Lower prices mean bespoke and off-the-shelf flex schemes are no longer worlds apart, says Kate Donovan
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For Keira Knightley gliding down the red carpet swathed in a silk dress, created by a top designer, has become a regular occurrence. For others, that is not an option. However, investing in a dress plucked from the rack at a high street store can end up serving just the same purpose, by making its wearer feel like a million dollars.
Just as both tailor-made and straight-from-the-rack fashion has its pros and cons, so do bespoke and off-the-shelf flex packages.
Flex first hit UK shores in an expensive bespoke format. Administration systems were costly to develop and the choice of providers limited, keeping costs high. However, over the last few years, increasing numbers of providers such as Vebnet, Eurobenefits and Motivano have developed software to deliver more affordable flex schemes. The cost of a bespoke package has fallen, just as a growing number of off-the-shelf packages have launched to market.
Tony Morgan, head of flexible benefits at KPMG, explains: “Once the new technology started to change the market place, the scope for flex-in-a-box developed as a concept.”
Bespoke flex packages and off-the-shelf options are no longer worlds apart. Look closely and the lines are beginning to blur. Tailor-made schemes can be used to attract a high calibre of staff via a plan in which time and money has been invested, which recognises workforce diversity and individual needs.
Depending on an organisation’s set-up, a bespoke option can be the natural choice. Jason Taylor, business development director at Ceridian, says: “Opting for a bespoke package can come down to the complexity of the benefits on offer. It could be that the business is heavily distributed, has a very high turnover, or significant diversity that requires a complex system to be in place.”
But employers looking to implement a bespoke benefits package have historically faced a high cost. Jacqueline Otten, a principal at Towers Perrin, says: “Bespoke is more expensive because you spend time shaping the design, the provider offering and terms, and programming the website.”
High bespoke costs can prompt organisations to consider off-the-shelf solutions. Marcus Underhill, head of flexible benefits consulting at Vebnet, puts the recent growth in popularity of off-the-shelf products down to organisations deciding they didn’t want to pay for every element in a bespoke plan. Other factors include smaller companies’ desire to implement flex, trust in the systems available and the growth of new technology.
“When we talk about flex-in-a-box, there are various elements that are simple to configure and arrange, and can be easily provided to a wide range of clients as is. With an off-the-shelf flex package you get the same product that everybody else has but branded to match the employer,” he explains.
When a company has the money to invest in flex, a bespoke package might appeal. For those that simply can’t afford this, however, an off-the-shelf package may be a better option. Jon Bryant, head of flexible benefits at Jardine Lloyd Thompson, says: “If [employers] haven’t got the money and there are relatively few or no benefits to design, then the off-the-shelf option gives employees access to perks.”
Off-the-shelf packages can also be quicker to implement and easier to design. Such schemes have often been criticised for their lack of flexibility, but this has changed of late. “Off-the-shelf systems can mean you lose, some flexibility but it doesn’t mean you don’t have options, it’s not that rigid nowadays. If you had, for example, 40 typical flexible benefit options, you could get all of those into an off-the-shelf system,” says Underhill.
Off-the-shelf systems also act as a stepping stone for employers to more complex flex packages and systems. Andy Lister, head of employee benefits at Grass Roots, says: “Often, off-the-shelf systems are a starting point for companies, and are then twisted and shaped into a more bespoke option.”
Off-the-shelf solutions, however, have often come under fire for limiting employees’ choice. Matt Waller, principal flex consultant at Benefex, who has recently worked with both a retail organisation and a large construction company, says: “Feedback from the retail staff showed they wanted mobile phones, shopping and experience [days]. The construction workers, however, were generally older with families and children. For them, the considerations were more about time and what-ifs, like critical illness cover, tax advice and will writing. A standard package isn’t going to fit all workforces or all markets.”
When it comes to administering a flex scheme, advances in technology have helped to bring costs down regardless of whether a plan is tailor-made or off-the-shelf.
However, schemes which are run purely online can generate problems, despite the advantages of speed and ease of management. “Some people prefer paperwork to online systems and, due to legal requirements, sometimes this necessitates the need to be able to use paperwork. Bespoke options are naturally designed to be either paper [based] or online, [while] off-the-shelf plans were originally designed for [use with] technology but now are somewhere in the middle,” says Underhill.
Once they are up and running, both types of plan require a similar level of attention. “Once employees have made their selections, the systems allow individual reports to be produced which are sent to the relevant benefit provider for both solutions. The difference is in the design of the schemes, not the administration,” says Bryant.
Choosing between off-the-shelf and bespoke will also depend on individual organisations and, for example, what stage they are at with their benefits offering.
“Newer benefits, [such as] bicycle [loans] and childcare vouchers, are more straightforward to include in a flexible benefits plan, and hence are more suited to an off-the-shelf product. With existing life insurance and income protection benefits, for example, these can be much more complex to include. We tend to use off-the-shelf solutions for newer benefits, but provide bespoke tailored solutions for some existing benefits, making the end result a patchwork of off-the-shelf and bespoke,” says Towers Perrin’s Otten.
In terms of tax efficiency and savings, she believes the two options are fairly evenly matched. “Both bespoke and off-the-shelf systems are tax efficient if set up properly. A good provider will make sure that an organisation [receives] salary sacrifice and National Insurance savings,” she adds.
Bespoke or off-the-shelf?
Employers should consider the following issues:
- How diverse is your workforce and what are employees’ priorities?
- How much money are you prepared to invest in your flex scheme?
- How quickly do you need the scheme to be implemented?
- Will employees be able to access the scheme online?
- What current benefits are available and what is the most efficient option for incorporating them into the flexible benefits package?
Case study: Monitor flex needs of staff
At the end of last year, Computers In Personnel, an HR software provider, turned its attention to its own employees and put together a bespoke flexible benefits scheme.Its priority was to adapt an already extensive benefits scheme into a package that maximised savings, was well communicated to staff, and considered easy to use.
Chris Berry, managing director, says: “Rather than just adding another benefit, we are giving people the decision to choose which benefits best suit them. We have used the software [provided by Thomsons Online Benefits] to manage flexibility within the benefits, for example, employees can now buy and sell their holiday online.”
The changes were driven by a need to put together a benefits package that was better suited to the company’s evolving workforce demographic. The average age of employees is now slightly older than previously, with workers at a different stage in their lives. A bespoke set up allowed Computers in Personnel to link the new benefits package with its existing range of benefits.
- For more information on flexible benefits visit: www.employeebenefits.co.uk/benefits/flex_bens