You already have flex, you just don’t know it! | Release Date Jan, 28 2010 |
During our recent employee benefit briefings, we have been asked by many attendees to define what flexible benefits really means. There appears to be some confusion and misunderstanding associated with the term and this has probably not been helped by the over use of the term in the market by various service and product providers jumping on the bandwagon. So, let’s be clear about what is really meant by flexible benefits – a good definition is as follows: | |
| “flexible benefit schemes are formal arrangements where staff are offered a range of benefits and a separate benefit spending allowance. Employees can choose benefits from a menu using their allowance and also top up using their own money, normally through salary sacrifice.” However, few firms operate flex plans where the allowance is provided without any default or mandatory benefits and in a way, the definition needs to be set in a broader context to be helpful to organisations considering their own situation. Redbourne therefore splits the description into 2 parts: the scheme design and the package design. The scheme design covers the range of benefits offered and how they are delivered in terms of communication and administration. Typically, a modern scheme design will include a “hub” that offers: 1. Employee engagement - employee self service, total reward, modelling tools 2. Cost effectiveness - NI savings, benefit inflation management 3. Risk management - tax, legal, data, administration The package design describes the basis on which the benefits are funded and we have 4 simple versions as follows: 1. Fixed Benefits - "fixed” schemes with no salary sacrifice, employee options through net pay 2. Fixed Benefits + Salary sacrifice - Employee salary sacrifice on tax efficient benefits, taxable benefits by net pay 3. Traded flexible benefits - existing benefits funded by the employer, some sold or downgraded, no explicit flex allowance. To increase benefits the employee sacrifices salary. 4. Full flexible benefits - flex scheme, employee allowance, full choice Hopefully, it is now clearer that you can modernise a scheme and either retain your current package design or make some modifications without the need to implement a full flexible benefits plan. In fact, that’s what most organisations are doing – using a range of package designs on some form of platform that supports a more modern approach to the delivery of the scheme. We are confident that our simple approach provides an excellent framework for any organisation to consider improving their benefit offering without having to buy a full flexible benefit plan and have the costs and disruptions that goes along with this. For more information please contact: Richard Stewart richard.stewart@redbourne.com D +44 (0)20 8339 8822 Gillian Haworth gillian.haworth@redbourne.com D +44 (0)20 8339 8824 | |