What have HR managers been saying about flexible benefits schemes? Mark Dixon takes a look, explains the rise of flex, and provides a checklist of steps to consider and common pitfalls.

Flexible benefits have been used in the US for years to recruit and retain the best employees. They’ve advanced to such a stage that they’re no longer the exclusive domain of large corporations – the latest technology is helping flexible benefits to be accessible to small and medium size companies too.

British organisations spend millions annually on employee benefits, yet most employees don’t understand, let alone appreciate their value or the efforts exerted in providing them. How often is an expensive-to-produce benefits booklet forgotten in a bottom drawer only to be next seen again when the employee cleans out their desk as they move on to other opportunities?

Yet web-based employee benefits programmes are proving to be a key tool to attract, motivate and retain staff. In the recruitment stage alone, it can be a critical device to draw the best talent. Imagine how tempting it is to a job candidate when you can show them point-by-point their prospective total remuneration package during the course of an interview?

The same is true for current staff. The first employee feedback we had about our online benefits system was simply ‘fabulous’, comments Jane Taylor, Head of HR at Delphis Consulting plc, a Morse company. “The employee didn’t realise he had such a comprehensive benefits package, nor ever knew its value.”

The rise and rise of ‘flex’

But an employee’s ability to review their benefits package online is only one important element. It’s now often seen by HR teams as a first step to introducing ‘flex’ to employees, giving each the chance to choose benefits to suit their own lifestyle.

Kathryn Dolan, HR Project Manager of Fujitsu Telecommunications Europe, explains, “We’ve gone through significant periods of change over a number of years and there were major inconsistencies and legacy issues in the way employees were rewarded. The implementation of a flexible benefits scheme was regarded as a mechanism for creating a transparent and equitable reward system amongst employees without reducing the value of any packages.”

Employers are attracted to flex because it can help control the costs of current of future benefit provision. It can also aid a shift to a defined contribution pension scheme, reforming company car policies and harmonising terms and conditions after a merger or acquisition.

VAI UK has grown through the acquisition of a major competitor. The directors made a commitment to move to a flexible benefits system after experiencing employee benefits harmonisation issues. Bruno Smith, HR Manager, says, “Our current benefits vary from employee to employee because of the different companies that have joined us. We decided that if we could do flex in a smart way without causing an administration burden, then this would help us coordinate our benefits, and therefore help our employees. We have a small HR team and needed a neat, cost-effective solution to make it work.”

What benefits can be included?

There are numerous benefits that can be included in a flexible benefits plan. The standard ones tend to be:
– pension
– company car
– private medical insurance, and
– life assurance.

Other ideas, though, are becoming increasingly popular:

• dental insurance
• home computers
• retail vouchers
• swapping holiday entitlement
• childcare vouchers
• sports facilities

And of course, employees knowledgeable about their own benefits means less HR time needed to manage the programme.

Administration

Paul Bartlett, Compensation & Benefits Manager of the London Stock Exchange, said: “Not surprisingly, there was slightly more administration for the HR team while the flex system was bedded down. You have to expect this at first. Now, we are better placed to manage complex data flows and we’re also seeing a significant reduction in employee administration when people want to change their benefits following ‘lifestyle’ events.” This is important, since 95% of The Exchange’s employees changed their benefits to suit their circumstances.

As for Total Reward Statements at the London Stock Exchange, for the first time the HR team didn’t have to go through the labour-intensive exercise of creating paper-based statements. New salary details were simply uploaded onto the system, so employees could login to view their own details.

Greater efficiencies are realised when employees, HR staff, benefit consultants and payroll teams are all using the same real-time web-based information. Nicola Clegg, HR Manager for New Media Spark, said: “Our administration processing has dramatically improved – we are using the same system as the IFA and can manage the benefits on a real time basis.”

Steps to success

To get your flexible benefits plan right, there are some key points to consider:

Know why you want flex. It could be to help recruit, motivate and retain staff; decrease business costs; improve HR/payroll efficiency and/or some other benefit.

Start gradually. Start by implementing an online benefits system that gives your employees a Total Reward Statement and lets them work with the technology, as well as understand and appreciate their benefits better. These systems should also ensure that managing benefits is much easier for HR and payroll. Data integrity will be improved and ready to make the transition to flex soon after.

Build your business case. Identify your objectives, develop a strategy for implementation and establish immediate and long-term solutions. This should include planning and design, estimation of implementation and running costs and identifying milestones.

Get company buy-in. Without support from top management, the scheme won’t get off the ground. Similarly, ask current employees what they would like from a flex plan. Talk to providers to get ideas that work for companies similar to yours.

Perform an HR and reward audit. Check what systems you have in place right now. Answer some key questions:
– What do you need?
– What will a new system need to produce the flex plan you want?
– What processes need to be taken into consideration?
– How are staff going to access the system and do they need any additional tools to do so?

Check the legal and ethical concerns. The new flex plan must comply with your employees’ current contractual obligations. Also, consider the ethical obligations that are inherent in offering flex. You should identify and establish minimum contributions that your staff must adhere to, without inhibiting their right to pick and choose their benefits.

Get ready to measure success. Establish milestones and identify how you will know whether flex is successful or not.

Manage expectations. Some people see flex as a remedy for many HR and payroll problems, so it’s important to set realistic goals.

Communicate. Internal communication, promotion and education of staff are crucial to the success of your flex plan.

Let the system do its job. The technology should be intuitive and manage the workflow for you. Email reminders can be programmed and sent regularly to all nominated individuals.

Common pitfalls

The biggest problem to watch out for is managing time; sticking to tight deadlines becomes difficult to manage at many stages, not least when working with pensions when you potentially have to get trustee agreements over alterations.

Managing budgets can also become a contentious issue – have a clear strategy from the start so you know the exact requirements and costs. Don’t over-promise anything to yourself, management or employees as it may lead to disappointment later. And finally, don’t forget to set those objectives. If you don’t you can’t possibly measure the success of your creation later.