A quarter of employers do not think they have enough benefits to bring in flex, and standalone tax-efficient perks via salary sacrifice are popular, says Nicola Sullivan
One-fifth (20%) of employers that have not yet considered implementing flexible benefits say they will do so in the future. This has changed little since last year, when 17% of respondents said they were prepared to consider offering flex. This year’s slight rise could suggest employers are beginning to feel optimistic about building on their reward packages after the recession. Just 3% of those that do not offer flex give the recession as the reason.
However, just as in 2010, a quarter (25%) of employers feel they do not offer enough benefits to flex. This compares with just 5% in 2009. This could also be because of the recession, which saw many employers make cuts to benefits or not expand on their existing offering. These are both facts employers may not want to highlight to staff.
Voluntary benefits schemes can be a cost-efficient precursor to launching a flex plan, enabling employers to test the water by introducing staff to the concept of having choice around their benefits package. Just over half (53%) of respondents that do not currently offer flex have a voluntary benefits plan in place. The proportion of employers without flex offering voluntary benefits varies according to their industry sector.
For example, such schemes are most likely to be offered by public sector employers, with 62% providing voluntary benefits in 2011. This compares with 61% of publicly quoted employers and 47% of privately owned organisations. Cuts in public expenditure could also mean employers in the public sector use voluntary benefits as a lower-cost alternative to flex.
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Total reward statements can be a useful way of communicating to employees what their benefits package is worth before launching flex. Almost half (43%) of respondents do not currently offer such statements, while 31% intend to introduce them.
Surprisingly, only 20% of respondents actually offer total reward statements. This is despite a greater need for employers to maximise the value of their benefits package during a period when budgets may not have allowed for new perks to be introduced. Meanwhile, 3% of employers claim to have removed total reward statements.
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About three-quarters (74%) of respondents that do not offer a flexible benefits scheme take advantage of the tax and national insurance (NI) savings that can be made by offering standalone tax-efficient benefits via a salary sacrifice arrangement.
This proportion has remained static over the past year, suggesting that employers have not been deterred from offering such arrangements by tax changes to perks, such as the forthcoming amendments to childcare vouchers for all except basic-rate taxpayers. Clarification on how other perks should operate, such as bikes for work, also appears to have had little effect on whether employers offer such schemes.
As in 2010, childcare vouchers remain the most popular tax-efficient benefit offered by employers, provided by 95% of those that do not operate flexible benefits plans.
Pensions and bikes-for-work schemes remain the second and third most popular benefits offered in this way.
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Read more from Employee Benefits/Towers Watson Flexible Benefits Research 2011