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Flexible benefits, in their truest definition, have been around for some time but have still some way to go before they become commonplace in the UK. Current estimates are that 20% of organisations across the entire spectrum of company types and sizes have flexible benefits, but that this is skewed towards larger organisations.
However, the term flexible benefits has a wide interpretation which covers everything from voluntary benefits to full flexible and total reward and within this definition the number of organisations offering “flex” in the UK is much larger.
Today, the majority of flexible benefits schemes encompass childcare, holiday, private medical insurance, life cover, and travel and dental insurance. They are generally backed by vendor and administrator flexibility and based on tailored IT platforms.
Increasingly, salary sacrifice is a feature as organisations introduce flex for business reasons with the focus on return on investment. Immediate developments are simple additions to the flex menu, such as tax return services, MP3 players or bikes; and mobile telephones are beginning to make an appearance.
To date, the evolution of flexible benefits has been based on the concept itself, but that is about to change and possibly trigger a complete metamorphous into a totally new concept, that of flexible reward. The major catalyst for this change is the advance of total reward, where the total amount of money spent on the employee is the focus of flexibility not just their benefits.
In future, employees will have complete choice on how they are rewarded with little or no barriers to flexibility. However, like all journeys, you have to start somewhere and these are the main areas of development currently underway.
The first pioneering steps are being made to challenge the typical restrictions on flexible benefit schemes in an attempt to achieve true full flexibility. This simply involves the removal of limits other than those imposed by statute, such as making choices throughout the year, having no minimum on life assurance, allowing all to trade cars up to top range vehicles.
New additions to the flex mix are also anticipated, such as Save As You Earn (also known as sharesave) schemes, putting bonus schemes and basic pay in the mix and allowing trading between guaranteed pay and “at risk” pay, personal development trading up, and similar. This forms the beginning of the introduction of flexible reward employing the total reward concept.
Currently, national insurance savings on salary sacrifice elements are largely “pocketed” by employers. However, beginnings of a move to ring-fence at least part of those savings and allocate them to the human resources budget to fund the development of flex can be seen. Cost/saving justification instead focuses on recruitment costs aided by better retention rates attributed to flex.
One other possible development is to begin linking flex to performance by varying flex funds according to the financial performance of the company.
A new concept of electoral flex is also emerging, which delivers “collective” employee involvement on decisions requiring expenditure on flex or specific elements. For example, staff may vote on whether or not part of an annual salary review budget is sacrificed to fund a new item of flex.
In summary, the introduction of flexible benefits is gathering pace and, at the same time, will continue to evolve in to flexible reward as organisations seek ways to lever and maintain competitive advantage. Developments are likely to become increasingly radical and will be culturally challenging for many organisations. The most likely future scenario is a phased approach with initial schemes being viewed as “pilots” while reward strategies and business cultures develop.
Because the development of flexible reward will be fundamental to the success of reward, HR and business strategies, a point will be reached where such schemes will