In order to design
and develop consistent and effective flexible benefits or cafeteria benefits schemes,
as they are also called and known, employers need to carry out a series of
activities and gather some information whose importance could be crucial for
the success of the overall project.
As suggested by
Lovewell (2011) one of the first steps which should be carried out is profiling
the whole workforce. This investigation will surely reveal to be useful both during
the designing stage, in order to help and determine the most appropriate
benefits to be included in the benefits’ catalogue and during the
implementation stage, in order to identify the most effective and suitable
communication method and approach in order to catch staff’s attention.
Another initial
important decision employers have to take when designing a flexible benefits
scheme is to determine the overall approach to the scheme, i.e. fully flexible,
partially flexible or “parfully”, i.e. an approach in between the fully and
partially flexible approaches. To this extent, employers should consider elements
such as the total number of employees and how varied is the composition of
their workforce.
Employers should
then determine, if applicable, which benefits have to be considered “core”, i.e.
which cannot be flexed and which benefits have to be considered “non-core” and
can, consequently, be object of individuals’ choice.
Once “non-core”
benefits have been indentified, the limit to their flexibility or inflexibility
needs also to be determined accordingly.
In those cases in
which a parfully approach has been identified as the most suitable for the
organisation, the first thing to do is to design and develop the different benefits’
groups or “menus.”
Companies should
also take decisions in respect of the opportunity or otherwise to state the
economic value they associate with each specific benefit. Since associating a
specific cash value to each benefit could make think individuals that they are
paying for that benefit, employers could rather consider associating each
benefit with a number of points (CIPD, 2010). Moreover, firms resorting to
parfully schemes should remember that whatever the system in place, cash- or
points-based, in the end the overall value of each package has to be the same.
Once the scheme has
been designed and drawn up, it has to be presented to the people concerned. It
is of paramount importance that the scheme has to be fully and clearly
understood by the entire workforce. An ad hoc communication programme is
definitely important and will surely turn to be useful and cost-effective. The
profiling activity, carried out before the scheme designing process, will
definitely help to determine the most suitable communication approach.
As suggested by the
CIPD (2010) it is also of paramount importance that individuals concerned understand
the implications of their choices. To this extent employers have to put in
place methods making straightforward for individuals confirming their choices
and, eventually, making future changes.
Businesses should
also make it clear how many times, the frequency and at what moment individuals
can change the benefits they have chosen. Usually, this opportunity is given
once a year, employers can, nonetheless, decide, as normally happens, to allow
individuals to modify their preferences at any time when particular events
occur, such as: marriage or divorce, birth or adoption, a relative’s dead,
long-term sickness absence, promotions and other such important events (CIPD,
2010).
Key factors for a successful scheme implementation
Although the phases
during which flexible and voluntary schemes are designed and developed are
definitely important for their successful implementation, consistent and
effective flexible benefits schemes also require a good deal of attention as
for what actually concerns their maintenance.
As the external
environment is subject to constant changes, needs and preferences of
individuals, which are deeply affected by those changes, are subject to change
accordingly. Social factors, technological factors and even political factors
can, in fact, all contribute to influence individuals’ mindset and push them to
differently value the same benefit over the time.
Flexible benefits
schemes need, then, to be constantly reviewed and kept up to date, with
specific reference to the range and variety of the benefits offered. Inasmuch
as assessing and reviewing preferences expressed by employees, by means of monitoring
their demand, can enable employers to eliminate from the catalogue the
undesired items, it could turn to definitely be less straightforward, on the
other hand, to find out which new items eventually include. Staff’s surveys,
focus groups and other two-way communication channel approaches could clearly
help. At Aviva, for instance, before launching the “My Aviva Extras” scheme,
the group HR Director held frequent web conversations with employees in order
to find out which benefits they valued the most: needless to say, the scheme resulted
in a great success.
As for the range of benefits which can be
included in a flexible benefits programme the list could really be rather long.
In general, the most popular benefits included in flexible benefits programmes seem
to be: childcare vouchers, bike loans, mobile phones, car parking, health
screening, work-related training, travel to work and meals or food vouchers
(Employee Benefits, 2011). More recently, and thanks to the agreements cut by
some employers with collective buying communities, also staff discounts on
household bills are taking off. Organisations the like of Network Retail and
Athos Origin have, by means of such agreements, already offered to their staff
discounts on life essentials like food or fuel (Hemsley, 2011).
One of the most important aspects, arguably the
most important aspect, to be duly kept into consideration is the fiscal aspect,
i.e. the taxation regime in force for the different benefits which a business
is planning to include in the scheme. The benefits included in the same programme
are not all obviously subject to the same kind of taxation and it is also very
important to be knowledgeable of which transactions can or has to be done via
payroll, the advice and help of a fiscal expert are clearly necessary.
If accurately devised also contributions to an
existing pension scheme can be offered to staff in the salary sacrifice forms
in order staff having tax and NI advantages (Employee Benefits, 2011).
Legal
aspects
One of the legal
issues employers might easily incur in launching flexible benefits programmes
relates to benefits accessibility. Ensuring benefits accessibility means that
all of the benefits included in the catalogue can be equally accessed by all of
the individuals composing the organisation’s workforce. In the event a
particular benefit, such as, for instance, an insurance product or healthcare
provision, could not be accessed by elder staff, this circumstance could be
tantamount as, and provide scope for, discrimination claims (CIPD, 2010).
When designing and developing cafeteria
benefits schemes, employers should also pay extra care to the age
discrimination legislation in force and remember to monitor its future
developments. To this extent, Naftalin (2006) expresses some concerns over the
benefits and loyalty payments which increase with length of service. Such a
mechanism, in fact, could provide room for indirect age discrimination claims, namely
against younger employees. Another pitfall to avoid in terms of age
discrimination legislation is associated with private medical insurance. Cover
is, in fact, based on tables drawn up on the basis of age groups, in such
circumstances employers should ensure that these tables have been prepared by
actuaries and that the right age ranges have been included (Hutchinson, 2006).
Businesses introducing flexible
benefits schemes should pay extra care also when updating terms and
conditions of their contracts of employment. In order to avoid that employers
should have to pay dismissed/resigned staff bills, in fact, contracts of
employment have to clearly state that benefits provisions end with contracts’
termination (Furness, 2006). This is important both in those cases in which a
benefit is provided to individuals on loan and when a voluntary benefit is
provided with a salary sacrifice. In both cases employers should make clear, in
the written contract of employment, that in such and similar circumstances is
the employee and not the employer who is liable for the related cost associated
with the benefits.
It must be said that flexible benefits schemes
might produce far-reaching legal consequences, insofar as some of these could
not even be actually expected. Also during procedures of staff transfer from an
organisation to another, where the Transfer of Undertakings - Protection of
Employment (TUPE) - regulation applies, benefits programmes have to be duly taken
into consideration. TUPE regulation, in fact, states that employees transferred
from an employer to another have to receive in the new organisation the same
terms and conditions they received when working with the transferor (i.e. the previous
employer) or, to put it in another way, transferred employees have to be
entitled by the transferee to the same benefits they were entitled to when working
with the transferor.
Employers should pay extra care to the legal
aspects associated with flexible benefits schemes and should not hesitate to
seek legal advice in order to avoid falling into the pitfalls linked to the
programme.
Communication
As mentioned above,
communication is of paramount importance for the successful implementation of
the scheme. Individuals have to know the benefits on offer, the way the system
works and the advantages it is intended to provide. Northgate-Arinso,
for instance, in order to attain this objective, after having developed a
cafeteria benefits scheme, developed a series of online micro websites in order
to explain to their employees the real significance and value of the new
programme (Hemsley, 2011).
Particularly
important is also the kind of approach used to get the message across. The
workforce profiling activity described above will surely turn to be very useful
and effective to help in the process. Many organisations also provide individuals with
total reward statement before launching the scheme in order to help staff to
better understand the value of benefits (Furness, 2006). This approach has been
adopted, for instance, at Panasonic Europe where in order to capture employee
interest total reward statements have been used to illustrate people “what
their benefits package is actually worth, alongside their basic salary (Mills,
2011).
Electing company
champions can reveal to be a very effective way to spread information about
cafeteria benefits schemes within the organisation. Basically the approach
consists on training key employees on the benefits package mechanism and
value in order them to explain these to their department’s
colleagues. This approach is very likely to work in that information are spread
by people that staff know and trust (Johnson, 2006).
Waller (2006)
suggests that although a “phased process of communication and implementation
can ignite employee interest”, today staff interest to benefits has declined
and that is why employers are paying much more attention on generating
awareness amongst staff before launching a scheme.
The implementation
stage of a flexible benefits scheme is a very important phase and employers should take
the right time this phase requires to be appropriately and effectively carried
out. As suggested by Morgan (2010), in fact, rushing the implementation process
means rushing in turn the communication process with the likely risk that
staff will not understand the value of the employer’s proposition.
Longo, R., (2011), Designing and developing flexible benefits schemes: key factors, legal aspects and the importance of communication, HR Professionals, Milan [online].
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