Flexible Benefits Scheme

More and more companies are offering flexible benefits as a way of offering employees a choice of benefits to suit their lifestyle, age or stage of career.

Direction of Benefits

As experts in the field of flexible benefits, Ashworth Black can design and implement a bespoke flexible benefit scheme for you and your company.

Because of the huge number of benefits available, the recognition that employees’ needs change as they go through their working life and the competition amongst companies to attract and retain the best employees meant the concept of flexible benefits was introduced.

Flexible benefits are a total compensation policy principally based on the recognition that an individuals personal circumstances change and thus the value of the different elements of their employment package.

Under a typical flexible benefits scheme, each employee would be given an allowance with which to ‘purchase’ a selection of benefits. A wide range of benefit options may be included such as company car, private medical insurance, dental care and life assurance.

The main advantages of flexible benefits are:

  • meeting the diverse needs of employees
  • containing future benefit cost increases
  • increasing employee understanding
  • helping recruitment and retention

Some companies need to gain a competitive edge in the market to recruit and retain employees with particular skills which are very much in demand e.g. IT, audit and compliance, and customer call centre skills. Other companies have used flexible benefits schemes to reinforce cultural change by increasing the link between reward and delivery. Flexible benefits can also add to an employee’s sense of participation, responsibility and ownership.

The freedom of choice element of flexible benefits schemes encourages employees to make decisions to suit their lifestyle. It has been said that the standard benefit package based on a “job for life” is no longer appropriate. Through flexible benefits an employer can introduce a range of benefits at little or no cost to the company thereby maximising the value of the current benefit package. Many employees have little or no idea of the value of their benefits package. A flexible benefits scheme can increase this awareness.

By giving employees choice to suit their individual needs, flexible benefits enhance the psychological contract between employer and employee and undoubtedly significantly increase the competitiveness of the whole remuneration package.

However, there are disadvantages to flexible benefits and the main ones are:

  • coping with the administration
  • the cost of implementation
  • taxation problems

Flexible benefits administration need not be a problem provided the routines and processes are designed to integrate, preferably electronically, with all appropriate internal and external interfaces. Many organisations do not link their reward package to their business or strategic needs and certainly do not communicate the links to employees.

The concept of giving people an individual choice of benefits, rather than providing a standardised package, has been discussed in personnel circles for many years and a growing number of companies are adopting flexible benefits schemes.

Employers’ reasons for flexing benefits are diverse – from empowerment or cost control to keeping up with rival firms. More companies are introducing flexible benefit schemes, particularly within professional service firms. Flexible benefits bring clear advantages to both employee and employer. It is a strong employee motivator, providing greater choice and empowerment to individuals, but still within the context of the employer’s overall strategy and objectives.

As a result of the sharper focus on the benefits package that flexible benefits bring, employees may value their benefits more. Flexible benefits enables the employer to recognise the differing needs and aspirations of an increasingly diverse workforce whilst enabling the employees’ to exercise a degree of choice in the make-up of their remuneration packages by making a trade-off between perks. Indeed the main advantages of operating a flexible benefits scheme are reported, in descending order as, better targeting of benefits, better appreciation by employees and more competitive packages. The simple act of telling individuals what benefits they can choose each year means reminding them just how much the company spends on their existing package – a figure employees often overlook! In addition the associated increased freedom and choice can be an aid to recruitment and retention.

Benefits typically used in schemes

The following benefits are commonly used as options in a flexible benefits scheme:

  • Company pension and additional voluntary contributions
  • Holidays
  • Childcare assistance
  • Company car
  • Discounted products
  • Life assurance (employee & spouse)
  • Personal lease car
  • Optical care
  • Disability insurance
  • Pet insurance
  • Retirement counselling
  • Private Health care
  • Private petrol
  • Financial counselling
  • Personal accident insurance
  • Mortgage subsidy
  • Sports facilities
  • Health screens
  • Personal Loans
  • Travel vouchers
  • Home PCs
  • Retail vouchers
  • Critical illness insurance
  • Training and development schemes
  • Childcare vouchers
  • Long term care
  • Professional subscriptions
  • Dental care
  • Concierge Services

Employee types and their choice of benefits

Here are some examples of employee types and the associated diversity of the benefits they choose:

Single, less than 30 years old

  • Disposable income
  • Disability insurance
  • Extra-curricular training
  • Meal subsidies
  • Sports Facilities
  • Mobile phone
  • Car

Married woman with young children and working part-time

  • Sick pay
  • Life assurance
  • Child care vouchers
  • Holidays
  • Health screening
  • Housing subsidy
  • Medical insurance
  • Creche

Married man, 45 years old and main family breadwinner

  • Life assurance
  • Pension
  • Disability insurance
  • Eye care
  • Dental care
  • Housing subsidy
  • Credit card subscriptions
  • Car

This shows that employees with different lifestyles choose different benefits to suit their personal needs.

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