexible benefits system for a long time. We try to remain competitive by adding value to the total package.
CC: At the moment, a lot of public policy emphasis is focused on the need to rebalance the economy and for organisations to become more innovative, creative and flexible. In turn, employers are trying to encourage their employees to be even more innovative, creative and flexible. As a consequence, employees expect the way that they are rewarded by their employers to be similarly innovative, creative and flexible.
JW: As we’ve moved in the last 10 years to defined contribution (DC) schemes, there have been a lot of employers out there whose people weren’t joining the scheme. With the removal of the default retirement age, employers are thinking – these employees could actually continue working for me for ever more. So all of a sudden employers are starting to push and promote just how great the pension is.
Paul Jackson, Trainer, Payroll Alliance
Paul has 36 years of payroll experience. He has been involved in training and presenting courses for more than 20 years, both with Payroll Alliance and for a major payroll software developer, in which time Paul acquired an extensive knowledge of payroll software and technology. Paul has implemented computer systems for a wide range of organisations in both private and public sectors.
Since joining Payroll Alliance in September 2000, Paul has been actively involved in the development and presentation of training courses and providing professional advice through the Payroll Alliance helpdesk.
Pay versus benefits
KS: How do benefits compare to things like pay and bonuses when it comes to recruitment and retention?
TG: Salary and bonus always take priority as people look for a cash remuneration. However, increasingly organisations have tried to move towards a total reward approach in communicating not just the pay or the bonus, but, the value of the benefits as well. Some organisations do use that in the recruitment process, and certainly within retention initiatives.
NS: Flexible benefits not only give employees a choice so that they can choose what they want as everybody has different needs, but from an employer point of view it allows organisations to look at labour markets and current trends. They can see what is going to help companies engage and retain people by remaining competitve.
PC: You mustn’t undervalue the goodwill that you can create among employees with an effective benefits strategy. If you’re empowering your employees with choices, they feel more responsible. A flexible benefits platform can create a voice for the employer. Again, it’s about doing it well, it’s not just a once a year exercise to be effective.
KS: How can businesses make sure they are – and stay – competitive?
JW: The key thing about being competitive is what is going to be attractive to the staff that you’ve already got, and those who you want to attract in. So companies need to think long and hard about that, rather than just getting all of the latest benefits.
SP: They need to take the time to review it all. Talk to the staff about what they actually want.
PC: The benefits can be costing a fortune, especially some protection policies.
SP: Your needs will change throughout your career – at one point in time you might want discounts on restaurants, then as you get older you might want CCVs and then you’ll be looking at your pension. Not necessarily in that order, but needs do change throughout your work–life cycle.
TG: Ultimately if you’re consulting your employee base, or certain segments of your employee base, on a regular basis you can build up trends about what is important to people and what they value.
SP: It is key though, if you’re finding that take-up rates are low, go back to your initial communication as it may be that people don’t understand the value of the benefit.
PC: It’s quite difficult to explain certain financial products to a mass of employees – we often expect too much from them. It’s probably about going back to basics, using really simple language and avoiding jargon.
SP: In retail, one way to get that message across is through a simple poster that everyone sees every day, for example, in the restaurant. It’s about engaging initially with someone, showing how much money they could save and then following it up with more detail. Communication has to be simple otherwise people just won’t bother to read it.
TG: For organisations that find themselves in a situation where there are a number of legacy benefits that might exist from mergers and acquisitions activity, we give them a feel for what’s out there, give them benchmarks that they can measure themselves against and some commentary on trends. There is plenty of information available for organisations that do feel that it is necessary to go out and look at what their competitors are doing.
JW: Some benefits professionals are starting to talk about ISAs, which is a big thing that companies are thinking about now. A workplace ISA, for most companies, is a fantastic benefit to offer, particularly if employees already have shares. It’s basically saying to people – you’re holding some stock, you can wrap that stock in an ISA and save tax. Yet the price of supplying that ISA wrapper to the employer is nothing.
NS: In order to stay competitive, organisations have to look at what flexible benefits make a difference to their employees as well as the business to drive competitive edge. Companies need to increase productivity through competitive edge because ultimately that is what is going to lead to corporate performance.
CC: You also need to be wary of raising employees’ expectations. Either they’ll ask for benefits that they subsequently don’t take up or they might ask for benefits that aren’t actually affordable. Also, when you are creating focus groups you need to make sure that they are representative of your workforce.
Charles Cotton, Public Policy Adviser, Reward, CIPD
Charles Cotton is the Chartered Institute of Personnel and Development’s (CIPD) reward specialist. He has worked with some of the UK’s leading organisations to create a range of good practice reward products and diagnostic tools for HR practitioners. He directs the CIPD’s reward research agenda and recently produced a free member guide on the annual pay review process.
Charles is also responsible for the CIPD’s public policy work in the area of reward and has given evidence to select committees on banking pay, redundancy awards as well responding to various consultations, such as on pensions, retirement and MPs’ expenses.
Charles frequently appears in the media commentating on reward and is often invited to present on his research at reward conferences and events. He is a regular contributor to the CIPD’s reward blog.
Voluntary benefits
JW: Within my firm, our benefits provider gives us discount vouchers and one of these is five per cent off your shopping at Sainsbury’s. If you put that in a context where companies aren’t giving big pay rises, five per cent off your weekly shopping bill is a great saving. Particularly if you’re spending 30 to 40 per cent of your disposable income on groceries.
SP: It’s about a simple message. If you spend £600 to £800 a month you will get X back.
CC: I’ve got some nasty examples where this has backfired horribly. The workforce said they would never spend the set amount to get the discount and didn’t know which planet the people in HR were on. Or they said they never went to those shops because they could never afford it.
SP: You need to go middle of the road really. You just need to make the example real.
JW: We’ve developed some pen portraits of individuals in the company. For instance: here’s Lucy, she’s a graduate, she would like to save for a flat but actually would like to go on holiday and enjoy life and she’s also got her student debt to think about – so what’s in the benefits package that can help her? Then we also had someone who was coming up to retirement and looked at the specific issues they had. We then related it all back to the benefits and actually said how this can work to the benefit of each employee profile. Pen portraits are never going to be perfect, but in terms of getting messages across it’s quite good. It is that communication of how can you get that message across in enough detail that people go – wow, I never realised I could save that much.
PC: I’ve seen people use real employees on a poster campaign. Then people go past and say, I recognise that guy, and that’s really effective to endorse the benefits.
SP: I read that John Lewis, which has a lot of shop-floor based staff, has given employees paper total rewards statements. Against different benefits there are barcodes which can be scanned and link into their intranet site, so those who have smartphones are linking into the intranet, wherever they are.
Demographics
KS: Is it harder to be competitive when you’ve got a wider demographic?
PC: You’ve got to look very carefully at your demographic and you can adapt your offering to different portions of your organisation, as long as you’re not being discriminatory.
NS: It’s not harder, as it encourages diversity when there is a wider demographic. In the example we had where different scenarios are given, employees can choose benefits that suit their personal circumstances.
JW: Of course, the employer can only take it so far. They can look at the profile of their staff and do some research to ascertain the spread of people and the benefits that they think are right. However, at the end of the day individuals have to self-select.
KS: How do you work out what’s best for your workforce?
JW: I often talk about push and pull strategies – so what are the things as the employer that you want pushed out, as employees won’t necessarily understand them unless they’re explained. Something like discount vouchers at Sainsbury’s isn’t difficult to understand. However, if you were rolling out an ISA to complement your share scheme then you would have to really push it out to people. You would need to go to people who are in the share scheme and explain what the value and what the benefit of doing this is, as it wouldn’t necessarily be as obvious as it would be with five per cent off your shopping bill. The more complex elements need to be pushed out, whereas simple things the employee can pull from the selection.
PC: It’s a balancing act between giving employees what they actually want, which is probably cash in their pocket, and what they really need, such as income protection and a realistic pension contribution.
Jonathan Watts-Lay, Director, WEALTH at Work
Jonathan is a founding Director of WEALTH at work. He is at the forefront of the latest developments in the use of financial education and the provision of savings within the workplace. With a background in both financial and online HR services, Jonathan has 20 years’ experience of innovative thought leadership in these areas.
Jonathan is widely quoted in the media for his expertise in workplace education and has been responsible for many of the corporate clients secured by WEALTH at work. His qualifications include an MBA and a Chartered member of the Chartered Institute of Marketing.
Work–life balance
KS: Do you think that flexible benefits have any part to play in helping staff achieve a sense of work–life balance?
PC: Holiday trading is a key one. It’s getting more popular, employees can buy or sell holiday. Typically the schemes we see are more likely to be a buy scenario than a sell.
SP: We’ve operated a buy and sell holiday scheme for a few years now and it’s very popular.
CC: This trend now seems to be moving in the other direction. More people are trying to sell holiday because of the increasing living costs and below-inflation pay rises.
SP: Employees have the choice to sell holiday to make their money go further.
TG: A trend of the last five years is the increasing role of lifestyle benefits. Things like holiday trading, and less direct things like CCVs, gym membership, bikes to work and other lifestyle-type benefits.
PC: Through flex you can let people increase their own pension contributions. You might get people saying I don’t want to work until I’m 70, what should I do to retire at 60? You can see, with a bit of advice, what you need to do. Is your pension pot sufficient to retire at 60?
JW: The whole notion of flexible retirement is really growing. Partly from individuals where they are in complete control of their pensions, but also as a default for people who don’t quite get to where they thought they would in terms of pension pot and the income it will produce.
KS: In a broader sense, what do employees get out of flexible benefits?
CC: If they are able to select those benefits that they are identifying with then that can have a positive impact on their feelings and their commitment to the organisation. This can lead to lower absence, lower employee turnover and higher productivity. Obviously on their own flexible benefits won’t achieve all of this, they have to support, and be supported by, other people management interventions.
KS: Is it important that it isn’t just the flex offering on its own?
JW: There’s always going to be a range of things – if you’re recruiting then people will look at benefits, but they will probably look at pay more.
Benefit trends
KS: Are there certain benefits which are more appealing now than previously?
CC: Certain benefits are widely taken up, but just because a benefit doesn’t have a high take-up, it doesn’t necessarily mean that it is unappealing, it could have a lot of support among the minority that use it. An example of this would be bicycle schemes: for one group of staff they are particularly well received, even though if you look at it from another angle, 95 per cent don’t take up the initiative. Employers need to dig deep into the data to see if the benefits are being valued.
PC: As an employer you’re in a great position to help your employees save some money. A lot of the usage of flex is driven by people realising that they can save 50 per cent off a new bike, or can save 40 per cent on health screening. It is often the simple things that have the most appeal.
Even if employees only benefit from a small number of benefits, they will usually be quite grateful to their employer, who will be seen as having gone to the trouble of providing the choices.
JW: I always find it interesting how what you might do from a pure financial perspective isn’t exactly how people behave. A benefit that everyone should be interested in is pensions – it’s amazing that at many companies there are matched contributions and some decide not to take them. Employees will justify not joining the pension by saying that they’re not very interested.
There’s a certain amount of irrationality in the way that employees think. Which comes back to how do you make it clearer for individuals?
CC: There are different drivers. Research indicates that some people don’t join the pension scheme because they weren’t initially eligible when they started at their employer, and when they did become eligible they put off the decision to join. Another driver is that staff think that they are not going to be at the organisation long enough to make it worthwhile to join. Or when they joined the firm 10 years ago they couldn’t afford to join the scheme but they can now and just never got around to it. It’s the issue about how much time employers spend educating their employees, or decide just to stick everyone into the pension scheme and let them make a decision to opt out.
PJ: Companies will need to think about that when auto-enrolment comes in.
SP: There’s an opportunity there as well when you’re introducing auto-enrolment and the technology that you’re going to have to implement and run that you will be able to look at your flexible reward package and link the two.
PC: That’s true, we predict a significant increase in online solutions and the natural home for that is in a flex system. It’s got to be joined-up thinking.
SP: Also, companies know that they’ve got to spend the money to put auto-enrolment in, so there’s an opportunity for the HR function to jump and say, for the same money we can put all of this together.
JW: The interesting thing, from the employee perspective as well, is that when you get to the four per cent – why did they not join the pensions scheme, even when contributions are matched, even though there’s auto-enrolment which basically enforces it. But if they don’t understand the value, then employees will just see that they have four per cent less pay this month than they had at the end of the last month.
People will either opt out or there’s going to be a question around the funding of that four per cent. Is there something else within the benefit provision that can help find that money? If they can actually fund part of that four per cent contribution every month to their pension through the benefits package – then going back to our pen portraits – if you look at the benefits package and say you can save £100 here, £400 here, does that go some way to funding your four per cent? That’s going to be a very interesting dynamic.
CC: At the moment the Department for Work and Pensions is distributing all of this communication literature. So hopefully employees are now more aware of what’s coming – but yes, it is a case of what they decide to do will reflect how well the economy is doing.
JW: Employers need to find a way to communicate with employees that if they do choose to stay in then there are ways that this could be funded through the benefit provision.
Philip Curtis, Managing Director, Fair Care Employee Benefits
Philip is the Managing Director of Fair Care Employee Benefits, a business he founded in 2005 with a mandate to build a nationwide consultancy. Now with more than 1,000 UK clients, Fair Care has earned a reputation for innovation, combined with excellent service delivery.
Prior to setting up Fair Care, Philip spent eight years as a finance director in merchant banking group Close Brothers. Part of his remit was responsibility for HR and benefits, which sparked a keen interest in tax-efficient remuneration. Among other initiatives, he introduced profit-related pay through salary sacrifice and various share incentive schemes.
Being on “the other side of the fence” for most of his former career has given Philip an advantage in understanding what clients really need. Dual qualified as an accountant and more recently as an IFA, Philip is well placed to be at the forefront of thought leadership in this ever changing market.
Auto-enrolment
CC: It also depends on demographics. I was talking to a restaurant chain and most of their employees are under the age of 22, and they don’t earn enough to get into auto-enrolment in the first place. So the firm is now working out how much communication effort it should focus on these individuals.
TG: One of the interesting things with auto-enrolment is those for whom it might not be the right thing, individuals who might look to opt out as they have debts which are the financial priority. For these individuals organisations can look at other financial benefits which would be valued.
CC: When you talk to young people about pensions they understand that it’s a long-term investment, but when you talk to them about share plans a lot of them are enthused by that and so it may be a good way of getting them interested in saving. Then you can use this opportunity to talk to them about pensions.
JW: Save As You Earn (SAYE) schemes – although it goes back to affordability – are a great way to save, as people generally trust their companies.
Lifestyle choices
KS: What drives people when they are choosing what benefits they want?
NS: Employees look at what suits their lifestyle and what is relevant to their needs at a particular point in time.
TG: With a lot of the technology that’s used in flexible benefits schemes, individuals can model their package and can see what works for them.
JW: I often don’t understand why certain things are offered as a benefit. I don’t see where the value is in things such as travel insurance.
Going back to ISAs, one of the big things about this (and I know this as providers are now putting ISAs into firms) is they’re selling cash ISAs. What I don’t understand is the benefit of selling a cash ISA into the workplace. Providing an ISA wrapper where employees can put their stock and benefit from low costs, tax-free growth, potential mitigation of tax on maturing share schemes and the ability to diversify the stock holding is a great benefit. However, with cash ISAs there may be a better deal on the high street so what is the benefit of offering this?
SP: Then it becomes a negative as employees feel disgruntled and you’re going against everything you’re trying to achieve. You’re not engaging them.
PC: The only positive is that you might encourage use of something like an ISA as an alternative investment savings vehicle, whereas otherwise the employee probably wouldn’t bother.
JW: Benefit provision in the workplace should only be there because it drives some value for the employee and employer.
Benefits perception
KS: What are the drivers – why would people take up cash ISAs when they can get better rates on the high street? Is it because they want something simple, which they don’t have to do research, and it’s in one place?
TG: It tends to be larger organisations which have set up ISAs and you look at them and they are largely empty boxes. As the workplace savings agenda moves forward, and where we perhaps see a more joined-up nature between share plans and pension arrangements and shorter-term savings vehicles within the workplace, organisations might take the view that they’ll either put three or four per cent into an individual’s pension. Or they’ll contribute three or four per cent into an ISA. Then these sorts of short-term savings vehicles may increase in popularity, as an alternative.
PC: If people are dissatisfied with the pensions idea or are sceptical, then a short-term vehicle where they can get their hands on the cash if they need it might be the answer.
KS: Are organisations that offer these ISAs doing so to encourage savings?
PC: Possibly, but I think it’s more about offering choices to employees.
PJ: As an employee the main point for me would be – what’s in it for me? What is it going to cost me and what am I going to get out of it? If you look at the cash ISAs most people would say there’s nothing in that for me, and it’s going to cost me money so I’m not going to join it.
JW: Then that comes back to employer endorsement again. Employees, generally, do trust and believe their employer.
SP: Also where they’re opting into schemes and they do see real value, Private Medical Insurance and dental or optical cover, they expect the same. So if you’re not delivering that then it can be a negative.
KS: Is there a perception that the more benefits are offered, the greater the scheme looks and is perceived by
the workforce?
the workforce?
NS: No, people just get more confused the more benefits they are offered. As mentioned earlier, organisations should really be focusing more on quality than quantity.
JW: The reason that most pension schemes only have a dozen funds is because employees find it hard to choose from a more extensive list. So from one perspective you could say that’s great that employees could be offered 2,000-plus funds, but what happens is that most people end up in default funds.
Terry Gostelow, Consultant, Gallagher Heath
Terry specialises in flexible benefits and total reward strategy, structure and delivery. He studied HR Management at undergraduate level and spent a number of years in his early career within an in-house HR environment. He subsequently moved into HR consultancy and later specialised in benefits and reward.
Throughout his consultancy career Terry has worked with a wide range of clients, from large corporate and public sector to small and medium-sized enterprises. In recent years he has focussed on the use of salary exchange benefits in the workplace, benefit re-design and utilisation of technology to better manage reward. He publishes articles on a range of subjects from pension auto-enrolment, risk benefits and flexible benefit management.
Business considerations
KS: What are the key things that businesses need to consider before they implement a flex scheme?
SP: It’s about making sure that you’re giving people what they want, not mis-selling, and giving them things that are going to add value.
PC: Having enough resource to manage it effectively. The cost implications and consultancy around it.
CC: There used to be a lot of focus on cost, that’s still important but we’re now seeing more of a partnership type of approach.
KS: So the business really needs to work out what it wants to get out of offering the scheme?
CC: Yes, 10 years ago many schemes were introduced because they seemed innovative and exciting, but now it’s about how does flex support what the organisation is trying to achieve.
SP: You need to think about whether you are going to offer cash instead of the benefit. Also, what you think the core benefits need to be.
PC: The definition for a flex scheme has become quite blurred. Some clients that we visit want flex, but actually all they want is a simple mechanical device to operate the salary sacrifice, a discounts scheme and perhaps holiday trading.
SP: It’s also about how you’re going to communicate. Have you got a population that have access to the online system? How often are you going to review them? We do our opt-in once a year, but I read this morning that one company is now doing this quarterly.
PC: Ultimately you would be able to opt in every month, the technology is there now, it’s the administration behind it that prevents this from happening.
Benefits technology
KS: What role does technology play?
CC: It makes life easier and it allows you to do more things. There’s a lot of interest at the moment about your flex budget reflecting your organisational spend. Benefits can then move from being a fixed to a variable cost.
SP: From an employer’s point of view, it’s easier for management reporting and P11D reporting. It also makes it easier to look at your demographics.
TG: Certainly within the enrolment process and communication to employees putting information online, including the modelling tools, can allow individuals to access and experiment with what exactly they want to include in their benefits. Technology is also where you can achieve the administrative efficiencies.
SP: Smartphone technology will also be used more and more as most people now have access to that technology. You can target your communication more easily as well.
JW: You can start looking at how different groups of staff are communicated with. So you don’t have a single communication to all, but it’s actually targeted.
TG: On the flip side, there can be restrictions around technology. I was recently at a large manufacturing facility talking to the HR guys there and they were saying that IT literacy was still quite poor. So you’ve always got to look at your employee demographic and see the acceptance and use that people have of technology internally before you say that’s what you want to do. Sometimes paper-based might be more appropriate.
SP: Another thing you need to remember is data protection. If you’re dealing with a number of different providers and you’ve got data about employees being fired back and forth, you need to ensure the data is protected in line with legislation.
KS: Does technology help employees understand the value of their benefits?
SP: With our flex system you are able to pick and choose benefits and see the value of them prior to submitting what you actually want.
PJ: There’s no real point of reference with that though. Is there really any substitute for sitting down and talking?
PC: There isn’t, but there are the costs, time and geography issues to overcome.
SP: The people you’re trying to reach don’t always have the time to come along and sit in a talk or a meeting for an hour, whereas if they’ve got access to it online they can do it whenever it suits them.
PJ: At some employers you have the issue of logistics, particularly in retail.
PC: Employers may take it on themselves to pay for financial advice, especially with the pensions issues looming – it’s going to create loads of questions.
JW: We’ve seen some signs of that already – employers are concerned about the retirement piece. If employees save diligently for 30–40 years and they then decide that they want to retire aged 60, due to all the new retirement legislation there are some pretty big decisions to be made. Some of those choices are irreversible and if you get them wrong you’re stuck with them. Then the employee, having saved carefully for 30 years, is abandoned right at the point where the decision matters. As a result we are seeing far more employers realising that they’ve got to give employees access to advice at that point. This is where good financial education is important as part of the management of that benefit provision.
Sam Plampin, Pay & Reward Manager, Debenhams
Sam started her career in HR in the construction industry in 1990, initially working as a Personnel Assistant for Mowlem Management. In 1992 she joined what was The Burton Group, working in Dorothy Perkins head office. On completion of her Chartered Institute of Personnel and Development qualification in 1993 Sam transferred to Debenhams, working within the HR function in stores. In 1997 Sam moved into the head office HR function working within the Personnel Services team. She was quickly promoted to the role of HR Systems and Admin Manager.
In 2002 Sam transferred into the Pay & Reward Department as Pay & Reward Manager, where she has remained ever since. She has been involved in aspects of pay and reward including flexible reward, relocation management, bonus schemes and staff discount.
Communication
KS: Are some communication methods more effective than others?
NS: It depends on the demographic of the organisation and what communication methods work best.
SP: You can have different methods of communication in the same company. In the head office we would communicate via email and in stores we may use posters. To back this up we have a comprehensive intranet site and HR service team to provide a consistent message. We also use a cascade system where we communicate from the management team down. However, then you still have logistical issues as you have employees working different hours and different days.
PC: Even when schemes are largely paper-based, the documentation will often refer you to a website. The sympathy for employee communities not having access to email or online facilities is fading.
CC: Technology allows you to segment your offering and message. You can identify which individuals are the wealth creators and add value. You can also identify which individuals do the jobs that are essential to the organisation, and you can then use this to create your reward and communications strategy and align it to your approach to talent management.
JW: The issue that we’ve seen growing is live webinar broadcasts.
KS: How much responsibility should employers take for making sure that their employees make informed decisions?
TG: There’s always an incentive for the employer to communicate and educate properly. Certainly, when you are setting up a flexible benefit arrangement for the first time, you want high take-up rates within the benefits that are on offer to show the investment in time and effort was worth it. Then there’s the question whether these benefits are valued by individuals. For employees to understand the value of benefits organisations need to communicate and educate.
KS: There’s an incentive, but is there a moral obligation to ensure that employees make informed decisions?
JW: There definitely is on things like retirement – and this is where The Pensions Regulator is getting increasingly concerned.
NS: Yes, agreed. However, in terms of the other benefits such as the cycle to work scheme, I am not sure if employers have a moral obligation. I would agree that organisations have an incentive to do this, as it helps if they want to drive engagement to make sure employees are retained and companies are attracting the right staff.
PC: The employer is the only real direct route to market to deliver this financial education – how else do you do it effectively? The Government sees employers as key educators. I suspect this approach will happen a lot more and might even come with some incentive; such as more tax relief for providing financial education.
KS: What about the role of line managers in communicating the information?
PC: You need their loyalty and engagement otherwise things fall over.
JW: It’s a doubled-edged sword. You need to get the line managers and the shift managers on side. If you can get their buy-in then that works well. What I have seen though, is where there is a complex message, trying to get a line manager to explain that to start with is fraught with difficulty. The danger of getting that wrong is so great, and the implications of people then taking action based on this information could be dangerous.
CC: They’ve got a role for signposting information. If you look at how employees tend to behave in the workplace it’s people asking their colleagues, rather than going to an HR or a reward person. So it’s important for HR to have these discussions with line managers.
Measuring benefits
KS: How can businesses measure their offering? How often should it be reviewed?
SP: Not only do you need to look at take-up rates but you also need to look at things like optical cover and the number of claims. People might be taking the benefit out but are they actually using it? For those who are using it you need to say, what was the value of it? What did you like about it? What didn’t you like about it? How easy was the process? If you just look at take-up rates in isolation, then it’s not necessarily giving you a true picture.
CC: If you introduced the scheme to raise your profile to be an employer of choice then you would use one set of metrics.
PC: Take-up rates can be a bit misleading. You might find that you have five per cent using cycle to work, three per cent using CCVs, three per cent health screening and so on. It sounds really low, but if you add them all together you might have benefited 25 per cent of your organisation, which isn’t bad. It’s about different things for different people.
SP: Even though the take-up rates may be low, the actual benefit to those employees is very high – so it is still worth doing.
KS: What are the cost implications for employers?
PC: There’s the cost of the technology, assuming you’re buying a platform of some sort, and then there’s the level of consultancy needed to implement it and the marketing that goes with it.
SP: The monthly administration.
PC: Sometimes the driver to introduce flex is NI savings. Often it’ll pay for the project.
TG: Sometimes flexible benefits on their own are regarded as a method of cost containment. If you are giving each individual a percentage of salary to spend on benefits then that can actually protect organisations against the increased insurance premiums.
PC: You’re avoiding wastage on core benefits that people just don’t want.
SP: You also need to look at those people who opt out and take the cash benefit.
Nanda Scott, Head of HR, LexisNexis UK
Nanda joined LexisNexis in August 2010 from the Bouygues Group, a French Engineering and Construction Group, where she worked as a Senior HR Manager for both public and private sector clients. These included The Cabinet Office, The Home Office, Grosvenor Property Headquarters, LOGOC (London Organising Committee for the Olympic Games), as well as on various projects in both Paris and Dubai.
Nanda started her career in recruitment in South Africa before moving into a general HR role 10 years ago and came to the UK in 2003. She has a Masters in HR, specialising in both Culture and Change Management, as well as Diversity and Equality from the University of Westminster.
The future of benefits
KS: What does the future hold?
JW: If you imagine a list of benefits, depending on which ones of those you select, you’ll be given value back. So for some you might get tax and NI relief, for others you might get tax but no NI, others may be a pure net payment but all of this is worked out for you through a simple to use online calculator. It allows people to calculate the values of different options and then what that bottom-line value is to them. That is a win-win. It’s a win for the employee because they think it’s great as they’re saving X amount and in turn it’s good for the employer as it’s helping them to reach their objectives of a more tailored and relevant benefits offering for employees. It will grow as a winner for both staff and employers.
CC: Flex may start reflecting changes in Government policy. For instance, university fee increases mean that people can’t always afford the cost of university or elder care and childcare. You might see benefit providers moving into these areas and the Government might encourage this type of provision through tax relief; so instead of CCVs will we get elder care vouchers?
TG: If you look at flexible benefit technology it will become even more efficient for HR, for payroll, for getting it to link up to various other systems. It will also become a more intuitive experience for employees, integrating with the pensions providers, creating a more seamless experience for users.
PC: Absolutely, as an employee you don’t want one password for one section and a different password for something else; you just want it all in one place. The wrappers will sit on a flex platform and it will link through so that you can see the value of your benefits fund on a daily basis.
SP: Some companies will use auto-enrolment to implement a new flex platform and roll it all up together.
PC: Auto-enrolment is possibly the most significant feature of all this and it’s coming our way pretty fast.
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- September 2011
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