Chris Noon, partner at Hymans Robertson: Challenge the commoditisation of benefits

Over the past 15 years, the balance of risk and responsibility that is inherent in the design of employee benefits plans has seen a dramatic shift from employer to employee. Some of this has been driven by cost, such as the flight from defined benefit pensions, and some by employee choice, such as the rise of flexible benefits.

With such a shift, you would hope to see a corresponding step-change in the way plans are managed, communicated and developed. But this hasn’t happened. Staff struggle to understand all but the headline description of a benefit and, in many cases, are being asked to make decisions without an appropriate support structure.

If an organisation’s benefits proposition was a business (with employees as customers), the way it would go about selling the proposition would be significantly different. To survive in a commercial environment, there would need to be differentiation, through product development and innovation, engaging delivery, and so on.

This is the mindset organisations should adopt in marketing their benefits. This would provide a more supportive environment for staff, and would also help ensure the organisation gets an appropriate return on investment.

There are a number of reasons why such an approach is not being adopted. The main reason is the commoditisation of benefits delivery, particularly with defined contribution pensions and flexible benefits. These have become like off-theshelf products, with little incentive for providers to innovate in benefits design or maximise staff engagement.

Employers must start challenging the commoditisation of their benefits proposition and treating it as a critical part of the employment deal. Talented staff know they are customers, so employers should treat them accordingly and sell them what should be a differentiated benefits offering. For many firms, this means taking a more critical look at the impact of their benefits spend, as well as challenging any commoditisation.

The benefits market is now mature enough to allow a shift to a best-in-class approach. This, coupled with a more customer-centric strategy by employers, could begin to fundamentally reposition the benefits proposition.†