The Advantages of Flexible Benefits
From an employer perspective, the advantages can be split in to two broad categories, the hard business advantages and the “softer” human factors.
The business can gain from a Flexible Benefits plan in three key areas. Firstly, there are National Insurance savings to be made on certain benefits by the way that additional employee payments are collected. For example, if the employer makes the payment for childcare vouchers for an employee, the funding is not subject to employer’s National Insurance (NI). So, if a company provides a childcare voucher option of £200 per month for each employee and 20 take it up, the NI saving over one year to the employer amounts to £6,144. Employees save NI too.
Secondly, the business can accurately control their future benefit spend because the payment is made through a monetary allowance as opposed to funding the benefits directly. Anyone paying for a final salary pension scheme or private medical insurance will be fully aware of the lack of control these benefits offer in terms of cost. For example, consider a private medical plan costing £600 for each employee a year and experiencing inflation at 10% per annum. The additional cost over 3 years for a company employing 80 people is about £30,000 and there is no control – the only option is to keep paying the increases or remove the benefit.
Thirdly, age discrimination regulations are causing major headaches for many employers, not least because of the cost of providing certain benefits can increase dramatically over age 65. Providing a flexible benefits package with a known (and non-discriminatory) benefit spend per employee can resolve the benefit issues arising from age discrimination legislation.
Another key area to consider is the positive impact a more employee focussed benefit structure will have on recruitment and retention rates. Organisations face the challenge of attracting, recruiting and retaining good people. Expectations have changed and the employer/employee model continues to move to one of partnership for mutual benefit. Flexible Benefits is viewed as something offered by forward thinking employers and is useful as an aid to recruitment. Once employees are on board, the Flexible Benefit plan engages employees who are involved in shaping their own package and, using powerful online management systems such as our own Real BenefitsTM, information can be accessed at any time, keeping the value of the benefits package at the forefront of employees’ minds.
Improved employee communication is a key benefit offered by Flex. It offers a good news story that can be continually promoted and the nature of the plan structure allows new benefit initiatives to be adopted on a regular basis. Using an online solution such as Real BenefitsTM, printing costs and other expenses can be significantly reduced.
There are several “softer” issues supporting Flexible Benefits. There is no doubt that most employees appreciate choice, although in some cases too much change from a really good fixed benefit plan can cause employees to become worried – Flexible Benefits work well with certain profiles of employees but they are not for everyone.
From an employee point of view, the ability to shape a benefits package that is most relevant to their own circumstances is likely to improve appreciation of the benefits they can access. It also enables them to access a broader range of benefits as a flexible benefit plan can offer a much wider range of benefits and a fixed spending allowance will control the cost to the employer.
The key benefits are listed below.
- Tax and National Insurance efficiency
- Cost control
- Employee choice
- Helping with recruitment
- Improved retention
- Improving motivation
- Being seen as a modern and forward thinking employer
These positive factors are often used to consider the financial benefits of implementing flex. An estimate of these over a period of time set against the costs of implementing the plan will provide the basis of a business case for the project.