The number of employers offering flexible benefits to their staff has increased steadily in the past few years, but many are not measuring their impact.
The annual Employee Rewards Watch of 468 employers by benefits provider Thomson Online Benefits reveals that the number of employers that are considering, are in process of, or have already implemented a flexible benefits scheme has risen from 17.5% in 2004 to 32%.
The most widely implemented salary sacrifice option by far was childcare vouchers (80%), with roughly equal numbers offering salary sacrifice for pension (40%) and home computers (38%), the survey reveals.
Over the next year around one third of respondents are considering implementing salary sacrifice options on home computers (34%) and bicycles (33%).
This year’s research showed that flexible benefits are no longer seen as merely a costly add-on, with more than three quarters of respondents reporting that schemes have helped staff recruitment.
Michael Whitfield, managing director of Thomsons Online Benefits, said: “Flexible benefits and salary sacrifice continue to grow in popularity and it is gratifying to see three quarters of companies with flexible benefits noting their positive impact on recruitment.”
However, the survey highlighted some worrying issues for employers.
Almost half of the respondents with benefits admitted that they do not know how much they are spending on them, while fewer than a quarter said they have measured the cost savings their scheme has generated.
This trend needs to be addressed, warned Whitfield. “It is imperative that having invested in flex or salary sacrifice, HR professionals derive maximum value from their investment and actually measure the success of the scheme and the tangible savings made,” he said.
To ensure they get a return on investment, HR departments must communicate the benefits of the scheme to employees, according to Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD).
“You need to look at what you are trying to achieve in terms of the values, behaviour and performance you want from your staff, and how flexible benefits fit in with these objectives,” he said
This is pertinent advice, given that only 6% of respondents to the survey believe that their employees highly value their employee benefits.
One employer which has successfully implemented a flexible benefits scheme is Loyalty Management Group (LMG), the company behind loyalty card scheme Nectar.
Under its Sweeter Rewards scheme, employees are offered the opportunity to spend up to 20% of their salary on flexible benefits, including salary sacrifice options on their pension and childcare vouchers.
Employees are also offered a range of benefits including discounted car rental, eye care, video/DVD rental and wine.
Gabrielle de Wardener, HR director at LMG, said: “Engagement with Sweeter Rewards has been high and a post-implementation survey of staff showed that more than 80% understood their benefits package better as a result of the launch.
“We’ll be adding new features, benefits and offers throughout the year, such as tax-free bicycles and home computer options which come on stream in April 2006.”
The key to the success of any flexible benefits scheme is fitting it in to the overall reward, HR and business strategy and ensuring you get senior management buy-in at an early stage, said Cotton.
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“It is crucial for the chief executive to be involved to highlight to staff that this isn’t just an HR initiative; it is an organisational one,” he said.
