A step change in benefits delivery: the future for flexby
How did we get here? The road to flex was paved with good intentions, explains George Farrow, from the paternalistic Victorian idea to today's austerity.
Flexible benefits were born in the mid 90s out of the necessity to take a fresh look at core benefits. The paternalistic industrialists of the Victorian era built homes and places of worship and provided recreation and education for the children of their workers and left a stunning workplace legacy such as Bourneville and Port Sunlight. You worked for your employer from cradle to grave. Core benefits such as final salary pension, lifetime medical and critical illness insurance cover, death in service benefit and so on were built on an unwritten contractual assumption of enduring mutual loyalty and long service between employer and employee which helped to make the economics work.
As loyalty broke down and equality of provision took root, it became clear that core benefits were both expensive to provide and irrelevant to large swathes of the employee population. Flexible benefits were intended to address these challenges, allowing employees to choose and build a reward package that suited them, using a proportion of the pay pot. Employees benefitted from their organisation’s purchasing power at the expense of bearing the economic risks attaching to the underlying benefits products.
The advent of flexible benefits brought a new set of challenges in reward management. Over time, ‘choice’ came to mean complexity. Complexity is rarely cheap and even more rarely is it flexible. To a considerable extent, the big-bang annual election cycles of flex bred and encouraged this; a no doubt unintended consequence of a very real desire on the part of employers to make benefits relevant and a good investment. As regulation increased, consumer markets evolved and employment patterns changed, both providers of flexible benefits solutions and suppliers of the products on a portfolio would be driven to engineer new products, new life events and updated terms and conditions.
These developments have made flex schemes progressively more unwieldy, meaning a draw on the employer’s resources. Employees struggled with understanding terms and conditions and weighed this against the now much wider choice available to them as a consumer for the staple products in a flex scheme. Some organisations found the employer’s position as an ill-defined intermediary between employee and product provider uncomfortable.
Employers starting from a clean sheet now have a real alternative to a ‘full flex’ scheme. If you are looking to fundamentally restructure core benefits – as opposed to bring a wide range of choice and control to employees – you will need to consider full flex. A clear understanding of the short and long-term objectives of the reward strategy will help to pinpoint this. Employers need to be wary, however, of unwittingly procuring ‘full flex’ to solve a problem better addressed by a much less costly, much more flexible solution. Flex is far from the only, and is frequently not the best, answer to wanting “better benefits” or “everything in one place and a website”.
So what else is out there? First, consider ditching the idea that your reward scheme needs brokered products; these are frequently narrowly focused and limit rather than extend choice for employees. If your flex product portfolio offers travel insurance from company A, what about the employees who, for reasons of their own, want to get their travel insurance from companies B-Z?
Then, if you are not providing a flex pot for employees to spend on the range of benefits, you need a straightforward, accessible solution for maximising employee and so employer value, and that is not a traditional full flex platform. It’s new flex. Full flex was a good idea that has now become flawed, new flex has evolved from this flawed concept to become the shining light of the reward armoury.
Employers do not need a traditional full flex scheme to offer a fantastic range of benefits. It is a simple as that. Received wisdom has been that access to multiple benefits in one place, such as employee discounts, childcare vouchers, cycle to work, medical and dental cashplans, discounted shopping vouchers and cards, total reward statements, holiday trading, gym membership and the rest means flex. But it doesn’t. The administration of a flex pot needs full flex, everything else is better dealt with on a fantastic, flexible, voluntary benefits platform.
This way, employers can provide the “flexible benefits” that an employee wants from a single website with easy configuration and real choice. In essence, ‘full flex’ is likely to revert to its original purpose of permitting employees to make core benefits more relevant through payroll adjustments and a flex pot. It is not the sensible delivery vehicle for other benefits.
- George Farrow is Client Service Delivery Director for Asperity Employee Benefits