Voluntary benefits’ underlying value lies in their ability to be greatly adapted, says Bea Oaff
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Wine and chocolate; books and CDs; holidays and days out; mobile phones and dishwashers; dental cover and car insurance – today, voluntary benefits cover anything and are available everywhere. But is there a danger that this very ubiquity may end up causing employers to question the validity of voluntary benefits in helping to attract and retain employees?
Introduced to the UK from the US around 20 years ago, voluntary benefits have only really taken off in recent years. Evidence indicates that their popularity, content and delivery has since grown and developed.
A package will now feature a wide selection of lifestyle, medical and financial goods and services that employees can choose to buy at a discount, typically between 5% and 40%. Some services and products will be income tax and national insurance tax efficient too.
Initially, employers communicated the array of available voluntary benefits to their employees offline, by providing a brochure outlining what is included and how to get it. But now more and more employers are setting out what is on offer online, with employees typically accessing a web portal and dealing direct with each supplier over the internet.
Voluntary benefits schemes can either be managed in-house or outsourced, bought off the shelf or bespoke.
Charges vary, for all sorts of reasons, not least because some providers will put a voluntary benefits package in place at no cost to the employer, and instead make their return by taking a commission on everything bought through the scheme, while others will charge a fee. The latter insist they are all the more ethical for charging, a criticism their competitors strongly refute.
Proponents of voluntary benefits claim they have three main functions. For organisations that don’t offer any benefits, a voluntary benefits package is said to be a starting point that is quick, easy and low cost. For organisations that offer some benefits but are looking to flex them, meanwhile, a voluntary benefits package is said to be a useful halfway point, giving employees an opportunity to adapt to the concept of picking and choosing what’s best for them. Thirdly, for organisations that offer relatively advanced benefits, a voluntary benefits package is said to be the cherry on the cake.
As may be expected, the industry is upbeat about the prospects of voluntary benefits. Martyn Phillips, chair of industry body the Benefits Alliance, says: "I think voluntary benefits will become even more widespread."
But critics suggest that in doing so, voluntary benefits may become a victim of their own success. Nick Isles, an associate director at think-tank the Work Foundation, says: "If everybody has something, its worth becomes diminished. Also, we get used to little luxuries. You could call it hedonic habituation. The more we have the more we want. So while voluntary benefits may seem like a bonus today, I don’t expect that to persist."
The industry remains insistently optimistic however. "I think voluntary benefits will continue to be appealing to employees and therefore effective for employers," explains Phillips.
The question then is, why? Two reasons have been put forward. One relates to substance, the other to style. As for substance, Phillips predicts that voluntary benefits have the capacity to evolve: "You will be able to buy the likes of a bike or a computer or a series of childcare vouchers through voluntary benefits using salary sacrifice. This will add significant and new value."
And as regards style, Phillips says the way voluntary benefits are marketed will change, driving even greater uptake. He expects that there will be more of a personal approach to promotion. "The suppliers themselves will come in to give face-to-face presentations on what is available," he adds. Furthermore, the focus will be different: "It will move away from the potential savings of the goods and services. This is because people, if they want to, can already trawl around to check for a better quote and sometimes, yes, sometimes, they can find one – even if it does mean spending an hour to save not necessarily very much. Instead, voluntary benefits will be sold on its ease and convenience. Here is something that helps you to find, very quickly, what you want, knowing that it is of a good quality from a sound source and at reasonable price. In an age of the time poor this will be increasingly attractive," Phillips adds.
Some experts agree that there will always be a place for voluntary benefits. Instead, the debate for them is what size that space will be.
Dilys Robinson, principal research fellow at the Institute of Employment Studies, explains: "[Voluntary benefits schemes] will still be a tool used for recruitment, retention and motivation. But they will be seen as something that is nice to have. They won’t be seen as something that is a deal breaker. Far more important to people, will be, as it is now, good leadership, fair treatment, opportunities for development, and practices that support a positive work-life balance".