Where, when and how?

What needs to be considered when choosing and implementing a flexible
benefits scheme?

Organisations wishing to introduce flexible benefits will usually need
significant help from an external consultancy at some stage in the process of
developing and implementing a programme. However, there are some key stages
that all organisations will need to consider.

The company needs to think through the business reasons for starting a
‘flex’ scheme: what is it trying to achieve? For example, some companies look
to flex to help solve problems in recruitment and retention. Others see it as
part of a culture change shift to encourage greater individuality. Some may be
driven by potential future cost control. Some may even just like the concept in
principle, but need to find out more about it.

Chad Daugherty, head of flexible reward design at Hewitt Bacon and Woodrow,
suggests setting up a feasibility study to look into wider business issues
before implementing a flex scheme. He says: "You first need to understand
at a high level how a flex plan will fit with your business strategy and reward
philosophy."

Benefits and savings

A typical feasibility study undertaken by Hewitt Bacon and Woodrow will look
at the technology available to individuals within the organisation, the
communication strategy used and the other resources available internally. Costs
related to the design, setting up and running the administration and
communicating the plan to staff will be estimated.

The costs can then be set against potential benefits. These include ‘harder’
benefits such as tax and National Insurance savings, or savings from
cost-effective reward harmonisation using flex following a merger or
outsourcing deal, for instance. In addition to these are benefits such as
reduced staff turnover or the ability to more easily attract and recruit that
are harder to quantify.

Daugherty finds the harder, known savings are of more influence when the
proposal is presented to finance directors. But with greater experience of the
impact of schemes, he is more able to show the financial impact of softer
benefits. For instance, he says that "with our experience we can work
through examples of the type of savings that a 1 per cent reduction in staff
turnover can lead to".

When designing a new flex plan employers often start by examining the
existing benefits package on offer, and working out which benefits are core –
perhaps a standard level of life assurance – and which ones are to be ‘flexed’.
As seen in the list on page 5, there are a wide range of benefits that can come
under the flex scheme. Some may be seen as suitable only for particular roles
or levels of seniority – company cars, for instance.

Particular benefits are more popular than others. Hewitt Bacon and Woodrow
finds that flexible holiday entitlement is usually very popular with employees.

Detailed development of the scheme throws up a range of issues – deciding
what impact changes will have on existing maternity or sick leave policies,
determining how often rules can be changed, and so on.

Consultants can advise on additional areas, including accessing external
funding – for example the Department of Trade and Industry makes funds
available for companies implementing work-life balance initiatives – and
ensuring legal compliance.

The company must decide how to operate the ongoing scheme – whether to
outsource the administration or to perform it in-house, and depending on this
choice, what short- and long-term additional resources will be required.

Developing key messages for employees at an early stage allows a
communications plan to be developed. This will often fit within the existing
communications strategy of the company, although additional techniques may be
required.

Tell the employers about it

Introducing a flexible benefits plan, managed properly, can send out a
powerful message to employees that they are valued and the introduction of the
plan can also be communicated externally to aid recruitment and position the
company as innovative and exciting.

How long will it take to introduce a new scheme? In Daugherty’s experience
usually upwards of eight months and up to 15 months for more complex plans.
This depends on a number of factors, how complex the scheme is, the variation
in terms and conditions across the company, the availability of clean data, the
systems and processes that need to be implemented, and the resources available
from the organisation including the degree of involvement from senior
management.

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