Choice is usually a good thing, right? The key to flexible benefits is of course the flexibility, where employees are given more options and choice. The idea being that employees can get the most out of the benefits on offer to them and the power is in their hands. Perfect! Or is it?
What’s so bad about choice?
It’s not necessarily that there’s anything wrong with choice. More choice with flexible benefits means that the benefits on offer are more applicable to more people within the business. Those who are interested in one scheme may not be as interested in others and vice versa. The amount of choice gives employees the power and in theory allows them to get the most from the benefits on offer.
Furthermore, flexible benefits and the choice associated with them are great for not only attracting employees but retaining them. The extra choice in theory means that your benefits options are more tailored to your employees, meaning they may be more reluctant to leave the business as they could lose those benefits. As they are more tailored, the benefits you offer to employees should be more effective in helping your employees save.
That said, the choice provided by flexible benefits can throw up some interesting dynamics.
Research into behaviour suggests that more choice can indeed be a bad thing in some cases. ‘Aversion to regret’ is defined as our anticipation of regret if we make the wrong choice. For example, say we include a gym scheme as part of our flexible benefits options. When deciding how to allocate their flexpot allowance, an employee may think one of two things. They could either anticipate regretting not choosing the gym scheme and missing out, or they could anticipate regretting choosing the gym scheme and it being something that they don’t take full advantage of. This ‘Aversion to Regret’ could put an employee off making a choice altogether. Therefore, the flexibility afforded to the employee could actually be a negative thing and many employees may rather the company choose their benefit options for them.
Furthermore, if an employee chooses a benefit that they then don’t take full advantage of, it’s perceived by the employee as a loss. However, if an employee doesn’t make the most of a benefit the company has chosen for them, it’s not seen so much as a loss by the employee.
Can ‘aversion to regret’ be a positive thing?
Absolutely! For example, if an employee chooses a gym discount, they’re more likely to use the gym because they don’t want to waste their choice. They’ll then reap the benefits associated with using the gym and this has been made possible by flexible benefits.
With other schemes, employers could see a higher scheme take up as a result. If the company chooses the benefits, the employees aren’t as inclined to use them. However, with flexible benefits, employees are much more likely to use their chosen schemes due to the perceived loss associated with not using them.
How should companies’ approach this?
Help reduce the risk of employees choosing the wrong benefits by educating them on the advantages of each scheme, so they make the most informed choice. Employee’s will feel much more comfortable allocating their flexpot allowance to a scheme that they know more about. This can be done through consistent employee communication via emails and flyers etc.
Workshops are also a great way to educate employees on the benefits on offer to them. Many scheme providers will offer to send a representative to your workplace to help educate your employees on how to get the most from their scheme(s).
Be sure to get feedback too. Whether this is in the form of employee surveys or simply by measuring scheme take up, it’s always important to ensure you’re doing everything to make sure the benefits you offer are right for your employees. By offering the right range of schemes for your employees to choose from, you’ll help make it an easy choice for your staff when it comes to allocating their flexpot allowance.
To answer the question at the very beginning of this article, yes, choice is absolutely a good thing! But it’s important that companies that implement flexible benefits are aware of how choice is perceived by employees. In being aware of things like ‘aversion to regret’ employers can help make their employees’ experience with flexible benefits a good one, increasing scheme take up and helping employees’ paycheques go further.