Russell Martin, HR Director Prudential, on flexible benefits

April 29, 2004

Russell Martin, HR Director Prudential, on flexible benefits

HR Zone quizzed Russell Martin, HR Director at Prudential, on why his HR team implemented a flexible benefits scheme, how the scheme works and the benefits realised since implementation.

Why did you decide to implement a flexible benefits scheme?

‘You Choose’ forms part of an integrated package of employee benefits and was launched to coincide with the key corporate initiatives in 2002. These are the Plan from the Pru (an approach to help our customers identify their financial needs in line with their lifestyle), the launch of our refreshed company brand, and the launch of our company’s vision and values. We also needed to harmonise the terms and conditions of nine seperate businesses into one organisation.

We wanted You Choose to mirror this Plan from the Pru approach for employees by giving them the opportunity to choose their benefits to suit their lifestyle needs.

Our goal was to allow employees to make choices about what they want and give them the opportunity to tailor their benefits package according to their own needs whilst harmonising the PMI and holiday benefits.

We didn’t think of flexible benefits as just a flex scheme but a way of thinking.

What benefits do you offer?

Ten benefits are included in the You Choose plan and these are grouped under 2 main headings:

Lifestyle & Leisure
Buy/Sell Holidays
Childcare Vouchers
Leisure Vouchers
Retail Vouchers
Cash

Health & Protection
Personal Accident Insurance
Healthcare Cash Plan
Private Medical Insurance
Dental Insurance
Critical Illness Insurance

We deliberately decided to exclude cars as an extra benefit within You Choose. Instead, we decided to launch Drive PRU as a separate initiative to allow employees maximum flexibility over when to buy a new car (unlike You Choose, Drive PRU does not have a fixed annual election period). All employees are eligible. In order to be aligned to our objective of minimum administration, we have arranged for an external company to administer Drive PRU on our behalf.

How did you decide what benefits to offer?

The key aim was to provide a wide choice of benefits (and flexibility within the benefits) which appealed to an ‘all employee’ population. This meant the menu had to cater for diverse needs and wants with something for everyone.

Our research showed that the benefits must be:

attractive to three main age groups
– less than 25
– 25-34
– 35-44

affordable to those earning less than £20,000 (60% of our population)

available/accessible in the three main locations

attractive to people with differing lifestyles – this is influenced by age, location and salary.

Benefits must also:

provide added value to the employee

provide a benefit which is cheaper than can be obtained individually, eg retail vouchers at a discount from the face value,
or

provide an additional benefit to the employee, eg private medical insurance with no underwriting required.

We surveyed staff through the intranet to help shape the benefits menu and plan design and definately made changes as a result of the responses.

Employee demographics (covering location, age and salary) and employee feedback were both key influences in the final benefit menu. It was interesting to find out the differences between what men and women wanted and by salary bandings and age profile.

Retail vouchers were very popular – far more so than we had anticipated. Childcare vouchers were also popular but obviously for a narrow group. Learning accounts and concierge services didn’t score. Neither did wine buying and Red Letter days. The higher paid tended to want private medical insurance. Critical illness insurance was also very popular.

How does your flex bens scheme work?

Each benefit has different options to allow employees maximum flexibility to tailor their benefit packages.

Instead of receiving a set number of holidays and PMI, employees receive a flex fund and can ‘buy’ from the range of benefits listed in the plan.

The greater of 10% of salary or value of existing holidays

10% of salary buys back 26 days holiday

Employees can purchase between 20 and 30 days

Employees can replicate existing benefits if required

Employees can use salary to buy additional benefits if they wish.

Do you have an interactive web enabled flex bens website which allows employees to update themselves?

Yes, after a tendering process we chose a company called Flag to develop this.

Our web enabled system enables employees to model and choose benefits and cars online. The system is intuitive and gives employees the freedom to model different choices and carries out all necessary calculations. It’s based on a shopping basket model scenario. Our employees say it’s easy to use and follow – one section leads to another in a simple format. The text is simplistic and easy to understand. It has won two design awards.

The You Choose system also feeds through to our payroll systems. This ensures a streamlined process from the employees making their choices through to their payroll deductions.

The administration of the scheme isn’t too complex. Changes such as new starters, marriage changes, etc are fed through HR each month.

How long did it take to implement the flex scheme?

One year from start to finish. We had a project delivery timescale of 1 October 2002 with deductions from payroll in January 2003. These dates were fixed from outset and were not moveable.

We delivered our initiatives on time and within budget. The You Choose scheme was formally announced in July 2002 and launched to all eligible PRU UK And Europe employees on 1 October 2002. 2004 is our first renewal year.

What percentage of employees took the opportunity to vary their benefits package?

We smashed our initial target of 50% of all employees making an online You Choose election. The number of employees who accessed their online account (92%), made an on-line election (87%) and chose to vary their benefits package (80%) demonstrates a high level of interest, understanding and appreciation of the opportunity to tailor the benefits package to suit their own needs.

Key benefits/successes?

Our critical success factors were based on employees and managers understanding and valuing “You Choose”.

The key hard measures of success are the take-up rates achieved and the number of employees who chose to vary their benefits package. This shows that employees had sufficient information and support to feel confident in making choices and that the schemes are understood and valued.

Softer measures such as the positive employee feedback received to date via the champions and the full support of our employee consultation bodies, PACT and Amicus-MSF, to the flexible benefits plan also support a successful strategy – all the time and money invested in it was worth it.

The scheme was delivered within budget and on time so our text book approach to project management obviously worked!

The introduction of You Choose was one of the key successes for HR in 2002 and viewed as one of the most important positive initiatives across the business. The scheme has won awards for:
– Use of a Flexible Benefits Plan
– Communications Strategy of the Year
– Most Effective Benefits Strategy.

Any pitfalls?

There’s nothing I’d do differently if had to do it again – we had great buy-in and that was key.

We met our objectives under challenging circumstances. This included immense organisational change such as revision and re-launch of the company’s vision, values and brand plus organisational restructuring including an announcement of transfer of certain operations to India on our You Choose launch date.

All these changes could have considerably disrupted our business plans but we were still able to achieve our key objectives and win over our employees from initial cynicism to interest, commitment and action.

What new benefits are you thinking of offering in the future?

Computers, a share incentive scheme and travel insurance. We’re surveying our employees to see what they want – it’s important to refresh the scheme.