Perks of the job? Now it's up to you

It used to be a company car and life assurance, but now flexibility is the watchword. By Stephen Pritchard
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A middle-of-the-range car, a decent pension and a gold watch at 65: these were the conventional trappings of a management career. But the world of work has changed and employment patterns are now much more varied. Benefits and perks are only just starting to catch up.

Organisations as diverse as broadcasters, local government, financial sector and IT companies are introducing flexible benefits programmes for their staff. Companies are realising that not everyone wants the standard package of a car, a pension and life assurance. Staff appreciate the chance to tailor their perks to suit their lifestyles, and to change them when their circumstances change.

At Oracle, the computer company, employees can use computerised kiosks or the web to select the benefits they want from a menu. Staff working at Oracle have a number of "flex points" which they can use to buy benefits including extra holiday, life assurance, disability protection, private medical cover and health screening. They can opt for a company car, or use flex points for cash or other benefits instead. If they do want the car, they can trade flex points for a better model.

"Benefits were decided by the employer and they were the same for everybody," explains Gaye Brogden, Oracle's human resources director (services), for Europe. "Now you can change your points with life changes. It is part of a general move to give more control to employees."

Like most companies operating flexible benefits systems, Oracle has some minimum requirements. Operational necessities and good sense mean that every member of staff has to take some holiday, for example. Nor is the scheme compulsory. Anyone who opts not to "flex" their benefits simply keeps their existing perks.

Companies have their own particular reasons for moving to flexible benefits. Changes to the tax and National Insurance system mean that increasing benefits in kind instead of pay is no longer the money saver it was. But firms with flexible packages point to other advantages. Staff are more satisfied if they feel they have control over their perks, and there is less wastage through employees qualifying for benefits they neither need nor want, such as life assurance for people without a spouse or children.

Flexible benefits give employers more scope when it comes to recruitment, as it is easier to tailor a package to suit the applicant. Schemes may have an impact on staff retention too. Flexible packages put a monetary value on benefits in kind, so employees can make more realistic comparisons with offers from other companies.

"It is not a panacea," warns Marcus Underhill, flexible benefits specialist at human resources consultants William M Mercer. "If somebody still feels they are not going to develop within a company, they will leave. But they might take a better benefits package into account."

The companies and public sector organisations that have moved to flexible benefits usually do so as part of a wider strategy of more flexible working. Sometimes a flexible benefits system is a way to integrate differing pay and benefits systems after a takeover or merger. Other firms' reasons are more cultural. "It is about empowerment," says Mr Underhill. "What flexible benefits do is reinforce the belief that you are responsible for your own choices." So far, relatively few companies have moved to fully flexible benefits. Estimates suggest that as few as one per cent of UK firms offer broad flexibility. When PriceWaterhouse Coopers surveyed benefits arrangements at 500 companies, seven per cent had "full flex".

More organisations have semi-flexible packages, allowing some changes within a core benefits deal. Surrey county council, for example, operates flexible benefits for a growing percentage of its staff. They can choose benefits including their holiday allowance, childcare, dental insurance, health screening, retail vouchers and health club membership. Some core benefits, such as pensions, are not in the package as Surrey employees are members of the local government pension scheme. Cars, too, have been left out of the programme.

At Surrey, some 25 per cent of eligible staff have opted to change some benefits, according to Nicola Kinghorn, personnel consultant. "People who don't flex anything still value the fact that they can," she says.

Over time, the number of staff changing benefits tends to rise as people become more familiar with their options, and as their needs change. In companies such as Oracle, staff can alter their packages after a "life change" such as marriage, divorce or having a child, as well as at the annual benefits review.

Cable & Wireless operates one of the largest flexible benefits programmes in the UK, covering some 12,000 staff. The scheme started in 1994.

Staff earning less than the average pay in the company - usually younger employees - are more likely to trade cash for extra holiday, according to Russ Watling, employee benefits manager. Staff in the 40-plus age group are more likely to top up their pensions. Childcare help is welcomed by single mothers in particular.

"It is in the nature of these things that the number of people changing benefits tends to increase year on year," says Mr Watling. "Over half the company has been changing at least one benefit from the start. That demonstrates that it is worthwhile. Even those who do not use it are glad it's there."