Employee Rewards Watch 2005, a study of 430 UK firms by benefits consultancy Thomsons Online Benefits, shows that the number of employers with a flexible benefits scheme in place has doubled to 10% in the past year.
Taken together with the number of employers currently in the process of implementing flexible benefits (3%) and those thinking about introducing such schemes (12%), this indicates that a quarter of UK employers have or are actively considering implementing flexible benefits schemes.
Michael Whitfield, managing director of Thomsons Online Benefits, said the survey results demonstrate that the spread of flexible benefits in the UK is finally living up to its previous hype.
“This is largely due to the fact that cost of web-based technology has [fallen], and its ability to mass produce benefit administration makes flexible benefits an affordable option even for small to medium-sized enterprises,” he said.
Whitfield also highlighted a shift away from employer paternalism towards a culture where staff are encouraged to take responsibility for their own decisions, so that they choose their options according to their own lifestyle.
This can be seen in the increasing trend of employers offering more lifestyle-orientated benefits, such as flexible working, childcare vouchers and the home computing initiative.
Despite this, the majority of employers (61%) continue to offer standard schemes, where staff are provided with a fixed menu of benefits.
However, the study shows these schemes still seem to be largely undervalued by employees, and poorly communicated by employers.
When employers with such schemes were asked which issues they currently face with their employee benefit programme, more than one-third (39%) said their greatest concern was their benefit scheme not being sufficiently valued by employees.
In addition, just 2% believed their standard scheme was “highly valued” by staff, suggesting employers are not leveraging proper value from their spend on benefits.
Among the employers who had already implemented flexible benefits, the biggest challenge was identified as effective communication (43%). There was also consistent evidence of a lack of structured evaluation following the introduction of a flexible benefits scheme.
The majority of respondents (54%) measured success through ‘general feedback’. Less than half (44%) relied on take-up rates, and one-quarter (25%) conducted an employee survey after a designated period.
But there was evidence that employers with schemes in place are getting more for their money. Almost half (49%) said the main advantage was that it clearly demonstrated the value of benefits and total remuneration to employees, and four in 10 reported that it had assisted recruitment and improved retention rates.
Case study: Motability Operations
Motability Operations employs 600 people in London, Bristol and Harlow. It is a privately owned business specialising in sourcing and delivering motoring services to disabled people.
The company originally offered its staff a benefits package that enabled limited flexibility around holidays and pension contributions. As the scheme was paper-based, there was a high burden of administration, which meant the company had to restrict employees to one opportunity to flex their benefits each year.
A new scheme from Thomsons Online Benefits has been in place since April 2004, and was further enhanced last month. During the initial feasibility study, an employee survey showed 92% wanted more choice over their level and selection of benefits, 86% wanted to vary their choices as they got older, and 82% wanted to change their benefits as their lifestyles changed.
Staff were regularly consulted through an employee forum and team briefings before the launch of the new package. The scheme was launched with a road show involving both HR and the Thomsons team at all three sites.
The core range of benefits that can be flexed up and down include pension, private medical insurance, holiday, critical illness insurance and life assurance. Additional options offered include dental insurance, travel insurance, childcare vouchers, season ticket loans, gym membership and car hire.
Deborah O’Kelly, HR manager at Motability Operations, said: “This has driven not only efficiency savings from an administrative point of view, but has also given us the opportunity to be more flexible. Now we have the ability to change, update and review both the benefits and the way we communicate them at any time.”
She said employees now recognise the true value of their package and realise that it is one of the best currently available in the market. It has also impacted positively on the company’s ability to attract and retain employees.
“The effect of re-communicating and re-branding the scheme has also been marked,” O’Kelly said. “Employees can now see the total value of their remuneration package, and it demonstrates the level of investment the business is making in its people.”