Construction consultancy firm EC Harris believes the provision of risk benefits, such as life assurance, income protection and group critical illness cover can play a vital role in attracting staff
Traditionally risk benefits are perceived as the backbone of employee benefit schemes providing core benefits in a number of organisations more as a matter of course rather than as part of a holistic strategy. Many organisations are now focusing more comprehensively on defining their total reward strategy, and while this is a positive development in the move towards a strategic HR profession there is a risk that it reduces attention being paid to the ‘nuts and bolts’ of procuring risk benefits in support of that strategy.
The provision of risk benefits (which might include life assurance, group accident insurance, income protection and group critical illness cover) at the right level as part of the total reward package can play a key part in the attraction of employees. They constitute a significant spend for the employer that needs to be managed as efficiently as possible, especially if some of these elements are provided as core benefits. Their role as a ‘hygiene factor’ in a reward package should not be underestimated, as these risk benefits are often a requirement for most organisations to play in their markets.
The range of methods that can be used to establish an effective risk benefit structure is considerable, especially if you operate a flexible benefits scheme. EC Harris has so far implemented flex in 10 of 22 operating locations, and has provided risk benefits such as accident and critical illness insurance as flex options where possible. However, a critical decision was made to retain life assurance as a core benefit for all staff, keeping it outside the flex scheme, and also to provide income protection as core for all senior managers. The decision to do this was simple, however, the method of doing this to ensure that we are truly operating as a single entity has been carefully considered.
Our critical issues in risk benefit procurement are some of the most common yet most complex. We want to ensure that administration is as effective as possible and the provision also achieves global consistency. The partnership structure of EC Harris presents a variety of challenges, for example ensuring that the most senior partners are covered at the market rate typical for those working at their level, which can be different to that for our ‘standard’ market, for example. Initially, this kind of challenge can seem insurmountable. However, our advisers, Gissings, have understood clearly our drive to support our single entity approach and fully deliver the reward strategy and commitments in our employee charter. The solution to our requirements is being developed using a multinational pooled arrangement for both life assurance and income replacement.
The concept of pooling almost seems too good to be true, and as a new departure for EC Harris, it has required careful consideration to make sure that it is not going to come back and bite us. The pool is effectively an international profit sharing system that allows us to obtain experience rating the insured benefits over the borders of the countries or territories in which we operate and introduce to the pool. The pool offers the facility to give potential returns on the premiums paid to insurers (the dividend), if the income on the form of premiums is greater than the outgoings which is composed of claims, expenses and commissions for the scheme as a whole.
We are now planning the implementation of a pooled arrangement for these benefits – taking two provider networks to complete the pool over our geographic reach and developing an entry strategy for each country into the pool based on requirement and risk profile. The commencement of this scheme is based on the movement of our existing UK and Irish risk benefits into the pool, immediately creating the potential for a dividend without increasing premium.
Joanne Wotton, HR project manager at EC Harris LLP
Best practice tips
- Take time to fully understand the risk benefit needs of your business, in particular local custom and practice in international locations.
- Explore all options and ensure that your advisers understand your business in the same way.
- Ensure you have easy to use information for both central and local management.
- Don’t underestimate the importance of risk benefits in the total reward package.