As any HR manager quickly discovers, there is no manual showing how to run the perfect employee benefits scheme. Each workplace will demand different solutions, and so-called best practices aren’t always the perfect solution for every employer.
Before looking into what best practice comprises, it is first necessary to define what the term actually means. Michael Armstrong, author of A handbook of employee reward management and practice,explains: “Best practice refers to employee benefits practices that have been proved by experience in a number of organisations to be so effective that they should be taken as models of the approaches that any firm should adopt.”
The trouble is HR and benefits managers face a bewildering array of often-conflicting advice on exactly what constitutes best practice. Consultants, providers, HR gurus and other industry know-alls all have their opinions about what makes the perfect perk. They award their seal of approval not only to types of schemes, such as flexible benefits, and the manner in which they are run and implemented, but also to standards within perks, such as 28 days’ annual holiday.
Jonathan Trevor, a lecturer in the human resources department at Judge Business School at the University of Cambridge, says there are gold standards in perks. “Within the current trends in benefits best practice, these principles are associated most closely with the use of flexible benefits and total reward statements, which detail the street value of benefits received,” he says.
A flexible benefits scheme is often regarded as the ultimate perk. This is reflected by the number of employers offering schemes. Over a third of employers now have flex, while another quarter are toying with the idea, according to the Employee Benefits/Towers Perrin Flexible benefits research 2007.
Also revered by the HR industry, total reward statements are enjoying a surge in popularity. These set out the benefits employees receive and the value of them, allowing staff to assess how their package ranks in the job market. The Chartered Institute of Personnel and Development’s (CIPD) Reward management survey 2008 found that 29% of organisations now have a total reward strategy, and 21% plan to adopt one this year.
Although there are different levels of generosity when it comes to individual benefits, some are more acceptable than others. Take pension contributions, for example. Mike Ashton, senior consultant at Watson Wyatt, says: “In relation to defined contribution pensions, Watson Wyatt’s 2007 FTSE 100 DC plan survey identified that total average contributions are now 14.7% of salary – up from 13.7% in 2006 – and that this is nearly at the generally accepted good figure of 15%.”
Notions of best practice can, however, vary wildly according to sector. Shaun Tyson, emeritus professor of human resource management at the Cranfield School
of Management, explains: “In some sectors, such as pharmaceuticals, wellness programmes may be seen as the norm, whereas these may be more unusual [within] a firm of builders merchants.”
Some experts believe that employers should focus on how benefits are run, rather than which perks to offer. Charles Cotton, reward and employment adviser at the CIPD, says: “In HR terms, best practice can be difficult to import into other organisations because of the existing culture, employee relations, size and sector. So we tend to talk about good practice: adopting appropriate practices and then adapting them to suit your circumstances.
“Practices which stand out as best tend to focus on implementation. So, involving key stakeholders, including the employees in design and implementation is often seen as a prerequisite for success, as is good communication and coaching to ensure that line managers have appropriate skills.”
Most experts agree that it is crucial to take staff feedback seriously and act on results. Software developer Armstrong Consultants – placed at number 17 in the Sunday Times’ 100 Best companies to work for – holds regular meetings to gain workers’ feedback. Chris Bayne, managing director, says: “The staff forums bring together representatives from all departments, but not line managers. They enable frank discussion about company issues, initiatives and ideas for change. The discussions are compiled for the board of directors to review and respond to accordingly.”
In response to staff suggestions, the firm has introduced a range of perks, notably free fruit and free monthly head and neck massages. Communication Clear and regular benefits communication is also essential. Lisa Page, senior consultant at Aon Consulting, says: “Along with the actual benefits on offer, employers should exercise a core best practice standard of communication, ensuring that employees receive clear, up-to date information about what their benefits package provides.
Clear and regular benefits communication is also essential. Lisa Page, senior consultant at Aon Consulting, says: “Along with the actual benefits on offer , employers should exercise a core best practice standard of communication, ensuring that employees receive clear up-to-date information about what their benefits package provides.
“A pension plan could be considered best practice where it is well communicated to employees and the employer actively reviews the plan on a regular basis on behalf of staff. The same pension plan may be worst practice if it’s poorly communicated and rarely reviewed.”
She adds that giving employees a fair deal is at the heart of best practice. “Employers should make sure benefits on offer really do what they say on the label. Any administration charges must be reasonable, [while] the terms an conditions of the benefit [must be] appropriate and meet employees’ reasonable expectations.”
This goes for salary too. While pay does not motivate everyone, employees do not like to feel shortchanged. Philippa Shorthouse, HR adviser at law firm Browne Jacobson, says: “It is also important for the financial reward to be right, otherwise it can be demotivating.”
So how can employers keep up to date on what is best in the world of benefits? Keith Nash, HR director at law firm Badenoch & Clark, says employers should embrace the power of networking. “Review the package at least every two years and then investigate your options. Whether or not you have changes to make, the way to keep abreast of current thinking is through networking forums, speaking to colleagues, customers, new hires and suppliers, and not just when you discover your staff aren’t happy with your benefits – this is an ongoing theme. Magazine articles and topical seminars are easy to come by but nothing beats talking to other organisations.”
Others, however, warn employers to avoid one-size-fits-all solutions. Best practice is a phrase that implies you can cast a spell to magically transform any employee group into a contented, productive workforce. But every organisation is unique so highly-prescriptive best practice methods may be misguided.
The University of Cambridge’s Trevor says: “There are a plethora of guru books which describe certain approaches and even specific practices. These are often treated as handbooks [but] they should be treated instead as guides or sources of inspiration and nothing more.
“The classification of best practice is overly simplistic, misleading and, at worst, damaging. So-called best practices, such as high levels of performance-related pay, do not fit all organisations and often prove ineffective. The best benefits solution is a bespoke solution. The benefits offering should, as much as possible, be tailored to both the employee and the context – the division, country or business unit.”
Armstrong agrees: “By emphasising best, the concept implies that what works well in one organisation will always work well in another, which is clearly not the case,” he explains.
A sophisticated flexible benefits scheme, for instance, may work brilliantly in a large organisation with deep pockets and a complex IT system to back it up, but the same scheme could be wrong for an employer on a tight budget with limited IT resources. Moreover, there’s a danger that rigid notions of best practice alienate large sections of employers, which could never afford state-of-the-art schemes or 15% pension contributions.
Gill Crowther director of HR at Nominet, the British internet registry that controls “.co.uk” web addresses, says that while she keeps abreast of HR developments, the company does not shoehorn in unsuitable perks. “Best practice standards for employee benefits are about knowing your workforce and defining a set of benefits that works for them. A lot of fuss is made of the oddities that some of the recognised best companies are able to offer their employees, for example, free ice creams or granny leave [when grandparents are given time off work to spend with newborn grandchildren], but we believe if we create an environment where people can do their best work it does result in high productivity for us. This doesn’t mean we have to match all the benefits that other companies are able to offer but it does mean we have to listen to our people and support them to do their best work.”
The key, says Armstrong, is to adapt rather than adopt. “One can learn from good practice elsewhere, but it must always be seen from the perspective of the special environment of the organisation. Also bear in mind that competitive advantage arises when organisations have unique resources that others cannot imitate. There is no advantage to be had from simply reproducing someone else’s idea.”
The dos and don’ts of best practice
DO talk the talk
While experts may dispute whether flexible benefits schemes fit every organisation, everyone agrees that communication is paramount. Make sure staff get clear, up-to-date information about what their benefits package does and doesn’t provide.
DO sit up and listen
Canvas employees for their views through surveys and staff forums as they often come up with the most innovative ideas. Crucially, act on this information so staff feel they have been listened to.
DO take to the front-line
Ensure all line managers are aware of employee benefits strategies, and give them the skills and knowledge to communicate perks effectively.
DO keep abreast of HR developments
There are a plethora of sources to tap into for inspiration: conferences, national newspapers and trade magazines, the internet, online communities, and surveys from bodies such as the Chartered Institute of Personnel and Development. But remember these ideas are there to inform, not constrain.
DON’T rigidly follow rules
Every workplace is different. While picking up tips from experts and other employers is useful, it’s crucial to adapt these ideas to fit your own organisation.
DON’T get stuck on the bench
Rather than just focusing on organisations within your particular sector, check out what others are doing. List 10 organisations that you admire outside your sector and then examine what they do. But bear in mind that while benchmarking may ensure you don’t fall behind, it won’t necessarily help you to move ahead.
Employer viewpoint: What is best practice?
“Best practice means identifying what your people want and offering a range of benefits that meets those needs. Best practice means not simply putting in place a set of benefits and leaving them but, on a regular basis, reviewing and refining them. It means making changes as the requirements and needs of the workforce change.” Chris Bayne, managing director of software developer and consultancy firm Armstrong Consultants “Being a best practice employer makes you attractive to your own employees as well as to people outside the organisation; both to those who may wish to work for you as well as to those who wish to do business with you. You earn this reputation by asking for continuous feedback from employees and customers, listening to it and acting on it accordingly. As a best practice employer, you should differentiate yourself in some way.”
Keith Nash, HR director of recruitment firm Badenoch & Clark
“Every group of employees in every kind of industry would have a different definition of what best practice would mean to them. I would therefore say that best practice standards for employee benefits are about knowing your workforce and defining a set of benefits that works for them. If we can have employees that love coming to work and enjoy what they do when they are here then we will have a successful organisation.”
Gill Crowther, director of HR at UK internet domain registration agency Nominet
“[Within our workforce] are Leicester Tiger fans, Birmingham City and Nottingham Forest supporters, skydivers and marathon runners. It’s central to best practice that the range of benefits is flexible enough to change according to the needs and demands of our people. We find that what people really want is to develop their skills in a way that is relevant for them within a supportive environment.”
Philippa Shorthouse, HR adviser at law firm Browne Jacobson