In the face of a much-publicised skills gap, attracting and retaining talented staff is ever more important. Benefits can play a role in this, but while subsidised gym membership might be the clincher for some, others may be more drawn to a role that offers health insurance or childcare vouchers.
Flexible benefit schemes enable staff to pick and choose the benefits that suit them best from a range of different options. While these schemes have traditionally been the domain of large organisation, small firms are increasingly seeing flexible benefits as a way to gain a competitive edge in the recruitment market? So how does it work, and could it give your business a boost?
How flexible benefit schemes work
Flexible benefits schemes give staff a specified budget, or “flex fund”, which they can use to buy benefits from a set list. This approach allows staff to choose what suits them best. It could be pension top-ups, annual leave, health-related insurance or marginal benefits such as childcare or retail vouchers, cash plans, pet insurance and gym membership.
Staff often value flexible benefits more than a one-size-fits all scheme, because they are actively involved in selecting and purchasing them according to their personal requirements, rather than having a set package. Flexible benefits can also help carve out a new company identity, building a culture that emphasises flexibility and individual responsibility.
Staff can amend their package as their lifestyle changes. A first-time homebuyer may trade one week’s holiday for additional salary, while a new parent might trade gym membership for extra leave. Typically, staff can reshuffle their benefits every 12 months, reviewing their choices at the annual pay round. However, schemes offer a window at certain life events, for example on having a baby, getting married or divorced, or suffering a bereavement.
The professional body for human resources the Chartered Institute of Personal Development is a supporter of flexible benefits and suggests such schemes should be a priority. “Employers who take the time to find out which benefits their employees want will reap the rewards in the form of improved performance and motivation, more effective recruitment, and reduced stress and absenteeism.”
Taking the plunge
Essentially, you can spend as much or as little as you like on the scheme. Costs depend on how many benefits you offer, and whether you want to run and promote it online or issue glossy brochures. It also depends on whether you do it in-house or farm out to a consultancy. Outsourcing is easier, but costs more.
A flexible benefits scheme involves a burst of activity once a year, typically around the financial year end. Administering the scheme in-house requires the flexibility to allocate more resources at this critical time. This is obviously easier for companies with large human resource departments than smaller businesses. Communicating and explaining the flexible benefits scheme is also crucial (and time consuming if you want to ensure take up.
If you are giving staff the opportunity to sacrifice salary in return for benefits such as holiday, pension, insurance and so on, this may involve changes to their contracts. This is not a major operation, but you need to ensure it is legally watertight.
Finally, consult with staff before introducing a scheme to make sure your choice of benefits meets the profile of your employees.