Making the most of flexible benefits

When an employer adopts a flexible benefits scheme this does not necessarily mean that benefits will be better managed, concludes a report published by technology consultants B2E Solutions.

Its survey of trends, drivers and best practice in benefits administration found that 90% of respondents who outsource some or part of their flex administration are unhappy with the arrangement, and 75% intend to make changes over the next two years: 50% want to bring their flex administration in-house.

At first it appears that, far from delivering an effective incentive and recruitment tool, the increased use of flexible benefits has actually delivered a headache to HR. “The biggest problem is control,” says Girish Menezes, business development director at B2E’s sister company, providers of flexible benefits sytem software  SBC Systems, “When you outsource the service you can lose the possibility of management information and reports.”

In some cases feedback about which reward selections are popular – crucial to the creation and maintenance of a popular and meaningful package of benefits – is not made available to HR.

And even if new benefit options are to be introduced, changing the package may not be straightforward. “New benefits arrive over the years and all those changes need to be programmed into the system,” says James Markham, director of B2E Solutions.

“That can be a long process, with systems going down for weeks at a time. That’s a big driver for saying the solution isn’t satisfactory and to look at the in-house options.”

Both Markham and Menezes agree that the research illustrates a learning curve for organisations that use flexible benefits. Having started in the late 1990s, “flex” was the focus for some dotcom boom companies, with suppliers selling fully outsourced IT-based systems which promised returns without excessive administration.

Since then technology has moved on and it is now possible for a talented in-house IT department to create a satisfactory solution at less cost per head of workforce, while delivering greater control of the scheme and more management information.

Louise Berry, reward manager at recruitment firm Adecco, has had experience of both in-house managed flex at BHS Mothercare and of outsourced solutions through her work with Mercer HR consultants.

She believes the decision to outsource or not can be dependent upon the organisation itself: “From my experience you can easily manage a 300-400 head count scheme in-house using fairly simplistic tools,” she says.

“With the big blue chip companies the sheer number of people involved means you have to have access to technology which can meet those needs.”

But she has a warning for the outsourcing companies: “Outsourcers need to be more careful about how they sell their package. They need to be clear how much support they are prepared to give to their clients,” she says.

According to Menezes, rather than declining, the flex market is pushing ahead, adapting to meet clients needs by providing configurable systems to suit organisations of all sizes: “There are some sub-3000 employee solutions that already offer employers the reports and controls they want,” he says. “The larger providers are already investing in that market and I would expect their technology to become more flexible with time.”

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