A minority of employers administer flex fully in-house, but many still claim not to know how much their scheme costs to run per employee, says Debbie Lovewell
The proportion of respondents that manage their flexible benefits scheme fully in-house has been on a downward trend over the past five years. Five years ago, 51% managed their plan in this way, and 58% did so back in 2006.
By last year, this had fallen to 31%, however it has moved up a little over the past 12 months to sit at 39% this year.
But despite this overall decline, keeping a scheme fully in-house remains the most popular way for employers to administer flex.
The downward trend may be due to the number of options that now enable employers to outsource part of their scheme.
Most employers use a third party for some aspect of their flexible benefits scheme. Just over half (51%) use a flexible benefits provider, while others employ help with specialist areas, such as tax advice.
But the number of employers using a third party for assistance with technology systems or consultancy has fallen slightly over the last year – from 33% for technology systems and 21% for consultancy to 22% and 16%, respectively. In an effort to control costs in the recession, employers may have gone direct to flex providers that also offer these services.
What respondents employ a consultant for has changed little over the years, however. Over the past five years, the main reason for them to do so – to help select a provider – has remained fairly constant. Just under two-thirds (62%) used a consultant for this reason in 2005, compared with 71% this year.
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During the recession and continuing economic downturn, employers have come under increasing pressure to justify their expenditure on reward and benefits. It is therefore somewhat surprising that the proportion of respondents that claim not to know how much their flexible benefits scheme costs to run per employee per annum (excluding the cost of internal resources and benefits) has remained constant over the past 12 months.
Where employers have recorded what their flexible benefits scheme costs to run, 14% spend £10 or less per head. Given the employer national insurance savings that can be obtained from offering tax-efficient benefits via salary sacrifice, it is possible to use these to offer a flex scheme at a low cost to the organisation, or even to do so on a cost-neutral basis.
A further 13% spend £16-£20 per head, which is up from the 6% that did so last year.
The most common cost per head this year stands at between £21 and £25.
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Despite many respondents claiming not to know what their flex scheme costs them, 62% actively measure its success, which is vital in the downturn. Back in 2005, 53% actively measured the impact of their flex scheme.
As we come out of recession, employers are likely to remain under pressure to justify their benefits spend, while providing a reward package to retain and motivate the talent that is needed to build the business back up.
Employee satisfaction with the scheme remains the most popular factor against which employers judge the success of their scheme.
The level of employer and employee savings also remains a key – and easy to measure – way of measuring a plan’s success.
This may account for the decrease in the percentage of employers that measure their plan’s success against its impact on recruitment over the last five years. Some 46% did so in 2005 and 27% in 2006, but this has now fallen to just 17%.
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More articles on: Employee Benefits/Towers Watson Flexible Benefits Research 2010