Nearly one in four employers has reduced their benefit costs by introducing a flexible benefits scheme, according to a survey of UK employers by consultancy Mercer.
A total of 55% of respondents believed setting up a flexible benefits scheme would actually increase their costs. Yet 39% of those with flex schemes said their benefit costs were lower than they would have been without a flex scheme, while 45% said their costs had been unaffected.
John Puddephatt, senior consultant at Mercer, said: “When put into practice, flex can be an effective vehicle for managing and reducing company costs. This is done by putting a limit on employer contributions to employees’ benefit packages. As costs increase, employees can elect to reduce their benefit levels, increase their own contributions or switch to another benefit.
“Employers can also make benefit adjustments that help to reduce tax and national insurance contributions. Examples are salary sacrifice programmes for pensions and other benefits.”
Only 11% of respondents said the most important reason for introducing flexible benefits was to reduce or control the company’s contribution to benefit costs. Puddephatt added: “From this research, and evidence from client work, we believe flex should be given higher priority as an option for managing company costs, given most companies are looking to make further cost reductions in the year ahead.”
A third of employers said they aimed to reduce their current benefit spend in 2010, while 45% said they planned to reduce benefit cost increases over time.