Voluntary benefits report 2009: Integrating voluntary benefits with total reward

Integrating voluntary benefits into a total reward strategy has advantages for both employers and employees, says Victoria Furness

Discounted shopping vouchers and critical illness insurance may not seem to have much in common, but increasingly they are cropping up in the same benefits package as employers integrate voluntary benefits into a total reward strategy. Glenn Elliott, managing director of Asperity Employee Benefits, says: “We see more organisations that want to have it all knitted together with single sign-on and an integrated communications plan between the two. It is becoming more common and I think people have realised flexible benefits are great, but it is always going to be about annual enrolment, whereas voluntary benefits are available all year round.”

The trend towards integration could also indicate some employers have become disillusioned with standalone benefits. Jason Taylor, managing director of Benefex, says: “They tend to be devalued and underused.”

Engagement levels

By contrast, integrated packages are thought to boost take-up and engagement levels by making them easy to use, for a start. Paul Waters, senior benefit consultant at Hyman Robertson, says people are busy enough without having to worry about what benefits they receive and how they can access them. “They do not care if benefits are fixed, flexible or voluntary,” he says. “They want to know ‘what is my company offering me and what can I get out of it?’.”

For employers, integrating voluntary benefits into a total reward strategy should also yield more management information, which they can use to market benefits more effectively or identify which elements of reward are best suited to different platforms.

To deliver an integrated reward strategy, most benefits suppliers advocate using an online platform to provide an interface into different systems if more than one provider is used. This might even be an organisation’s intranet site. The aim is to give staff single sign-on and access in one place to everything they are entitled to in their reward package.

Starting from scratch

If starting from scratch with no voluntary plan, it is vital to consult staff and identify which benefits they value most. “Make sure you draw out the ones employees relate to,” says Waters. “That way, you can integrate [these] into the benefits strategy better.”

When it comes to managing mechanisms behind the scenes, Asperity’s Elliott says: “If employers have a different provider for voluntary benefits and flex, they need to make sure they work well together, so look for evidence of that. Also, decide who will lead on the communications plan to avoid employee confusion. For instance, we do not communicate voluntary benefits during the flex enrolment window for our client, IBM, (see page 8) to avoid mixed messages.”

A common starting point for integrating voluntary benefits is to allow staff to top up core or flex benefits using the voluntary benefits platform. Mark Carman, marketing and communications director at Motivano, says: “Some organisations have put healthcare cash plans [in their voluntary benefits offering] to support private medical insurance [PMI] products. Where employers are increasing employees’ excess to get a lower premium, an employee can protect against that by taking out a cash plan.”

Critical illness

Alternatively, employees might want to use a voluntary benefits package to extend benefits such as critical illness cover or dental insurance to their partners or families. Integration may even be as simple as posting information about other benefits on the voluntary benefits site. For example, Signet Jewelers (which owns H Samuel and Ernest Jones) turned its voluntary benefits site into a single site about all its benefits.

Voluntary benefits can also be integrated into total reward statements (TRS). “It might be something as straightforward as featuring an advert for voluntary benefits,” says Elliott.

“We did some TRS for Scottish Water and it said, ‘you could be adding up to £1,500 equivalent of salary by using employee discounts – are you getting yours?’.”

This works best when employers have usage data to draw on, so TRS might come a year after launching a voluntary scheme. “But [employers should] only do it where it is appropriate,” says Benefex’s Taylor. “Saving £300 on voluntary benefits is more meaningful to someone earning £13,000 than an investment banker [for example].”

Occasionally, a voluntary benefits scheme might be integrated with a reward and recognition scheme, so an employee hitting targets receives a pre-paid card to spend on voluntary benefits, for example. But a far more common integration route is to use voluntary benefits as a precursor to flex.

Lee French, proposition director at Alexander Forbes Financial Services, says: “We introduced flex for our own employees and introduced voluntary benefits first.” Benefex’s Taylor adds: “It is low cost and it is a good news story. Employers are giving something back to the employee that could save them hundreds of pounds.”

However, where appropriate, Taylor says he would always advocate flex as the final goal. “You tend to get better-quality benefits and have more control over flex.”

Election periods

Once the transition has been made from voluntary benefits to flex, there may be doubt over whether there is still a need to have a voluntary component. Most providers say the answer is a resounding “yes”. Richard Davies, head of employee benefits at P&MM, says: “One-off elections for things like PMI and some risk benefits are fine, but high-impact salary-sacrifice benefits like childcare vouchers and tax-free bus passes need an open window of opportunity for employees [to take them up when they want].”

Where voluntary benefits are integrated within a total reward strategy, it is important not only the platform is integrated with single sign-on. The scheme’s helpdesk, processes and communications also should be.

It is also advisable for employers to ensure they do not duplicate benefits if offering several schemes, for example, by offering discounted retail vouchers through both flexible and voluntary benefits plans, in order to minimise employee confusion.

“It is a good idea to have an overall reward brand and, within that, to have different strands,” explains Motivano’s Carman. “Our client Hoare Lea has a flex scheme called iFlex, lifestyle discounts called iSave and its total reward strategy is known as iBenefit.”

Targeted communication

Employers could also promote employee reward through targeted communication campaigns, rather than as standalone components.

Carman explains: “For instance, benefits could be aligned around corporate objectives, so if employers have a green initiative, they could promote bikes-to-work or carbon offsetting, rather than simply promoting the flexible or voluntary benefits scheme on their own.”

But however an employer chooses to integrate its voluntary benefits scheme into its total reward strategy, it is not a one-off job. It is an ongoing process to ensure employees are using their total reward to maximum effect, that the scheme is continuing to deliver value, and that providers meet their targets. But many happy employers will testify that the benefits of creating an integrated total reward strategy are worth it

Knowing the law: terminating provision of benefits

Employers should bear in mind that disputes can arise if an employee leaves an organisation and expects to take their benefits with them. Esther Smith, a partner at law firm Thomas Eggar, advises:

“There needs to be some clarity in the scheme, so both parties realise what happens on termination of the employment contract.”

But if an employee falls out with an employer about buying additional holiday, she warns:

“It may be related to an employee’s needs to take time to care for children or indeed themselves, and this could lead to allegations from the employee that he or she has been treated unfavourably on a gender or disability basis.”

If an employer decides to remove a benefit – as some have considered in these difficult times – they could face a claim if an employee has a contractual right to that benefit and it has been removed without consultation.

“Childcare voucher schemes are an interesting case here. If an employer stops giving the vouchers, an employee has a claim for breach of contract,” says Smith.

“But if the employee comes out of the scheme because they do not need childcare any more, there is no guarantee they will get their salary back.

“It is to satisfy tax rules and, to be honest, the vast majority of employers do reinstate it, but there is no guarantee, so the employee has to do it on trust.”

CASE STUDY: 3 staff access voluntary benefits through flex website

In April, mobile phone operator 3 relaunched a combined flexible and voluntary benefits package.

Reward manager Emma Leadsom explains: “We wanted to extend the original scheme that only covered operational groups to the whole company and extend the scope of the offering. As part of the design exercise, we engaged widely with employees and received strong feedback that they wanted all company and voluntary benefits on offer in one place.”

To access all perks, staff now log on to the flexible benefits site, called Just Rewards, which is provided by Bluefin. From there, they can see all their core benefits and voluntary perks, provided by Asperity Employee Benefits, as well as individual total reward statements. 3 communicates the flex and voluntary plans together during the flex election period, and runs awareness-raising competitions through the year to raise the profile of voluntary perks.

“Communication is easier for us and employees can easily see how they can supplement their company benefits with other voluntary offerings that are relevant to them,” says Leadsom.

The scheme has only been in place for seven months, but 3 expects voluntary benefits to be popular in its retail business. “This will help us increase participation in the part of our business where it is lowest,” Leadsom adds.

CASE STUDY: Penspen integrates perks plans

Penspen, an engineering firm in the oil and gas industry, launched an integrated flexible and voluntary benefits package for its 163 staff in April this year.

Aida Rehmatullah, HR pension and remuneration officer at the firm, says: “It was decided to introduce PenspenPlus flex and voluntary benefits jointly to increase and optimise the personal benefits associated with employment with the Penspen group. An integrated package allows staff to choose and tailor their benefits to best suit their and their families’ requirements.”

Before this, the company offered a core benefits package, including a pension and flexible working, which were promoted via a benefits factsheet. Now the flex and voluntary benefits are branded under one name, PenspenPlus, and accessed online. They are communicated in tandem to employees through the brochure for 2009-10 flex or in total reward statements.

Although it is too early to tell whether the integrated benefits platform, provided by Benefex, has had an impact on take-up of perks, Rehmatullah expects it to increase. “We have had some feedback on the success of voluntary benefits,“ she says. “When a competition to promote voluntary benefits went out via email, the response was impressive, with site access and spend improved.”

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