Flexible benefits - can you afford not to offer them?

A flexible benefits plan

enables employees to

choose a mix of pay and
benefits that is appropriate

to their individual needs,

while allowing the

organisation to control the

costs

Mercer has designed and implemented flexible

benefits for a range of 
Irish organisations.  Our

specialist work to deliver

successful, innovative

solutions to meet

business objectives 

Increasingly, employers are recognising the importance of developing remuneration strategies that will attract, motivate and retain the best talent. Blanket benefit provision is unlikely to be the most effective method of meeting the diverse benefit needs of employees. Instead, more and more organisations are
choosing to give their employees some flexibility and choice over the make-up of their remuneration package.

Traditionally, few employees have appreciated the true value of their overall remuneration package. Employee benefits are often taken for granted with little appreciation of their actual worth. This situation is not helped by the lack of input most employees have regarding the make-up of their benefits.

Typically, the expectation was that the organisation would provide a reasonable level of benefit that might be supplemented in certain cases (e.g. where benefit levels are linked to grade). More recently, however, we have seen that the introduction of flexible benefits can offer distinct advantages against a more rigid fixed benefit approach.

The Oppportunity

An effective flexible benefits plan can:

Support Cultural Change

Introducing flexible benefits can signal a move away from traditional employment practices, to a culture that respects individual responsibility and ownership. It can also underpin flexible working patterns and improve employee involvement.

Enhance an Organisation’s Profile within theEmployment Market

A flexible approach to benefit provision can help to position an organisation as an ‘employer of choice’, with advantages for attraction and retention.

Maximise the Impact of the Benefit Package

In a cost conscious environment it is important to maximise the value of every euro spent on motivating employees. A flexible benefits plan enhances employees’ understanding of their total remuneration package, and the cost and range of benefits available.

Address Diverse Needs of Employees

Not only are workforces becoming more diverse but individual employees’ needs change over time. Whether it relates to changing family circumstances or employment status, benefit choices that take account of these diverse needs are a key feature of flexible benefits.

Harmonise Benefits

Acquisitions and mergers are now common features of business life. Flexible benefits can help bring employees together by offering a harmonised compensation framework within which employees can retain their original benefits or choose other benefits, while reducing the organisation’s need to “cherry pick” the highest levels of benefit from each side.

How We Can Help

Mercer provides a wide range of consultancy and administration services that can be tailored to suit your specific requirements.   Our consultants can offer guidance and support in the following areas:

• project planning
• business case
• benefit design
• tax and legal advice
• communication
• administration

  
Project Planning

The introduction of any type of flexibility will require careful consideration. Mercer uses a well defined process which aligns with Mercer best practices and externally accepted project management principles.

Business Case

The initial stage of any flexible benefits project typically involves the development of a business case. A well constructed business case will need to consider many factors, including:

• links with organisational business goals
• overall reward strategy
• resource implications (human/technological) culture
• budgetary considerations
    

Central to the business case is a feasibility study that takes account of the issues involved in the transition to a flexible benefits framework.

Our approach involves five main stages:

• identify the key objectives
• develop a strategy for implementation
• provide comparative market data
• outline basic design proposals
• estimate cost/resource implications and timescales

The feasibility study can also include several optional elements, such as benchmarking the proposed benefit provision and undertaking contractual audits. The combined aim of all of these processes is to deliver a clear plan covering cost issues and realistic time-scales for implementation.

Benefit Design

With the business case approved, work on finalising the design can begin. Issues to be considered include:

• Degree of Flexibility
     
  A key part of the flex design is determining the level of flexibility. This will be influenced by the existing benefit structure and
  the objectives behind the introduction of flex. Mercer can help identify the appropriate level of flexibility for an organisation.

• Benefits Range
  
  A considerable range of benefits may be incorporated into a flexible benefits plan. These typically comprise mandatory ‘core’ benefits and other optional benefits which employees may choose.

Mercer can provide expert guidance and advice in all benefit related areas including pensions, healthcare and share schemes.

Tax and Legal Advice

A flexible benefits plan has both tax and employment contract implications. Mercer can work with an organisation to develop a flexible benefits structure that maximises any tax advantages available. Similarly, our expertise in employment law will ensure that any contractual amendments required are highlighted
and built into the design.

Communication

An effective communication strategy is vital, not only to a successful implementation, but also to foster a sense of enthusiasm for change from employees, gaining their active involvement. The communication elements include:

• employee focus groups to identify the benefits that employees are likely to find most appealing
      
• launch materials using appropriate media and messages to enhance understanding of flexible benefits and contribute towards the momentum for change
           
• ongoing communication support providing training and education through appropriate methods to ensure longterm success.

Administration

Many organisations have been reluctant to introduce flexible benefits because of the perceived administrative burden that accompanies their operation. The growing use of computerised systems - whether on an outsourced or in-house basis - has helped to alleviate many of these concerns.

Mercer can work with an organisation to identify the administration option that best suits its requirements.We can also assist in aligning HR systems and processes to ensure the flexible benefits structure operates effectively.

• In-house Administration
  A system may be developed for the administration of flexible benefits or, alternatively, the existing HR system can be adapted for this purpose. Either way, Mercer will work with the organisation to ensure that the system design meets all requirements. The organisation then has total control of the flexible benefit processes and responsibility for staffing and technical support.
     
• Outsourced Administration
  The majority of organisations in Ireland with flexible benefits outsource the administration to a third party, such as Mercer. Mercer has developed a system - eFlex - specifically for flex administration. eFlex is a web-enabled enrolment system directly linked to a database holding the benefit decisions. Reports for the various benefit providers and payroll can be generated through eFlex. eFlex allows online real time access for employees to view and amend a range of relevant pay and benefits data online.

In addition to the system platforms, direct employee support is available. This includes helplines and e-mail accounts to facilitate day-to-day flexible benefits management.