Business Essentials: When wages are not enough

A consultancy is striving to devise a flexible benefits package that suits all its staff. Kate Hilpern reports

How much will I get paid?" That used to be the question job applicants most wanted to ask in the interview. Now it's just as likely to be: "What's included in the benefits package?"

How much will I get paid?" That used to be the question job applicants most wanted to ask in the interview. Now it's just as likely to be: "What's included in the benefits package?"

With more employers offering choices ranging from childcare vouchers to travel insur- ance, and from additional annual leave to money-off at high-street retailers, the flexible benefits package has become a big selling point in attracting and retaining top talent. Which is why CHA, a 13-year-old consultancy specialising in workplace communications, is keen to get on board.

"At the moment, we offer gym membership to all our 14 employees," says director Rebecca Jones. "Because we believe in the work/life balance, we are signed up to our local Holmes Place in Clapham [in south London]."

Now that CHA has decided to develop a flexible scheme, it is looking to add private health insurance and pension contributions to the list. "Research shows these additional benefits are the most popular in our sector. Ideally, we'd like to offer one of these options to junior staff, two to middle-level staff and all three at senior level."

The company faces two challenges, however. "One is that it will bring administration hassle and costs," says Ms Jones. "We're not sure how to limit these."

Second, "with a diverse workforce, not everyone wants gym membership. What's more, one of our directors says he doesn't want either this or private health insurance - in the latter case, because his wife has it. So he'd gain nothing if we went ahead with our initial plan."

One solution under consideration is to ensure every employee receives the same overall value of benefits. In this way, the director could have bigger pension contributions to make up for the other two benefits he doesn't want. "But it could get complicated because we'd have to do the same for everyone - and gym membership is around £80 per month, whereas private medical cover is around £20. And that issue will become more tangled if costs change.

"This would mean our first potential problem - administration hassle and costs - could get even bigger."

Ms Jones has looked into outsourcing to one of the growing list of flexible benefits providers, but she is keen not to spend unnecessarily. "We are a small company and we would prefer to manage the benefits package ourselves."

CHA has considered other benefits. "One staff member suggested money towards external learning or classes like yoga," says Ms Jones. "But we decided against that because we feel the company already encourages both these things. No other options seem suitable, either."

www.chapr.co.uk

WHAT THE EXPERTS SAY

Charles Cotton, reward and employment conditions adviser, Chartered Institute of Personnel and Development

"One option could be to offer a cash sum instead of benefits. Staff may appreciate the flexibility to spend this on those benefits that best meet their needs. The advantages to you include reduced administration and passing on the risk of future cost increases.

"However, staff could end up paying more for a particular benefit than if you'd arranged it for them, and they might not make decisions that are in their long-term interests, such as contributing to a pension.

"Another option could be a voluntary benefit scheme where employees are able to buy discounted goods and services from an affinity provider. However, the costs of this could be an issue that you need to investigate.

"Look at non-financial benefits like career progression and personal development, too; these can be as powerful as the financial rewards."

Pat Wynne, director, Entegria (employee benefits consultancy)

"Full flexible benefits packages are normally only suitable and cost effective for companies with more than 50 employees. Negotiating special benefit rates or covering additional holiday entitlements could be quite a challenge for a small firm. However, there are other areas worth exploring.

"Instead of a complete flexible scheme, CHA could look at offering a 'total reward' sum from which benefits can be purchased. This cash amount will help staff appreciate the worth of their package and give individual choice.

"CHA could also undertake a simple employee benefits survey - potentially online. This will help it understand its staff and see what 'clusters' of benefits are desired. Armed with this information, it may be able to negotiate local deals for its employees as it did with their gym. CHA could also source benefits such as childcare vouchers, offering these on a voluntary basis."

Mo Desai, director of human resource services, PricewaterhouseCoopers

"Before deciding on the choice of benefits that the company should provide, a survey of employee wishes should be carried out. In this way, a more tailored scheme could be introduced that would ensure higher take-up.

"If the firm is providing gym membership and private medical insurance, and these are neither wanted nor valued by employees, the cost is in effect money down the drain. Allowing employees the choice of how they wish to take their overall package leads to increased value for them and cost effectiveness for the company - a pay rise at no additional cost.

"Even with the best 'flex' package, not all employees' requirements will be met, so the option of an all-cash package should exist. Clearly there will be some extra administration, but this needs to be balanced against the advantages for employees and for the company."