Which elements of flex require regular review?

Launching a flexible benefits plan is only the start of a long process, as employers need to keep up with new developments to manage it effectively, says Nick Golding.

The successful launch of a flexible benefits scheme will often result in all involved breathing a sigh of relief. After all, conducting a feasibility study, running a tendering process, negotiating benefits costs, achieving board sign-off and communicating the plan to staff, can make launching a scheme hard work for all concerned.

But, in most cases, this sense of relief is short-lived, as, in reality, the hard work is not over for employers. To ensure that a flexible benefits scheme continues to be valued by staff and achieves the aims set down at launch stage, they should ensure that the plan is regularly reviewed.

Employers that leave their flex scheme untouched following the launch will soon find that it becomes outdated and, ultimately, fails to deliver what was expected of it, explains Matt Waller, chief executive officer at Benefex. “There are loads of [flex] schemes in the market that just haven’t been touched since launch, sometimes for three or four years, yet these [employers] wonder why employees aren’t valuing the package,” he says.

Refresh benefits
Regularly reviewing a scheme can help to keep it fresh and ensure that it remains relevant to employees. By reviewing take-up of individual benefits annually, employers will be able to gauge which are worth keeping or replacing. This is essential if the flex scheme is to remain up to date and continue to appeal to the workforce. Providers will be able to supply records of take-up levels from previous year’s enrolments. This data can then be used as a starting point to refresh the package.

When reviewing the benefits available, employers should also ensure they remain up to date with tax and legislative issues. Some subtle changes, for example, may not be widely publicised but could greatly affect the popularity of a benefit or, in extreme cases, employers’ ability to include it with a flexible benefits scheme, from one year to the next.

Nigel Dumbrill, a flex consultant at Aon Consulting, says: “It is important to keep up with legislative changes around salary sacrifice benefits, [for example]. Some [changes] are high profile but quite often there are slight [alterations] or clarifications that are less publicised and these can turn out to have a large effect on a benefit.”

The needs of employees or an organisation’s workforce demographics may also change over time, so employers should ensure that they respond accordingly if their flex scheme is to continue to appeal to and engage staff. The current economic downturn, for example, means that many employees are now looking for ways to make their money go further, so schemes can be changed to include more money-saving perks such as retail discounts. “In a year the benefits market can change a great deal. At the moment, we are seeing a lot of people suffering from the credit crunch and wanting to save money, [so] benefits need to be reviewed and adapted because people’s circumstances change,” adds Waller.

Inevitably, the benefits available and their cost may also change over the course of a year as providers launch new products and develop some of their existing offerings. Some areas of benefits provision will be more affected than others. Employers that offer healthcare benefits through flex, for example, may be able to gain better value for money by regularly reviewing the products on offer and renegotiating cover.

Martha How, head of reward at Hewitt Associates, explains: “Anyone reviewing benefits should look at healthcare, because the [area] has so many new perks available, such as health education. A company that hasn’t looked at healthcare for three years will be surprised by what is now on offer.”

On the flip side, however, employers should be careful not to change too much at once in order to maintain a degree of consistency. Significantly changing a scheme each year might unsettle or even confuse employees. Jenny Balme, head of reward and relations at accountancy firm Grant Thornton, says: “It is important to keep the offering reasonably consistent. If it changes too much, it is possible flex will lose its impact.”

Review scheme structure
The way that flexible benefits schemes are structured should also be kept under review. Within traditional flex plans, employees are given a pot of cash to spend on benefits. The amount that they are given should be reviewed annually as it must stay in line with employees’ salaries, and reflect factors that are subject to change, such as the cost of the benefits on offer through a scheme.

“If funds are generated from fixed percentages of salary then they must be kept in line with pay rises, [so a review] must be done alongside pay reviews, probably once a year. Also, if the cost of benefits is increasing the fund has to reflect this,” explains Waller.

It is also important to review the way flex is communicated to staff on an annual basis. If messages about flex are not reaching as many employees as possible, or cannot be easily understood, this can have a significant impact on take-up levels. Grant Thornton, for example, surveyed employees following the first year of its flex scheme to ask if they were happy with the way it was communicated to them. Staff were quizzed about how they would like to receive flex information going forward. “Following our first year of flex we surveyed employees and are [now] using the feedback to develop the communication plan for the next enrolment,” adds Balme.

Reviewing the communications strategy will also enable employers to take advantage of new ways of passing information on to staff, such as via podcasts, webcasts and text messaging.

Technological developments also mean that advances in flexible benefits systems and administration are a regular occurrence, so it is worth employers keeping an eye on the market in order to ensure they continue to gain the most for their spend on flexible benefits. Chris Bruce, managing director at Thomsons Online Benefits, says: “We add around 600 new features to our software each year, so if a client that went live three years ago hasn’t reviewed the technology it uses, there is a strong likelihood, [it is] not getting the most from [its] flex package.”

Leaving a flexible benefits scheme well alone once it has been launched, therefore, can lead to a plan soon becoming out-dated and under-valued. Regularly reviewing key aspects of flex, however, will ensure schemes remain fresh and help employers maximise employee appreciation and take up†

Features to review regularly
If take up of flex is low, then perhaps employees have not been made sufficiently aware of how the scheme works and what they can do. Employers could look at different methods of communicating the perk or surveying staff to gain feedback on it.

Benefits options
The benefits within a flexible benefits plan need to be kept up-to-date. This does not mean employers should overhaul a scheme every year, but they should at least look to enhance it slightly by adding or removing some options.

Flex allowance
The amount of money allocated to staff through a flex allowance should be reviewed regularly as it must be kept in line with the cost of the perks.

Providers frequently bring out new products and technology around flex, so employers should keep abreast of these changes in order to take advantage of those that are most appropriate for their organisation.