Flexible Benefit Design

Flexible Benefit Design

Each organisation needs to be clear about what is trying to be achieved by introducing Real Benefits™.  Whilst some companies might have specific issues that Real Benefits™ can resolve, for those looking for a modern benefit offering to deliver a more choice to staff, it is often sensible to keep some elements of the existing benefit offering and enhance it with flexibility.  This is easier to communicate and less likely to confuse.

Most current research shows that childcare vouchers are the most popular benefit offered by flex plans, with a range of other insurances following (medical insurance, life insurance etc.).  Pensions have historically often been left to one side but this need not be the case with modern defined contribution pension schemes, which are ideally suited to flexible benefit arrangements. Real Benefits™ for final salary type pension plans represent more of a challenge. 

It is also popular to introduce the option of trading holidays, allowing employees to sell days back for additional cash or flex allowance or to purchase extra days using the flex allowance.  There are some obvious risks with allowing this that relate to staffing levels but a sensible limit and management approach can make this work really well.

Nobody knows your staff better than you do. Getting the balance right is the key – too much change may not suit your employees, especially if there is a general level of satisfaction with the existing benefit environment.  Perhaps two or three new choices might be a good first step.  The ability to buy heavily discounted life and critical illness cover is likely to be attractive where employees have families and have been buying individual policies.

A younger group of employees may accept more of a radical change.  Consider the release of some of the pension funding, repackaged as a flex allowance.  Give them options to have bicycles (exempt for tax and National Insurance under current legislation), subsidise car purchase and private medical cover. 

Consider asking your employees about what they want as part of the feasibility work – it shows you value their input and it is a great way of starting to let employees know you are considering a change in benefits.

Real Benefits™ plans offer a real opportunity to design benefits that reflect your company ethos and there is no such thing as a typical plan. The following example gives an example of how a plan might look:

Flex allowance of 10% of salary, used to provide the following:

• Stakeholder pension – core benefit of 3% of salary
• Life assurance – fixed at 2 x salary plus options to flex up to multiples of 3 or 4 times
• Long-term disability cover – core of 50% of salary plus options to flex up to 65% or 75%
• Critical Illness cover – units of £10,00
• Spouse/Partner Critical Illness – units of £10,000
• Private medical cover – 3 levels of cover
• Dental plan
• Childcare vouchers
• Holidays (able to increase/reduce allowance by +/- 3 days to reduce/increase flex allowance)
• Employees have an allowance to spend on benefits – part of the allowance provides the core benefits with the employees free to select their own benefits package with the rest of their allowance.

Depending on your requirements, there is no reason not to include other benefits like cars, health screening, etc.  In fact, there is merit in trying to think of non-standard benefits that might help to make more of a connection with your staff and customise your plan to suit your organisation.