What are the drivers for the uptake of flexible benefits? Jane Lewis outlines the advantages and pitfalls, and sets out a six-point guide to best practice implementation
Although the take up of flexible benefit programmes is still minimal in the UK - only between 5 and 10 per cent of companies currently have formal schemes in place - there is no denying that the momentum is growing. Evidence suggests that between 50 and 60 per cent of British companies are actively looking at offering a more flexible benefits package to their employees over the next few years.
The drivers are many and varied. When the first 'flex' schemes hit the UK in the early 1990s, the main demand was from organisations "which just wanted to be different", says Marcus Underhill, head of flexible benefits consulting at Mercer Human Resource Consulting. The strongest uptake was in sectors such as IT, telecoms and consultancy, where "the age profile was much younger and there were very real pressures of retention".
Offering a 'personalised proposition' was a very good way of facilitating employee loyalty, he says - and that still remains the case. A tailored benefits package can be key to attracting and retaining high performers.
Many companies have also found a strong financial incentive for making the move. Although offering flexible benefits is no longer a tax-efficient strategy (the Government removed that NI loop-hole in 1999), it still provides what one supplier coyly terms "a cost management opportunity". Underlying this is the shift between a defined benefit plan (a potentially open-ended arrangement financially) and a defined contribution plan.
According to Underhill, the former typically costs an employer some 18 per cent of an individual's salary, while the latter is usually fixed much lower at around 10 per cent. Thus, providing an allowance per head allows companies to better predict and control their benefit costs.
The logical consequence of what Richard Stewart, head of Partridge, Muir & Warren's employee benefits practice describes as "setting a cap in monetary terms", is that you need the flexibility to make the most of it.
"In today's low-inflation environment, companies are looking to leverage better value from their benefit spend," he says. Having flexible benefits have also proved a boon to organisations involved