How to balance budget and employee choice in your flexible benefits scheme
A well-structured flexible benefits scheme can make sense for employers whilst improving engagement and retention.
Flexibility and autonomy have become increasingly significant to employees regarding when, where, and how they work. Consequently, flexible benefits schemes are gaining prominence as employers seek innovative methods to provide choice and maintain employee engagement.
According to the Chartered Institute of Personnel and Development’s (CIPD) Reward Management Survey, published in April 2022, there has been a noticeable rise in the proportion of employers offering flexible benefits since 2018, with 45% of respondents providing choice through a flexible benefits scheme.
The trend towards enhanced flexibility is increasingly evident and, in some sectors, it is now common to see between 20 and 30 benefits offered—an appreciable increase compared to a decade ago.
Employee Appreciation
This flexibility yields substantial advantages, as a broader selection within benefits correlates directly with increased employee appreciation.
Research conducted by WTW demonstrates a clear link between the degree of choice and flexibility provided by employers and heightened levels of employee satisfaction and appreciation regarding benefits.
Employees who value their benefits are considerably less inclined to pursue new job opportunities and exhibit stronger intentions to remain with their current employer.
Nonetheless, given the ongoing economic challenges faced by most organisations, HR and benefits leaders must carefully balance the need for increased flexibility to accommodate a diverse workforce with the imperative to adhere to constrained financial resources.
Workforce Analysis
Achieving this equilibrium begins with understanding workforce preferences. Approaches may include demographic analysis, external benchmarking, competitive intelligence, surveys, focus groups, and consultations.
We are now seeing the growing use of dynamic, real-time feedback mechanisms. For instance, enabling employees to rate their preferred benefits within digital platforms provides employers with deeper insights into benefit reception beyond mere selection statistics.
Forward-thinking organisations are increasingly examining the full lifecycle of their workforce and recognising the evolving needs associated with different life stages. Employers can leverage demographic segmentation to develop a nuanced understanding of their workforce.
For example, younger employees might prioritise financial wellbeing support to assist with getting on the housing ladder, while parents may focus more on health and risk-related benefits. Organisations are encouraged to adopt a strategic approach by aligning offered benefits with their overall employee value proposition and talent strategy.
Employee Choice
With regard to the most popular flexible benefits, there has been increasing demand for offerings related to financial wellbeing, sustainability, and mental health. There has also been a surge in salary sacrifice schemes for electric vehicles, reflecting employees’ growing interest in environmentally conscious options.
Many employers are introducing more self-funded flexible benefits that employees can select via salary sacrifice. This approach enables employers to control costs while providing employees with greater choice and access to tax-efficient arrangements. However, implementing a benefits allowance or flex fund requires careful budgeting, and organisations may need to adjust existing benefit levels to accommodate these changes.
Efforts to maximise return on investment depend on ensuring employees are informed about and utilise the available benefits. Communication is key; employers should collaborate with benefits providers to capitalise on marketing materials, value-added services, and robust data insights.
While budgetary discipline remains essential, the rationale for flexible benefits extends beyond cost management. The overarching business case lies in the enhanced value derived from greater employee appreciation, engagement, and ultimately, retention.
Substantial investments are already made in employee benefits, and adopting a flexible benefits approach, employers can significantly enhance their impact by delivering more relevant and engaging offerings.
The next step
As the above shows, a well-structured flexible benefits scheme can be created to fit your budget and play an important role in employee engagement and retention.
If you would like to improve your employee benefits proposition or would like to move toward a more flexible benefits-based structure, contact Kellands Corporate today. We would be more than happy to help.