A flexible benefits scheme giving employees a wide element of choice in constructing their personal benefit package is not only popular with employees but a useful management tool for the SME. It enables the enterprise to exercise a greater degree of control over costs than many conventional ‘fixed’ benefit schemes and enables it to respond more easily and more quickly to market changes or individual employee requirements. Before implementing any major benefit revision an SME should understand what its employees want out of the benefit package as well as what it wants as a business. A facilitated “brainstorm” can help establish the latter whilst attitude surveys and focus groups can establish the former. In this way benefit changes will satisfy both company objectives and employee aspirations.

Remember the following:

  • It is vital to include discussions with providers at an early stage to establish the viability of the benefits being offered both in terms of cost and, where necessary, underwriting.
  • The choice of benefits to be included in new or revised package will depend on the outcome of the 'research'. The final choice should reflect management aims, employee demand and the existing benefits package, balanced by the outcome of discussions with external providers such as insurers.
  • Some common choices for inclusion in a flexible benefits scheme are:
    a. salary
    b. holidays
    c. cars
    d. medical insurance
    e. dental insurance
    f. life insurance
    g. health cover
    h. critical illness cover
    Some less common benefits include provision of personal computers now they can be made available for personal use as a tax free benefit, and the provision of transport on being suspended from driving.
  • If pension benefits are to be included in a flexible benefits scheme, it is far easier to design a scheme around defined contributions than defined benefits which disguise a considerable degree of cross subsidy between different ages and between the sexes.
  • Stakeholder pensions offer a convenient, low cost and flexible alternative to occupational money purchase schemes. They dispense with the need for trustees, including member-nominated trustees, with their attendant liabilities and need for training.
  • Whether or not a flexible benefits scheme is chosen, it is imperative that a thorough communications exercise is undertaken to explain the benefits so that employees make the appropriate choices for them and the enterprise derives maximum return from the exercise.
  • The lead-in time to get a flexible benefits scheme up and running is typically around 9 months. It’s not an exercise that can be rushed if the enterprise wants to optimise the returns it obtains from its benefit spend.
  • The company’s benefit programme should reflect the desired culture and aims of that company and not be a copy someone else’s with different aims.