Proof at last: flexibility works

Flexible benefits have been in the British workplace for more than a decade and the concept is widely understood: Rather than an employer stipulating precisely how a worker will be rewarded, employees have a degree of choice as to which benefits they receive.

Flexible benefits have long been in the domain of HR, typically being used to attract and retain staff. But new research from consultancy Hewitt Associates shows that chief executives and financial directors are becoming increasingly interested in the bottom-line advantages that flexible benefits schemes can offer.

The report, Flex Comes of Age, shows that more than 50 per cent of CEOs now take an active role in creating and implementing flexible benefits. And 50 per cent of the respondents claim their financial director is now involved in flex, compared with less than 20 per cent last year.

One of the major drivers for implementing flex has been to reduce the overall cost of employing individuals. Give an employee a benefit and you can reduce the amount of cash you pay them by a comparable amount. Reduce this figure and you reduce the amount of National Insurance you need to pay for that individual.

Some benefits are non-taxable – childcare, pensions, mobile phones and in-house sports facilities, for example. According to Phil Murray, leader of Hewitt Associates UK Flex Design Team, companies are now starting to quantify the softer benefits flex brings.

“We surveyed 190 organisations and found respondents attributed a reduction of 0.75 per cent in employee turnover to flex,” says Murray, “This amounts to 36,000 per 1,000 employees.”

Elsewhere in the report, 52 per cent of respondents credited improvements in employee commitment to their full flexible benefits scheme, while 67 per cent reported that flex schemes improved productivity.

However, for a flex plan to bring these kinds of improvements, says Murray, three ingredients must be in place.

First, the plan should take a ‘total reward perspective’. This means telling employees the total monetary value of their package. Everything from pension contributions to bicycle schemes should be given a cash figure, so employees can see what they are getting.

At global asset management company Schroders, total reward statements are being introduced prior to implementing a full flex programme. The statements will offer greater clarity for each employee as to the value of their reward package. “People don’t understand the value of the packages they are currently receiving,” says Rob Levine, head of compensation and benefits. “Clarifying this will help employees understand the new approach to delivering benefits.”

Second, organisations should ensure employees are aware of the flexible benefits on offer and that they are easily accessible, says Murray. “An organisation can offer a superb range of flexible benefits but if employees don’t know about them or find them difficult to access, the scheme is failing,” he says.

Barclays Bank promotes its flex programme through a variety of means – e-mails, in-house posters and internal newsletters – and at pertinent times throughout the year.

Catherine Redmond, head of benefits at the bank, says: “We want staff to understand they can opt in or out of share schemes, trade down on their company car or get tax breaks with childcare and computers. It’s important we help them understand the financial implications and advantages that go with their choices.”

With the internet ubiquitous at home and work, employees should no longer find it hard to access their benefits. Supermarket chain Somerfield uses ‘Bring Me’, a web-based service developed by Lloyds TSB, which allows staff to make selections and change their benefits choices online. For employees without access to a computer, the company offers call centre support.

The third requirement, according to Murray, is that the benefit choices offered by any flex plan should balance traditional security-related benefits – insurance products, extra pension contributions – with lifestyle benefits, such as extra holidays, employee computer purchase schemes and one-off experiences such as rally driving.

However, as the number of new options which can be slotted into the ‘less cash, more benefits’ structure start to diminish, predicts Mike Elworthy, a European partner at HR consultancy Mercer, more companies will also start to incorporate work-life balance options into their flex strategies.

“A growing number of companies will add flexible working hours and working from home to their flexible benefit schemes in the future,” he says. 

Flexible benefits to try

– Bicycles: these can be part of a company’s green commuter plan and the running costs of such schemes – bike hire, bike stands and even paying employees to use their own bikes – is a tax deductible expense

– Home office equipment: the Home Computer Initiative means PCs can be loaned to employees as a benefit free of tax and National Insurance

– Personal development funds: money to be spent gaining new skills which may not be directly work-related

– Deferred cash savings account: enable employees to save for a special occasion

– Mobile phones: extending the offer to the employee’s family improves employer reputation

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