A summary of the CIPD Executive Briefing
This research on flexible benefits aims to give a strategic overview of the key issues that employers should consider before introducing a flexible benefits initiative at their workplace. While there may be many benefits from adopting a flex plan, such as aligning the reward and business strategies with one another or managing the cost of future benefits provision, employers need to consider whether such a scheme is right for them. Flexible Benefits will help organisations evaluate whether a flexible benefits scheme makes sense for them. The Executive Briefing doesn't concentrate on what a flexible benefits scheme is, or why employers have been introducing them - various publications and articles already cover both these issues extensively. And it's not a 'how-to' guide for people to have on their desk as they implement a flexible benefits scheme. Instead, it covers some of the crucial design issues and examines some of the important implementation issues.
In addition, this publication raises technical implementation questions for employers to consider, such as:
- How will the new flex scheme relate to our existing occupational pension plan?
- How will it interact with legislation and taxation?
- How will the various stakeholders, such as HR, pensions, payroll and finance, work with one another?
What are flexible benefits?
A flexible benefits scheme (also known as 'cafeteria benefits' or a 'flex plan') is any arrangement that gives employees a choice over the mix of cash and benefits they receive. Flexible benefits schemes are not new - they've been around for about two decades. But what is new is that more employers seem to be using them or are actively investigating the possibility of introducing a flex plan in the workplace.
In the past, complexity and cost of administration have been the major barriers to introducing flexible benefits. These days new technology, better ways of working and the availability of specialist third-party administration have reduced these barriers. Designing a flexible benefits plan doesn't have to be a long, complex process. It can be simplified to answering a series of related questions, most of which need some research/data collection or advice to enable the employer to reach an answer.
What are the benefits of flex?
The potential benefits of flex schemes for employers include:
- being able to adapt to a changing labour market
- better targeting of benefits
- enhancing your employer brand
- raising awareness of the value of the complete reward package among staff.
The benefits for employees include having a wide choice with the ability to tailor their own total reward package towards life changes such as marriage or promotion.
Flexible benefits may not always be the right solution and therefore an extensive feasibility study should be undertaken to confirm the right choice.
Building for success
It's crucial for employers to: build a substantial business case for the introduction of the flex scheme; ensure that the culture of the organisation is ready for such a concept; and determine how best to communicate the new scheme. Employers need to consider:
- How and when will the scheme be implemented?
- What benefits will be included?
- Are there any tax implications?
- How will the project be managed?
- How will a feasibility study be carried out?
- How will the scheme be administered?
- Does the employment contract need updating?
- And how will details of the scheme be communicated?
For flex plans to work, employees need to know what they are being given and why, how it will work and when it will be introduced. Effective communication is vital. The organisation should also try to engage employees in the scheme's development so that they have a sense of ownership. There should be continuous communication to explain how the scheme will work and, once implemented, how well it's working.
The management of a flexible benefits scheme involves co-ordination of several different elements. These include the administration team, HR function, payroll function, product providers, helpdesk function and IT function.
Measuring the success
Many reward initiatives fail, not because employers haven't addressed the design issue, but because they've overlooked the importance of the implementation process. They concentrate on the 'what' rather than the 'how'. To try and redress this imbalance, Flexible Benefits indicates some of the implementation issues that employers should consider at the outset, such as, 'How will flex fit in with the reward, HR and business strategies?'
Those employers who consider how a flexible benefits scheme will support their business goals and assist the aims and objectives of the HR and reward strategies will find it easier to successfully implement such a scheme and see more positive results. Also, by setting objectives, organisations will find it easier to judge whether the initiative is a success or not. At the start, organisations need to consider what measures of success they should adopt to evaluate and monitor the scheme.
Conclusion
Some HR commentators have said that the 'who' is just as important as the 'how'. Employers should consider who the most able people are to carry out a feasibility study to see if flex is the right option for the organisation. If flex is the answer, which key people should be in the implementation team to look at scheme strategy and design? And who are the best communicators in the organisation to sell the initiative to staff?
This Executive Briefing doesn't attempt to answer all these questions. The solutions for each organisation will depend on their own set of individual circumstances, but the report highlights the existence of the questions and employers need to be prepared to tackle them. Flexible benefits can bring tangible benefits to an organisation as part of an integrated and aligned total reward strategy, but only if employers address the implementation issues as well as the design issues.
This is a summary of the CIPD executive briefing, Flexible Benefits by Philip Hutchinson. For further details visit the CIPD bookstore.
Contact details
- Contact us if you would like to discuss the research on which these findings are based.