Benefits for employees’ dependants are under pressure, but their contribution to staff engagement is clear, says Sam Barrett
Extending benefits to family members has a long tradition, going back to the days when the likes of Cadbury provided employees and their families with housing, education, healthcare and sports facilities. Today, although most employees do not expect quite such extensive support, there is still room in the workplace for benefits that recognise their families.
Elliot Webster, head of flexible benefits at Bluefin Corporate Consulting, says: “Offering employees family-friendly benefits, such as subsidised private medical insurance (PMI) for a partner, an annual Christmas party for the kids or discount vouchers, can really help with engagement. They make employees think more holistically about what they receive from the organisation, rather than just about cash.”
This can help to create greater loyalty, leading to improved employee performance and retention. It can also help an employer to communicate positive messages. For example, publishing house Informa encourages its staff and their families to take part in the World Cancer Research Fund’s annual Beat the Banana sponsored runs. Thomas Humphris, head office HR director at Informa, says: “It is a global event, so all our offices around the world can join in. It is a great family event, but also one that shows we support our employees’ health and wellbeing.”
But although there are business advantages in offering family-friendly benefits, in tough economic times, these areas of expenditure can take a battering. Andrew Woolnough, director – benefits management at the Jelf Group, has seen a steady trend of organisations withdrawing company-paid benefits for employees’ families. “It is just too expensive to provide benefits to family members,” he says. “Employers have had to tighten their belts in the recession.”
PMI for dependants too expensive?
This can be seen particularly with insurance products such as PMI. With medical inflation currently around 10%, many organisations are finding it too expensive to pay for employees’ dependants. Charlie MacEwan, corporate communications director at insurer WPA, says he has seen a rise in organisations continuing to pay for employees’ medical insurance but pulling back from paying for dependants. “More schemes are introducing an element of co- insurance for dependants,” he says.
“This reduces the cost, but also differentiates the employee from their family. Additionally, because they have to pay to use it, it improves the value of the product.”
As well as company-paid insurance benefits for dependants, perks such as Christmas parties for employees’ children are also on the wane. Here, the practicalities can prove as much a deterrent as the cost. Martha How, senior reward consultant at Hewitt Associates, gives the example of one central London client that stopped running children’s Christmas parties after attendance dropped to 30%. “Employees can be based all over the place and it just became impractical for them to bring their kids into the centre of London for a party,” she says.
But although budget squeezes during the recession have made it tougher for organisations to fund benefits for dependants, this does not mean they have been shelved completely.
Legislation may have a part to play in this by helping to ensure that family-friendly benefits maintain a high profile in the workplace. For example, measures introduced under the Work and Families Act 2006 included extending maternity pay and giving employees who are caring for an adult at home the right to request flexible working arrangements.
“Under EU law, all employers have to have family-friendly employment policies such as allowing parents time off to look after sick children,” says How. “This has forced employers to adopt a more flexible way to working, and also to look at what they offer employees’ families.”
Flexible and voluntary benefits
But rather than run up a bill for family benefits, employers are increasingly using flexible and voluntary benefits schemes as an easy and cost-effective way to deliver perks to family members, allowing employees to decide whether they want to pay to extend cover to their dependants. “If an employer is already offering flex, it will not cost them a penny more to extend benefits to family members,” says Webster.
Flex is also a fair way to offer benefits to family members. Employees who do not have partners or children can choose not to extend cover to family members rather than feel discriminated against.
Employees also value this approach. As well as being fairer to those without partners and children, where employees’ family members do take out cover, they often benefit from discounts that make the products cheaper than if they had bought them independently. And, given the likelihood that the employee’s partner also works, offering benefits through flex also reduces the risk of them doubling up on cover if both their employers extend benefits to families.
However, just because an employee pays for their dependants’ cover does not necessarily mean their employer will be immune from the effects of any claims. For example, on a PMI policy, the claims made by dependants can be added into the risk pool and will affect the price paid for all members, including staff paid for by the employer.
A few safety mechanisms are built into schemes to reduce this risk. Webster explains: “Insurers are fairly strict about what constitutes a family member [see panel below], generally restricting this to an employee’s partner and any child dependants. Additionally, where risk products are involved, they will usually limit the number of changes that can be made during the policy year. This prevents an employee from changing their partner on their PMI policy to whichever of their friends might need treatment.”
Typically, changes will be allowed only at annual renewal or when a lifestyle event occurs, such as the birth or adoption of a child, marriage or divorce. Also, many insurers will allow only employees to upgrade their cover by a set amount and will require some form of underwriting on partners as well as the employee where cover is extended to them. “We are also seeing loadings on dependant cover, for instance excesses on PMI, to prevent reckless claims,” explains Webster.
As well as offering standard employee benefits to family members, organisations are acknowledging the role of employees’ families in other ways. For example, support services to help staff deal with the pressures of home life are becoming more common.
Although employee assistance programmes (EAPs) cannot be extended to family members without turning them into a taxable benefit, family members may receive counselling for an issue raised by the employee. How says more employers have introduced family support networks and workshops, such as those offered by Employee Matters. These cover various areas, ranging from being a first-time parent to how to deal with a teenager with a drug problem.
More flexible working options are also gaining popularity as a way to support employees with family demands, and this is not just driven by legislation, says Ben Wells, senior consultant at Buck Consultants. “Employees increasingly want more of a work-life balance and employers are responding to this with initiatives such as flexible working and sabbaticals.”
Wells adds there is potential for more innovation in this area, especially as higher earners’ pensions relief is reduced.
“Although nobody has introduced it yet, there is talk of offering financial benefits to employees’ family members,” he explains. “As an example, rather than pay into the employee’s pension, their employer might fund their children’s postgraduate savings to help pay off their student loan.”
Communication is the key
But whether employers decide to offer company-paid, flex or voluntary benefits, communication is key. “Employers have to engage with the family to get the most from these benefits,” says Woolnough.
“Many employers will put their benefits online so employees can select what they want at home with their families. There are a lot of silent decisionmakers out there.”
Brochures are also important when it comes to promoting these benefits and savvy employers, such as Informa, send these to employees’ homes rather than hand them out in the workplace. Linda Hilliard, UK reward manager at Informa, says: “It is important to communicate benefits to family members.
As well as sending the brochure to the employee’s home, we promote benefits on our staff website and run discount days before the school summer holidays to raise awareness of the offers we have for families. Employees and their families really appreciate what we offer.”
So, even taking small steps to involve employees’ families in their benefits package can pay dividends when it comes to factors such as engagement and loyalty.
What constitutes a partner?
Fifty years ago, the traditional family model was a male head of the household bringing home the bacon to his stay-at-home wife and 2.4 kids. Today this is far from the norm, with staff much more likely to be living alone, as single-parent families, with friends, or, often because of university debt, at home with mum and dad.
It is essential to recognise these varied lifestyle arrangements when extending benefits to family members and dependants, so employers have moved away from stipulating that perks are for a husband or wife. Rules are often determined by the insurer, helping them to manage risk. Elliot Webster, head of flexible benefits at Bluefin Corporate Consulting, says: “Marriage is no longer necessary to be regarded as a partner. Neither do insurers care if it is a partner of the opposite sex or the same sex. Often, all they will insist on is that the person is financially dependent, which rules out parents, and lives at the same address.”
There is some flexibility around this. For example, at WPA, smaller schemes must stick with the definition of partner as an adult dependant living at the same address, but there is more choice for bigger organisations. Charlie MacEwan, corporate communications director at WPA, says: “It is down to the employer to decide what a partner is. They can design any sort of benefit they want.”
With other benefits, especially those that do not involve insurance, there is no need for restrictions. Informa, for instance, includes a gym membership deal in its benefits package, offering discounts to employees and their friends and family. Thomas Humphris, head office HR director at Informa, says: “There is no limit on the number of friends that can take up the offer. We have had more than 200 employees and friends take up the benefit.”
Case study: Enterprise Rent-A-Car drives family values
Recognising employees’ family members through a range of benefits is important for car rental firm Enterprise Rent-A-Car. Donna Miller, European HR director, says: “It is essential to thank an employee’s family as well as the employee. They look after the employee at home and this can make a big difference to how the employee feels and performs at work.”
Among the benefits Enterprise Rent-A-Car extends to family members are private medical insurance (PMI), an employee assistance programme and discount vouchers.
“Employees can add their spouse and children to their PMI if they like,” says Miller. “Offering it in this way makes it a lot cheaper for them and we have a good level of take-up for this.”
New parents are offered generous maternity and paternity benefits, says Miller. “We have phase-back programmes for employees after the birth of a child or an adoption to ease the employee back into the work pattern. It can be an anxious time for both the parent and the child as they settle into a new routine.”
The parent receives full pay but works fewer hours during their first five weeks back, gradually increasing their hours week by week.
Enterprise also runs events specially for family members, such as a summer picnic, open days which graduates can bring their families along to, and business seminars for partners.
“These types of event can give families an insight into what the employee does,” says Miller. “This can really help to create loyalty.”
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