Now, as the UK economy falls into the doldrums, is the time for innovative thinking around benefits provision. And this applies as much to providers as to users.
Periods of doom and gloom tend to be perfect hunting ground for the opportunists of this world; the people who have no problem finding positives among glaring negatives and can always turn challenging situations into beneficial ones.And these people appear to be in good supply across reward and benefits. Even though the downturn has caused cuts to benefit spend across all industries, employers are still finding ways to make budgets stretch further to continue motivating staff and encouraging loyalty and commitment with perks.
Sheila Sheldon, director of European operations at reward specialist Michael C Fina, says companies must forget buying hugely expensive benefits and rediscover traditional values.
Old values
“Staff need to continue to feel valued, and this doesn’t necessarily mean that you have to throw money at the situation,” she says. “It is about going back to the old values of just making someone feel totally and utterly embraced and part of the culture.”
To be prudent, employers must have a good idea of what employees want, and currently anything that helps to save money will be a fairly safe bet. So employers not already offering perks such as childcare vouchers and bikes to work through a salary sacrifice scheme are missing a trick.
Under salary sacrifice, employees opt to pay a certain amount for benefits via gross rather than net pay. By doing so, they make tax savings on selected items such as the popular childcare voucher scheme. In some cases,staff can claw back more than £1,000 per year via the tax-efficient childcare scheme, which is a saving that plenty of working parents would want to access.
Kim Howness, head of flexible benefits and salary sacrifice consulting at HR consultancy Watson Wyatt, explains: “Salary sacrifice is a restructure, so that the employer pays the contribution instead of the employee and the savings [for the employer] can reach hundreds of thousands of pounds per year. Now is the time to be doing salary sacrifice.”
Substantial savings
At the same time, the employer can make substantial savings on national insurance (NI) costs. These savings can then be ploughed back into the benefits budget, allowing organisations to increase their spending.
Those that already offer salary sacrifice are finding value in re-promoting the benefits that come within its compass. But they must make sure that the savings are optimised for the company, and that staff are getting the most value from the benefits.
For accountancy firm BDO Stoy Hayward, the attention has now turned from extending benefits choice to getting the most from existing ones, says reward manager Jane Richards.
“When we re-launched our flex scheme in December, it was less about choice and flexibility and more about getting the best value from the package. The message was really showing staff where the value lies; that was the slant we put on it this year.”
Bulk buying
The firm has seen employee interest in discounted retail vouchers rise. Here, employees can save by bulk purchasing vouchers via a provider to spend in selected stores. Benefits experts see this as another cost-effective way to provide employees with decent perks at a time when the budget for many employers is tight.
“A couple of years ago, people couldn’t be bothered to save a little bit of cash, but all of a sudden 5% discounts are well worth it, and it is this kind of ‘something for nothing’ that people want at the moment,” adds Howness.
Martin Cooper, Love2reward marketing manager, says “from the employer’s perspective, gift vouchers and gift cards provide great value as discounts against face value are on offer. There’s also an additional benefit in that administration and fulfilment are simple and straightforward, either via HR or through the supplier.”
As demand for retail vouchers and retail discounts has grown, so too has interest in voluntary benefits. Though these employee-funded benefits have always lived in the shadow of the more generous flexible benefit scheme, the voluntary option appears to have edged its way back onto the reward scene.
Range of deals
Under voluntary benefits, staff have access to a range of deals and promotions that have been pre-arranged by the employer or scheme provider. One supplier believes that the price of the voluntary scheme and the quality of some of the programmes in the market, have driven demand.
Glenn Elliot, managing director at Asperity, says in some instances voluntary benefits are toppling flex programmes. “Some companies were thinking about a flex system and are now moving to voluntary benefits. It costs a fraction of the price and offers quite a few of the benefits as well.”
Such schemes are very cheap to install, and though prices vary, they can be a third of the price of flex schemes. So, as employer demand for cost-effectiveness pushes the voluntary option under the spotlight, some providers have found it tough going.
This is simply a case of employers becoming savvier about schemes by shopping around for the best deals. There isn’t the room in the market for tired plans that are not regularly updated and don’t offer employees the deals they demand.
Quality
James Taylor, managing director at provider Benefex, where both voluntary and flexible benefits schemes are on offer, says: “I think what is happening is that quality is shining through. Employers are now educated and knowledgeable about what they need.”
But a number of employers remain unhappy with the level of service that providers are offering generally in the market, and believe that while money is tight, it can only be spent effectively.
Companies, constrained by budgets, are feeling forced to challenge their provider in a way that has not been done before to go above and beyond what they have offered in the past, says BDO Stoy Hayward’s Richards.
“There is scope to challenge providers now. We have had two-year deals that are up for renewal this year, and from the summer onwards we will challenge them.
“There was once a sense of sentimentality about it, but not so much anymore,” she says. “We wouldn’t hesitate to switch supplier. Even though we like to be loyal, this is about cost.”
Business is booming
And this is a view shared by a section of providers themselves, who are finding that despite the downturn, business is booming because demand is high, driven not only by cost but by competitor complacency too.
“Some providers haven’t changed their products in years, they haven’t been innovative, nor have they tried to engage staff using their product,” says Asperity’s Elliot.
Challenging times are usually good ground for creative and innovative thinking as well, and though the recession has removed the expensive ‘big-bang’ benefit option, it has forced many organisations to bemore resourceful when it comes to benefits.
Some are managing this by setting up simple reward programmes that involve large sections of the workforce. It can be as simple as sending staff a weekly e-mailed question with the option of entering a draw to win a number of one-off prizes.
Create a buzz
According to Sheldon, the idea here is that it is not only a cheap way to reach out to a large number, it also creates a buzz around the office when morale is low.”Everyone gets an e-mail, and goes online to play for the opportunity to win a gift. It’s just a game of chance, but it boosts morale and is very powerful among employers at the moment,” she says. “There’s no major cost, but there is hidden ability to make people feel valued.”
There is no denying the fact that such ideas and benefit strategies are being put in place to fill a gaping hole once filled by pay rises and bonuses. But, while voluntary benefits, reward programmes and retail vouchers tend to be well received by staff, they will always struggle to compete with the cold hard cash that was once on offer.
Efforts are appreciated, and as long as companies are open and honest with staff, explain that these are challenging times, and then bring other ideas to the table, the damage can be limited.
Case study: Buckinghamshire County Council
Buckinghamshire County Council is no stranger to offering benefits on a budget, as public money must always be spent sparingly, especially when it comes to reward.
However, the council still supplies a range of perks to staff, and has always seen value in the tax-efficient salary sacrifice schemes.
Gill Hibberd, director of people and policy at the council, says: “Salary sacrifice gives the most value to employees and employer. We put the savings the council makes into a pot, which is then used to invest further for staff. Funding is always tight, but tax-efficient benefits can help to generate capacity.”
Some of this money is invested in the organisation’s recognition scheme, which is where line managers are empowered to instantly recognise efforts at work with a ‘thank you’ or ‘well done’ in a card.
However, says Hibberd, providers are still falling short when it comes to responding to the economic crisis and are offering few cost-effective options, especially to the public sector.
“Providers focus very much on the private sector. But we in the public sector have to be conscious that we are spending taxpayers’ money, so I’d like providers to be more creative with what’s on offer, avoid gimmicks, and come up with other recognition ideas.”
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Money box
Salary sacrifice schemes involve employees giving up part of their gross salaries. This means that national insurance contributions (NICs) should be lower for employers who can, as a result, save up to 12.8% on NICs. Also, as employees pay for benefits out of gross pay, savings of more than £200 per employee for the employer can be generated.
