Research released last April by HR consultancy Towers Watson confirms this, revealing only 27% of companies offered a flex scheme, up just 8% since 2007, and that 32% of employers said take-up of such schemes was lower than expected.
A flexible scheme lets employees choose the pay and benefits package that best suits their lifestyle and personal circumstances. They can, for example, opt for more tax-efficient benefits or make salary sacrifices to boost their pension. Some confusion has come with the inclusion of additional voluntary benefits, which are generally discounted products and services paid for by the employee. This has led to the terms 'flexible' and 'voluntary' becoming interchangeable.
But it's not just words that might be stalling schemes with employers. Angela Wright, senior lecturer at Westminster Business School, describes the pace of growth of true flexible benefits schemes as modest. "The costs and the time involved in setting up these schemes in relation to their value is a big factor in this trend," she says.
Wright believes many providers had unrealistic expectations about take-up levels because they based their estimates on experiences in the United States. "They overlooked one critical factor, which is that employee healthcare is a must-have in the US, while in the UK it is a nice but not essential benefit," she explains. "Across Europe, the benefits that really engage people are based around flexible working and improving work/life balance, such as buying and selling holiday time."
There is a trend towards staff opting for preventative benefits such as cycle-to-work schemes rather than medical insurance. Dental insurance, health cash plans and critical illness cover are still valued, however. But innovation in the flex market can be difficult because workers will usually choose the same benefits year after year, as their lifestyles do not alter much.
The key to making a scheme a success in a company, it appears, is effective internal communication - not just before, but crucially after the launch date. So, it is vital that HR has a strategic communication plan in place.
Nick Throp, co-founder of Like Minds, an employee benefits communications specialist, says companies often spend big on their launch event but then fail to promote the choices available throughout the year or to explain the personal value of each benefit. "Companies must find different angles to engage staff or a flex scheme will just become another part of the corporate wallpaper," he says. "Take-up and engagement levels will be higher if individual employees can see how they will gain personally from choosing one benefit over another."
Employees are turned off by dry technical descriptions of how flexible benefits work, Throp adds. "We used to spend a lot of time explaining to people what critical illness cover is and how it differs from income protection," he says. "Now when we point out that the average age when people claim critical illness support is 42, they take an interest. Telling a story around different benefits engages people."
According to Sam Waterhouse, a consultant at benefits communications company Shilling Communication, it is not enough to just invest in a clever online site and leave employees to pick and choose the benefits they want. "You cannot simply dump everything online and hope for the best," she says. "There must be ongoing offline communication to explain exactly what these benefits mean to individuals' lives." Line managers should be encouraged to cascade information down through the organisation, and Waterhouse recommends putting up posters to promote the scheme. "There is also an argument for segmenting the messages and using real-life case study examples of how certain benefits have helped people."
For food manufacturer Heinz, investment in effective communication of its flex scheme has been a priority for Anne Sewell, HRD UK and Ireland. Sewell says a decision was taken three years ago to introduce a new benefits scheme to help recession-hit employees. The HR team had also realised that many employees were focusing only on their salary and not factoring in other benefits when making decisions about their future with the company.
Heinz worked with flex benefits company Serenity Flex to pull together a robust discount scheme. A benefits website was created as the centrepiece of the communication strategy. By year three, take-up of the scheme was 50%. A 60% engagement level is forecast for this year.
"We had to make a sustained effort to change people's mindset around flexible benefits and to leverage salary sacrifice," says Sewell. "We started with pensions, childcare, cycle-to-work, plant-a-tree, and an allowance which allowed up to five days extra holiday. When it comes to healthcare, staff can trade up or opt out."
Heinz employees have already saved £250,000 in discounts since the launch and the business has benefited by £3.8m, after set-up costs. "The online flex window is behind our success because it has created a one-stop-shop for HR tools, policies and for the administration of all benefits," says Sewell. "There is a big promotional campaign every year to build excitement around the scheme, which we keep fresh by adding new offers and improving the benefits we already include."
Heinz may be achieving high take-up levels, but Nina Platt, reward manager at technology manufacturer Philips, argues that companies should not get overly concerned about how engaged people are with specific benefits. Philips' flex scheme (with additional voluntary benefits), launched in 2002, is designed to appeal to the organisation's diverse workforce of factory workers, office staff and scientists, who cover an age range from 17 to 67. "Even if only a small percentage of staff take up one benefit, it is still of real value to them at that time in their lives," says Platt.
When it comes to building a business case for launching a flex scheme, for most employers it centres on three questions: do our competitors offer it, do our employees want it, and what are the salary or NI savings? Matthew Gregson, managing consultant at Thomsons Online Benefits, says what is essential is making sure everyone gets what they want from a flex scheme, which must be sustainable as well as attractive to staff. "If schemes are too flexible, costs can actually increase year on year," he says.
Staff buy-in is of course crucial, but if you want a flex scheme to really take off, you must ensure buy-in from the very top of an organisation, and that means talking to the finance director. According to Matt Duffy, head of online benefits at Lorica Employee Benefits, a finance director's first instinct may be to question the cost of implementing and running a scheme, especially in tough times. To overcome this, he says business leaders need to appreciate how a well-communicated scheme can deliver higher staff engagement and productivity, as well as saving on tax and NI. "Sometimes HR does need to convince the business leaders that most schemes are cost-neutral when you consider the financial benefits," says Duffy. "If the people at the top support flex, believe in the premise and know it benefits the bottom line, then it's much easier for employees to join in."
However, there is also a view that far too many obstacles are being put in the way of employers by providers and legislators. These might keep flex schemes from being as flexible as hoped. Julia Turney, head of benefits management at Jelf Employee Benefits, thinks the market constrains many companies, especially small and medium sized businesses that want to offer their staff something different. She cites the example of life cover, which usually requires firms to have more than 250 employees to be able to offer flexibility (as well as the fact that many benefits schemes still work on a 12-month flex year.)
"Insurers go on about risk and adverse selection, but they need to offer an umbrella arrangement for smaller clients wanting to offer a real flexible choice," says Turney. "In an SME with, say, 150 employees, it is difficult to offer an attractive flexible benefits package. This problem ties in with the lack of innovation in the market."
The cost of designing and running a true flex scheme can also be a major turn-off for smaller businesses with limited budgets. Ed Smithson, deputy head of Helm Corporate, Helm Godfrey Partners' employee benefits division, thinks SMEs may be best advised to offer core company-paid benefits with a small element of choice alongside a suite of voluntary benefits. He says: "Many of the benefit schemes we see these days are flexible with a small 'f'. If you only have a couple of hundred staff, can you justify the cost of offering a large suite of benefits?"
Andrew Erhardt-Lewis, senior manager at Deloitte Total Reward and Benefits, also bemoans the lack of innovation and creativity in a flex market that is obviously failing to wow both employers and staff. "The financial benefits that were really attractive a few years ago are not always as good and there are more restrictions on schemes these days," he says. "The HR industry has been sluggish in adapting to new technology and in how it communicates with the majority of people in their organisation, such as the lower paid. HR can spend too much time wrapping its highest earners and biggest performers in cotton wool when it comes to benefits."
