Steve Herbert, head of benefits strategy at Origen, looks at the less obvious lessons to be learnt from Charles Dickens’ classic tale.
“Humbug” is the quote we most often associated with Charles Dickens’ great fictional character, the miserly Ebenezer Scrooge. However, given the current economic climate, perhaps we would do better to focus on another quote attributed to Scrooge: “Christmas is harvest time for the money lenders.”
Sadly, this is now very much the case as we enter the festive season in 2008.
Despite the fact that many of our current economic woes are largely the fault of money lenders (in this case, the multinational banks), the refusal or inability of those same organisations to continue to oil the wheels of commerce are forcing UK businesses to look very carefully at the bottom line in 2009 and beyond.
Virtually all employers will be investigating how best to implement cost savings, protect their business and plan for the future. There are some easy wins for those involved in benefits spend to consider.
It seems opportune to make a further analogy with Dickens’s tale here, by looking at Christmas past, present and future
Christmas Past
As with Scrooge’s own story, it is important that employers acknowledge past failings, to gain an insight into how these can be avoided.
Over the past decade, UK plc has often been guilty of losing sight of the detail. Many employers have worked on the principle that long-standing relationships with insurers should be maintained. As a result, cost savings and more suitable alternative products may have been overlooked. Employers may find themselves operating overpriced, ineffective benefits, and often cannot demonstrate any concrete return on investment to justify their benefits spend.
Christmas Present
For many employers, the bill for next year’s benefit package has either just arrived, or will arrive in the next few weeks. In the current climate, such costs may be challenged, and I would therefore urge employers to consider the following areas:
Return on investment (ROI)
Seek to establish why the benefits were established initially. Often benefits were put in place as much to support the employer as to benefit the employee.
A good, but by no means unique, example is the provision of a company-paid medical plan for staff. Such plans were often established to ensure ill-health absenteeism was kept to a minimum. In reality, very few employers operate any system to ensure that employees use their medical plan when ill. If such systems can be introduced, you are well on the way to demonstrating a fiscal reason for offering this benefit.
This could equally apply to cash benefit plans, employee assistance plans and even childcare vouchers. Employees need to know about, understand and (most importantly) use the benefit package funded by the employer. If they don’t, then any realistic ROI is either marginalised or removed altogether.
Market reviews
Employers should regularly review the provider of any insured benefits (such as group life, medical and income protection). By undertaking a full market review, it is often possible to obtain significant reductions in premium.
In some cases, it is possible to not only lower costs, but also to improve the benefits as well – a huge bonus in the current climate.
If you are undertaking a review, it’s worth seeking professional advice, as care should be taken to avoid breaks in cover for eligible employees. It’s also worth considering how you are funding any adviser costs. Commission is often just added to the premium charged, so you may find that the adviser remuneration is much larger than you expected.
Benefit structure
Check exactly what is on offer, as it may become apparent that the benefit structure is inappropriate to your business strategy or workforce. A change under these circumstances may generate a huge cost saving.
A good example would be income protection, where it is common for benefit to be payable until normal retirement age. While this is a cracking benefit for employees, it is often difficult to see the value for an employer. Given this, perhaps look to limit payment to a nominal period (say, five years). This remains a very valuable benefit, but will massively reduce the overall premium each year.
Similarly, if you can find no justification or demand for offering certain benefits, then stop doing it and use the cash saving more wisely.
Changes of this nature may be contractual, so it’s worth treading carefully and taking legal advice, but the savings often outweigh the concerns.
Protecting your business
Finally, check out your key-person policies. A ‘key’ employee is pretty much anyone that is pivotal to your business, and whose loss would adversely impact on your operation.
Most organisations will have policies to protect the business (not the employee) in the event of the death or illness of such a key employee. Such policies are always important, but the loss of a key person in the current climate could potentially be devastating to your organisation. Policies may be in force, but are often on the wrong employees and/or at the wrong level of cover.
Christmas Future
By following the simple steps above, perhaps your benefits spend can achieve some level of redemption, and you will also be doing your bit to help your organisation through these very tough times.
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The spirit of Christmas Future brings one additional concern, however: the introduction of personal accounts in 2012. This will increase costs and workloads for most UK employers, and I would therefore urge employers to plan early for this eventuality to spread the cost and admin headache.
With all the above under wraps, you will hopefully have a great Christmas and a prosperous 2009.
