Cost, communications expertise and the provision of management information services are among the factors to be considered when choosing a voluntary benefits provider, says Nicola Sullivan
To read the full Employee Benefits Voluntary Benefits and Salary Sacrifice 2008 supplement, Click here
Voluntary benefits schemes are often seen as the icing on the benefits cake, enabling employers to offer their staff a range of discounted perks, often at relatively little, or even no, cost to the organisation.
But although the appeal of voluntary benefits schemes is fairly clear, the hunt for a suitable provider may prove baffling for employers tasked with setting up a scheme for the first time or with reviewing their existing arrangements. Making a straight price comparison between products is not that simple as most providers now offer a range of services for employers to choose from.
One of the first matters for employers to consider before they embark on selecting a provider is what type of scheme they want to offer, and which benefits they want it to include. Some employers, for example, will want to offer a range of retail discounts, while others will prefer to go further and provide a system that includes access to other benefits, such as childcare vouchers, bikes for work and a healthcare cash plan. So before signing a contract with any provider, employers must decide what they want to achieve, establish a clear business case and look at their existing perks so as to avoid duplication.
Darren Smith, a senior consultant at Towers Perrin, says: “One of the most important things is the extent to which providers can adapt their programme to fit in with the other benefits that employers offer, particularly if they offer flexible benefits. There are a number of benefits that are offered through a flex programme that may also be offered through voluntary benefits.”
Jon Bryant, regional director of benefits and communication at JLT Benefit Solutions, adds: “If one objective is to improve recruitment and retention and [employers] want their contract acceptance ratio to be higher than it is currently, they need to look at offering a wide range of benefits. They need to look at what kind of staff they attract, what kinds of benefit they have already, and how competitive they want to be.”
Despite the fact that voluntary benefits schemes often have a reputation for being cheap and cheerful, employers must ensure they do not face unexpected costs. Law firm Mills & Reeves decided to switch providers after its previous supplier, Bringme – the former voluntary benefits arm of Lloyds TSB Registrars (now Equiniti) – announced it would begin charging for what had been a free service. Bringme has since been acquired by Asperity Employee Benefits. After several months without a provider and having analysed the voluntary benefits market, Mills & Reeve eventually appointed perks.com, which does not charge for its services.
Cost differences in voluntary benefits schemes
Sandy Boyle, HR director at Mills & Reeve, says: “All providers differ slightly in how they provide voluntary benefits. There are differences in the cost per head or per annum, so employers need to be really clear about their budget. In our case, some providers ruled themselves out straight away in terms of the level of investment we wanted to make.”
When looking to ensure a provider can implement a scheme to budget, employers should also consider how they want employees to pay for the perks they take up. For example, some employers will want, primarily, to take advantage of benefits that can be offered through a salary-sacrifice arrangement, while others might simply want to negotiate deals with providers on their employees’ behalf for them to purchase products and services as they wish. Voluntary benefits can also be paid for directly out of employees’ net pay.
The way in which staff can access a scheme will also be a key consideration. Some retail discount schemes, for example, may issue staff with plastic cards that they can take into various retailers and receive money off products. Paper or online vouchers can also be used. Other providers, meanwhile, enable employees to claim cash back on certain products, which, for example, can be accumulated into an account or saved into a child trust fund.
However, employers should not choose a provider solely on the grounds that it offers creative delivery methods. The discounts included within a scheme should be the overriding factor, says Boyle. “I think one of the things people get fed up with is if they can get a better deal themselves rather than through a voluntary benefits provider. They will test that to destruction,” he adds.
Many employees are now so used to shopping online that they will become disgruntled if they can find better deals for themselves. Bryant says: “You will see a lot of providers out there that are putting out discounts that anyone can get if they spend two seconds on Google as opposed to actually coming up with good discount rates that are more competitive or that employees can’t get anywhere else.”
Other deal-clinchers for employers will be whether potential providers can ensure schemes are easily accessible for staff. Most providers now offer online benefits platforms, which employees can access at work or at home, but employers may also want to cater for staff who do not have internet access at work. This means many are expecting providers to come up with solutions to engage staff wherever they are based.
Mark Carman, marketing and communications director at Motivano, says: “Retail organisations want a lot of offline support and help to communicate voluntary benefits. There is a lot of offline material that can be launched throughout the year and a lot of deals can be done over the phone.”
Many providers use their communication support services as a major selling point, helping employers to set up co-branded websites, issue publicity materials and send email alerts, for example.
Carman says employers increasingly expect a provider to supply them with management information that allows them to track how many staff log onto online benefits platforms and to identify the most popular perks.
Checking that a provider has robust service-level agreements in place with suppliers will also be a consideration for employers which are keen to ensure their employees experience as few problems with the scheme as possible. “As a provider of a service, we take responsibility for the performance of suppliers. We are constantly vetting suppliers, then making sure they are delivering what they have promised,” adds Carman.
As cost margins are squeezed, employers could become concerned that abuse of voluntary benefits may undermine their scheme. For example, staff could buy their employer’s products at a discount and then sell them on at a profit or publicise discounts given to them through their scheme online. A report published by BDO Stoy Hayward in July this year, As the credit crunch bites, so do the fraudsters, shows fraud committed by employees this year has risen to 11% of all fraud cases, compared with 2.5% in the same period last year. Although providers can’t offer complete protection against benefits abuse, they can update their systems so that leavers are unable to claim discounts illegitimately. Some online employee discount schemes also enable the employer to monitor who is using the website to select items.
Helen Craik, operations director at Asperity Employee Benefits, says: “Robust registration and leaving procedures, and online management information for employers are the best safeguards on the benefits front.”
Ultimately, when it comes to selecting a voluntary benefits provider, employers should consider which is best able to meet their objectives.
What to look for in a voluntary benefits provider:
*Effective management information services to enable employers to establish the popularity of their voluntary benefits scheme.
* The flexibility to provide a scheme that complements existing perks.
* An effective communications offering to help maximise the effectiveness of a voluntary benefits scheme.
* Mechanisms and procedures to prevent employees abusing voluntary benefits.
* Ease of access to the scheme for all employees even where they do not have the use of a computer at work.