Organisations want to get the most from their investment in people, and flexible benefit programmes have grown up around the belief that they will help employers achieve that goal: by tailoring their company benefits to individual needs, while containing their cost, they can increase the attractiveness of the remuneration packages being offered and improve their ability to attract and retain talent in their organisation.
So how should companies go about introducing a flex programme? There are four main stages to consider:
- assessment and feasibility;
- design;
- build; and
- operation
Assessment and feasibility
The first and critical step in considering whether to implement flexible benefits is to take a step back and ask the question: ‘What do we want to achieve through our benefits strategy, what do we expect our benefits package to do for our employees and for us?’ One of the conclusions that might come out of a critical review of strategy is that flex is not the answer, or maybe not the whole answer. There are a number of options for employers to think about, ranging from introducing an affinity voluntary benefits scheme to a complex flex arrangement that is part of a broader reward strategy.
Guiding principles should be established at the outset, with a clear idea of the scheme’s aims and objectives clearly linked to the company’s business, HR and reward strategies. It is also important to agree measures of success from the beginning – for example, will these be purely financial and focused on the RoI, or will there be some measurement of the less tangible benefits such as employee engagement and attitude.
The feasibility study should involve internal fact-finding across a number of areas, including an audit of current benefits and communications to understand any gaps and improvements to be made. A review of IT infrastructure and admin processes is also important for understanding the scope of any changes, while establishing employee attitudes and preferences, through surveys and focus groups, will inform the decision-making about the potential design of the plan.
A key part of the assessment stage is to build a business case, incorporating the data from the reviews and audits. A good way of measuring cost and benefit is to use an RoI modeller that captures all the costs, savings and risks associated with developing the new flex programme and plots the net effect over a defined period.
At the end of the assessment and feasibility stage a report should be produced for review and decision-making by senior management. The report will bring together all the strands of the feasibility study with some recommendations on key issues such as:
- Scheme design and financing, including cost sharing between employer and employees.
- The range of benefits to be included.
- Administration processes – out-sourced, in-house or co-sourced?
- Assessment of tax and employment law implications and overview of any changes required.
- What resources are required for the implementation project?
- The cost/benefit analysis.
- Identifying the proposed success measures.
The final outcome of this stage will then be a decision to proceed (or not!) with the programme, and the project team will be formed to move the programme to the implementation stages.
Design
The scope of this phase of the project will be shaped by some key practical considerations:
- Timeline for implementation.
- Administration processes.
- Benefits to be included in the programme.
The main issues to be resolved during the design phase will be around funding and the benefit structure. Decisions about which benefits to include will need to be finalised – there are a huge range of benefits that can be included in flex, however, for the initial launch most employers are conservative in the range of benefits initially on offer and tend to introduce more choice and potential complexity as the programme matures and employees become familiar with it. The choice of which benefits to include will also depend on the financial impact – for example, salary sacrifice benefits that deliver NI savings back to the employer need to be included where the original business case is predicated on their inclusion.
Another key design consideration is how much money will be available to employees to spend on their benefits. There are several approaches to this but a common one is to set a benefit allowance at a level that will allow employees to replicate their pre-flex package. This allowance is usually set to include the cost of core benefits. However, the basis of funding can be changed over time and the employer allowance can also change, allowing employers to future-proof their risk by enabling greater cost-sharing with employees should this become part of a future strategy.
Total reward statements may be included in the design where the employer wants to communicate to employees the full value of pay, benefits and other reward components of their package.
Build
This stage is all about putting in place the practical building blocks to enable the flex programme to operate as planned. So the key elements are:
- System build. The admin system needs to be configured with all of the design options and needs to be bench-tested against the specification. All connections to other systems such as payroll, HR admin and provider systems need to be established.
- Communications plan. The brand, look and feel, key messages and communications media need to be prepared. This work will be done around the systems build as the ‘look and feel’ of the flex portal is integral to the system build. Project management of the communications activity is vital as this activity starts before the launch of the programme and runs right through the benefit year. There is very solid evidence that employees value benefits in direct proportion to how well they are communicated.
- Benefits broking and sourcing. All of the agreed benefits need to be arranged. Depending on the scope and complexity of the programme it may be desirable to tap into a range of pre-agreed, ‘off the shelf’ benefits. For more bespoke programmes this stage will normally involve a market review and broking process for insured benefits to ensure that best terms are secured. For those lifestyle benefits where there are fewer providers, a ‘best match’ approach is more practical. The necessary data flows need to be agreed with providers so they receive timely notification of the benefits employees have selected.
Operate
This stage covers the launch of the programme when enrolment and operation go ‘live’. The processes and support for this stage will have been agreed in the design stage and, depending on the size of the employee population, could include outsourcing support to a call centre operation as part of a package of outsourced administration services – or, if not outsourced, enrolment would be supported in-house by the HR team.
Reporting for payroll and providers will need to be produced at the end of the enrolment period and then on a regular basis to capture leavers, joiners and changes. In addition, management information reports will need to be produced on a regular basis to provide an overview of how the programme is operating.
Looking forward, these reports will also be a vital source of feedback to loop back into the design phase when the next renewal of the programme is due, and when the opportunity can be taken to make any refinements to the programme and the benefit options being offered.