Duncan Brown: Making the case for flexible benefits

Finance directors and board colleagues may accept that offering a good benefits package secures higher-quality staff and, as efficiency wage theory suggests, take the pressure off base pay levels and increases.

Duncan Brown

Flexible benefits is very much a minority employer pursuit, concentrated among larger organisations in the private sector. Only 20% of all UK employers in the Chartered Institute of Personnel and Development’s Annual reward management survey, published in 2013, use the approach.

A higher proportion of employers will almost certainly be experiencing a growing diversity of their workforce, and some research studies suggest that certain employee groups, such as working parents, place a value on arrangements such as flexible working hours that is way above their actual cost to the employer. One study, The effects of a flexible benefits expert system on employee decisions and satisfaction, published in 1993, carried out in a bank, for example, found that employees valued simply being offered a choice, which led to a more favourable view of their total package.

Although, offer too many choices and our aversion to regret and loss may outweigh this effect.

So, for the answer, we must go back to what one might expect for finance directors and indeed any rational investor: how does the cost to set up and run compare with the financial returns? For example, how does John Lewis afford its wonderful benefits package, or US convenience store QuikTrip afford to pay its store staff a living wage, well above the market median on base pay? Were their finance directors asleep when the proposals went through?

No, far from it: these two and many other forward-thinking employers clearly make the case for investing in their staff rewards because the returns in terms of staff quality can be shown to be proportionately much greater, with sales per employee at QuikTrip, for example, 50% higher than their competitors, enough to make any finance director dip into his or her wallet.

So borrow a financial analyst if you need to, but make sure you can show a positive return on the investment in flex if you want to get the finance director and board on side.

Duncan Brown is head of HR consulting at the Institute for Employment Studies