Flexible benefits can save costs and motivate staff in a downturn

Flexible benefits come into their own in times of economic struggle, as they can save costs and motivate staff, but employers should concentrate on quality rather than quantity, says Alison Coleman

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  • Flexible benefits plans need monitored and managed objectives, irrespective of the economic conditions. This involves reviews of the business and financial objectives.
  • It is not the quantity of benefits that make a good flex scheme, but their quality and relevance to staff. Adding perks for effect or withdrawing benefits to save money can undermine value.
  • Effective flex schemes need a sound communications strategy. This is even more important in tough economic times.
  • In the absence of salary rises and cash bonuses, savings-related benefits can reconcile frustrated employees and encourage long-term staff loyalty.

When it comes to reward, flexible benefits plans are often considered the gold standard, helping organisations to fulfil goals in staff recruitment, retention and engagement. Now, as employers struggle through the recession, some may be questioning the value of these schemes, yet flex can be at its most effective in an economic downturn. Matt Waller, chief executive of Benefex, says: "At a time when some employers are forced to restrict pay increases and bonuses, a good flex scheme can help offset some of the frustrations felt by employees, and keep them motivated and engaged."

Implementing flexible benefits

But having invested substantial amounts of time and money in implementing a flex scheme, employers need to be sure they are getting the most out of it. This includes reviewing their original objectives for implementing flex. Andrew Woolnough, director benefits management for Jelf Employee Benefits, says: "Regardless of the economy, flex can assist organisational objectives, and it is up to HR to make sure flex is fulfilling its role. For example, if flex was implemented to tackle absenteeism, then that cost is high regardless of the economy."

A flex review should include a reappraisal of the benefits offered. Marcus Underhill, global reward director at Thomsons Online Benefits, says: "Employers are looking to control or reduce their costs, and are increasingly turning to salary sacrifice arrangements that are attractive to staff and good for the organisation."

But Chris Noon, a partner at Hymans Robertson, sounds a note of caution about adding more benefits. "The first flex schemes were implemented via a consulting process, but as they took off, they became a commodity and ended up all looking the same," he says. "Employers tried to differentiate their own scheme by adding more benefits, regardless of their relevance or value to the staff, which actually devalues the scheme."

Quality not quantity of benefits

Reducing the number of benefits may result in savings, but what really matters is quality rather than quantity. The ultimate purpose of a flex scheme review is to ensure employees are offered benefits that are relevant and valuable to them. "It is fundamental to understand what people want, and it is not always the obvious things like pensions and healthcare," says Woolnough. "Right now, people are asking for financial education programmes. They want courses on debt counselling, financial management, how to invest, and so on."

Key to maximising the value of a flex scheme is good communication, but this is one area where organisations consistently fall down, says Matthew Hunnybun, employment solutions practice leader at PricewaterhouseCoopers (PwC). "They can develop the best schemes with the most popular and financially-valuable benefits, only to be let down by the communications side of things," he says.

Redesigning flexible benefits

Noon advocates a back-to-basics approach, redesigning flexible benefits systems so they resonate with individual members of staff. "Employees do not understand benefits, so instead of forcing them to make a lot of complicated decisions about their benefit choices at one major annual review, think about introducing a number of review stages, focusing, for example, on lifestyle benefits in the summer, and discount benefits in the winter, and ensuring that employees have access to professional advice and support at each stage to help them make the best choices for them," he says.

Forward-thinking organisations with an eye on a future economic and labour market recovery and the need to keep valuable staff on board, are tailoring flex to engage people for the long term. Branded benefits, such as cashless cards emblazoned with the corporate logo, serve as reminders to employees of their employer's efforts to reward their hard work and support them through difficult times, each time they use them. "This can be an effective strategy," says PwC's Hunnybun. "However, these cards are being looked at by HM Revenue and Customs, so employers need to be mindful of the tax implications."

He adds: "The beauty of a well-planned and communicated flex scheme is that it allows the employer to provide something that will engage everyone. If staff can also eke out significant savings through salary sacrifice benefits, discount vouchers and financial advice in these difficult times, so much the better."

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