Flexible benefits schemes are complex by their very nature, so employers need to ensure they fully understand providers’ service propositions before appointing them. We look at the top five criteria that employers should consider.
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- Employers should ascertain whether a provider works alone or is supported by a third party to deliver the scheme.
- The provision of eight to 10 employee benefits is advisable in the first year of a scheme.
- Workplace benefits days can help employees to understand the perks on offer.
Employers that are either planning to introduce a flexible benefits scheme or to switch provider should first ascertain whether prospective providers work alone or in partnership with, for example, an IT provider to power their technology.
Martha How, a reward principal at Aon Hewitt, says: “It’s important that [employers] coming into the market know if they’re dealing with one supplier or two. They may be happy with one of the providers, but might want to do due diligence on the third party.”
Employers should also assess a provider’s technical capability. “Flex is very broad, so [employers] should look for knowledge of employment law, taxation, the benefits market, HR issues and general reward,” adds How.
Managing expectations should be a fundamental part of any flex provider’s proposition. Manesh Patel, senior flex consultant at Lorica Consulting, says: “HR needs support and assistance in knowing what to expect, when to expect it and what to do when they expect it.
“Some organisations naively assume that all providers will give them that, and suppliers will naively think that organisations already know what to do because they’ve indicated a plan of action. But [by providers] stipulating from the outset what they expect to do, how they intend to do it, and what [employers] get at the end of [the process], there’s no ambiguity.”
3. Benefit selection
Pension provision, medical cover of some description, the ability to buy or sell holiday, life assurance and some form of income protection should be the minimum selection of benefits that employers new to flex should consider offering their workforce.
But How says employers should also include health screening because of its tax efficiency, dental insurance because of its popularity, and childcare vouchers, bikes-for-work schemes and travel insurance.
“A flex plan without those 10 benefits is going to be fairly thin,” she says. “Beyond those 10, I think it depends on an organisation’s strategy.”
Patel agrees that employers should consider 10 benefits as their optimum flex offering in the first year of a scheme. “The more [employers] give, the less likely it is that [employees] will choose benefits,” he says. “We’ve seen a trend that it takes new schemes at least two years before staff feel comfortable that this is going to be the norm in their remuneration programme.”
Employers new to flex should focus on building their communications programme, particularly for benefits that staff may struggle to understand.
Equally, flex providers should be doing all they can to engage and educate employees, with benefits fairs being a popular channel for workplace communication.
Benefits days, when employers invite individual providers in to discuss their benefits offering, are also popular. Lorica’s Patel says these give a focus to each provider, and can make it easier for staff to digest information, rather than having eight or nine providers in a room.
5. Organisational fit
Employers need to ensure the benefits they offer through flex appeal to their employee demographic. For example, wealth management and retirement planning are unlikely to appeal to a young workforce that may be more concerned with student debt.
Researching providers’ track records can help employers identify one that can suits their particular needs.
If competition issues prevent employers from being able to source testimonials from a peer in their own sector, they can instead source references from a business of similar size.
Focus groups and online feedback channels can help employers monitor the relevance of their flex plan to their workforce.
Read the full version of our Flexible Benefits supplement.