Jonathan Trevor, a lecturer in human resources, believes difficulties associated with implementing flexible benefits plans are not always insurmountable, say Jenny Keefe.
The cost of implementing a flexible benefits scheme is often cited as a barrier for many employers otherwise keen to go down this path. But, Jonathan Trevor, lecturer in human resources and organisations at Judge Business School, University of Cambridge, does not believe employers should be put off by the cost without considering the benefits of flex. “If people object to the set-up costs of flex, then all I can say is ‘get a life’,” he says.
Nevertheless, more than half (54%) of employers cite the cost of implementation as a reason for not setting up a flex scheme, according to the Employee Benefits/Towers Perrin Flexible Benefits Research 2008. And as organisations struggle with the effects of the credit crunch and issues such as soaring fuel prices, many will regard the need to control costs as being more important than ever.
However, Trevor argues that offering a flexible benefits scheme can in fact slash reward bills by thousands of pounds.
“I think flexible benefits schemes actually make a huge saving, because [employers] have three choices: [they] can provide very poor benefits; [they] can provide very generous benefits; or [they] can have a middle ground, providing certain benefits for different people at different times.
“With flexible benefits, employees get the flexibility to choose which benefits they value. For the employer, it is a way to reduce their [benefits cost as a] fixed overhead [in the long term],” he explains.
By using flex, employers can not only cut out expensive yet under-valued perks, they can also maximise economies of scale.
While Trevor may have completed a PhD at the University of Cambridge, his experience of human resources and benefits is not confined to academia. He has worked for Mercer as a consultant and much of his current research involves analysing real-life human resources practices within global companies. “I have conducted about 20 case studies, reviewing human resources and reward arrangements, including benefits in every single case. All of those were large, complex, typically multinational companies operating in the commercial sector. Nearly all of them use flexible benefits in some or all of their offices around the world. Certainly in the case of the UK, flexible benefits is the norm.”
Trevor is currently exploring how organisations can bolster their financial performance by spending more on benefits. “The area of research that I’m focusing on currently, which absolutely involves flexible benefits, is what I call the ‘value gap’. We take the FTSE-100 companies and look at the amount each organisation spends on pay and benefits. What is apparent is that between firms in the FTSE-100, even between companies in the same sector, such as consumer goods or banks, there is a wide variation between what employers spend on pay and benefits. There is also a wide variation in the financial performance of companies in the same sector. But there isn’t necessarily a correlation between what employers spend [on benefits] and desirable employee behaviour.”
Trevor explains it is not necessarily the size of an organisation’s benefits package that counts, but rather what they do with it that matters. “It is not how much [employers] spend but how [they] use the systems that [they] have. Some organisations spend less than others but secure a greater motivational return and presumably greater financial performance as a result. Flex would be an example of this.”
Achieving better results for a smaller spend has long been the holy grail for employers. They may find some guidance as to how this can be done by looking at what their competitors are doing. Trevor says: “The question is ‘what are successful organisations doing differently?’ My answer to this is that they simply manage the rewards experience better than other peer firms. So crucial, but often neglected within reward strategies and reward design, is how employees experience reward and how that then shapes their perception of the [package] they receive.”
But however much an organisation has to spend on perks, its efforts will be wasted unless employees value what is on offer. Trevor says that enthusiastic line mangers can be key to engaging staff.
“Of all the stakeholders involved in reward determination, it is line management and not the reward function that influences most employees’ perceptions of the value of their reward package. It is line management that makes the rewards experience meaningful for employees. It is line management that influences profoundly the perceived value of reward, irrespective of the actual cost of reward organisationally. Fundamentally, it is line management who are able, if they are engaged, to make meaningful, motivational, and therefore effective, pay and benefits practices,” he explains.
Apart from communicating salary, pension and bonuses, line managers also have a role to play in explaining flex, and the host of benefits that are available through it, to staff. Trevor says that communication of a flexible benefits scheme in person will be more effective than simply relying on the benefits website, no matter how flash.
“Flexible benefits is a way for the organisation to directly interact with the employee, but that is not enough. The line manager needs to bundle that all together into a coherent package as part of a meaningful performance review. All companies that have flex have really good benefits websites, but all that does is complement the role of the line manager,” he explains.
He adds that when communicating flex, employers should ensure they do so using clear simple terms even if it seems that they are stating the obvious. “There’s a risk that those who design flex assume that the people who use it understand the benefits as well as they do. You see this time and time again. What the people who design them don’t seem to understand is that you are catering to a mass market, so employers have to appeal to the lowest common denominator,” says Trevor.
Employers should also try to keep flex schemes simple in order to maximise employee appreciation. Many packages are too complex, adds Trevor. “It is almost infinite, the number of things that a scheme could include. Keep it simple. Why offer 50 [benefits] when you can offer five-to-10 [options] that are really what people want?” Looking to the future, Trevor believes the popularity of flex will continue to grow. “I think more companies will continue to add it. Flex is now a household name and is becoming ever more well known.”
The onward march of technology, for example, has made setting up and implementing flex much easier.
What was once regarded as a daring, strenuous task can now often be little more than a meeting with a consultant and buying an off-the-peg IT system.
“It is no longer an innovation. Flex used to be an IT leap, now it is fairly easy to bring in. It is becoming simpler: we are seeing more off-the-shelf, as opposed to bespoke schemes, designed from conception to execution,” says Trevor.
However, there are still challenges for employers to overcome. “If you are a multinational and you want to roll out flex across all of your organisations, there are two major challenges. The first is the technical challenge: literally how do you manage flexible benefits over 50 countries for, say, over 100,000 people? That is a huge IT infrastructure project, which requires harmonisation of pay and benefits across the entire organisation.
“The second related point is how do you achieve that harmonisation, when different countries have different regulatory and legislative requirements?” says Trevor.
Whatever approach employers take to introducing flex, line managers can be a crucial asset. “Most importantly, engage line management, not just at the point of delivery, but at the point of design, because it is line management that will make the benefits offered meaningful to employees,” Trevor concludes.
Jonathan Trevor is a university lecturer in human resources and organisations at the Judge Business School, University of Cambridge.
His research interests include human resource management, pay and reward strategies and risk management.
Trevor also serves as deputy director of Cambridge University’s new Centre for International Human Resource Management, which was launched in July. The centre aims to bridge the gap between universities and real life by bringing together companies and academics to debate the latest HR issues.
Prior to becoming an academic, Trevor spent three years as a consultant with Mercer in its London-based performance and rewards practice.
Jonathan Trevor’s top flex tips
Get line managers on board early. Tap line managers for ideas when designing a newflex scheme as they will be the ones communicating the perk.
Don’t be daunted by IT. Cheaper, new technology means flex is now easier to introduce. Buying off-the-shelf systems can provide a flashy website for little effort.
Ditch the jargon. When communicating flex, use simple, plain English. Employees don’t want to read reams of obscure terminology.
Don’t be scared of the cost of implementation, as flex can reduce overheads and maximise economies of scale. If implemented well, it can also boost motivation and, hopefully, financial performance.
Employees shouldn’t receive all their information about flex via a computer screen. Encourage line managers to sum up perks as part of employees’ performance reviews.