As employers get to grips with changes to the benefits tax landscape, adopting an innovative approach to flex has never been more important, as Peter Crush explains
To say not much has happened in flexible benefits in the past year would be like saying it’s been quiet politically.
HMRC’s initial assault on salary sacrifice may have been expected, but the bombardment is continuing. In March it was confirmed that any employee boosting group income protection cover through flex would now have to pay income tax on the value of the benefit, as would employers.
So while the government might be upbeat about recovering £9.5bn in ‘lost’ employer National Insurance contributions and £5.5bn in staff NI, critics have been less positive about the wider impact – such as whether employees will now pay for perks such as health screening, or whether employers themselves will curtail flex options now that they cost more to provide.
“I actually believe HMRC’s changes give clarity back to an area that’s long had a shadow over it,” argues Stephen Holt, commercial director at engagement provider Grass Roots. “It’s stripped out benefits that weren’t getting much take-up anyway, meaning we can all get on with more pressing issues, like innovation, and making flex simpler to access and sign on to from mobile devices.”
The consensus seems to be that it’s these trends that will dominate 2017, not whether employers will cut back offerings. Luke Prankard, practice lead, health and wellbeing at Thomsons Online Benefits, says: “You’d have to question employers that would only offer benefits based on saving NI.”
In fact, he and others argue it’s an overall lack of alignment between what staff want from flex, and what employers offer that needs to be addressed.
“Latest research we’ve done shows staff want all their benefits choices in one place (68%) yet only 16% o_ er sta_ access to all their perks from a single portal,” says Prankard.
He adds: “Typically, staff need to talk to their partners to make their flexible benefits choices, because they affect them, too. Since they can’t be with them at work, employers must allow mobile device access – it’s probably as important as what the benefit actually is.”
However, his research shows the extent of the divide: 54% of staff want to access flex from their mobile devices, but only 28% of employers provide it.
Northumbrian Water is one business that in the past 18 months has grasped the access nettle, through provider Staffcare.
Neil Robertson, the utility’s pay and benefits director, says: “The aim was to have a system so that everything benefits-related was in one place. It’s also meant we’ve been able to see which benefits just weren’t worth having – like salary sacrifice for mobile phones. Only 20 people in a business of 3,000 people used it.”
The fact staff can access the system on their iPads at home has also massively boosted benefits uptake, he confirms.
Robertson shows how employer and employee needs really can align – and cites the reduced administration burden as another business benefit – but it’s not just companies and their workforces that need to work together.
Employers and providers must also work in harmony. “Flex is still the best opportunity to give a wide variety of staff a range of benefits that suit them,” says Pam Whelan, director at Simply Health, “but there is also a risk flex can become a big repository for everything.”
She argues firms need to discuss with staff about how flex is offered, too – for instance via salary deduction schemes – similar to salary sacrifice, but not attracting any benefit-in-kind tax – and providers need to up the ante over what they offer, and if it makes a difference. “Providers need to make sure they don’t just ‘sell products’,” she says.
Tech for flex
Examples of innovation include Grass Roots’ Techscheme – allowing staff to save money on gadgets such as tablets, laptops and smart watches. Holt accepts its 5,000-employer client-base is small, compared to the 45,000 who take advantage of a cycle-to-work scheme, but he says he’d rather provide perks that employees want.
“It’s a harder sell supplying things staff can buy in the high street,” he admits, “but it’s a challenge we’re willing to overcome. We think it boosts the IT skills of staff – that’s the message we’re telling to employers, but it’s incumbent on providers to talk more about value.”
But if providers need to do their bit, so too do employers, in being braver to run with what’s being regarded as the next big flex trend – ‘flex pots’ or reimbursement funds – money staff can use for whatever they want.
According to Thomsons only 4% of firms use them, even though they remove the need for employers to offer tens of different benefits that may or may not be taken up.
Thomsons is itself a user of flex pots – not just to showcase to employer-clients, but because it has broader gains – as Lynda Greeves, people director at Thomsons, explains. “We’ve been running them for 18 months – primarily because we have lots of millennials, for whom a traditional list of benefits just wouldn’t suit.”
She adds: “We know that force feeding certain benefits – like gym membership – would give us 25-30% take up, max. But giving a monthly amount, which staff can use for anything to do with personal, mental or physical wellbeing, has yielded 85% take-up, 15% of which was personal and professional development.”
Because staff do not have to pick from a rigid list of perks, they have so far used the pots for skydiving, drumming lessons, buying books, horse riding and more.
A clever feature is that money deliberately doesn’t accrue month to month, meaning staff have to think about their flexible benefits portals every four weeks. And it works: Greeves says only 3% of staff have used their pots once.
Of course, more regular flexible benefits windows have long been cited as the key to drive use, and more reward heads appreciate this, too. Robertson says now his platform is up and running, the annual and bi-annual (for bikes) flex windows will move to anytime. “We have to make flex relevant to people’s changing lives, and this means more regular access.”
Ben Hollingdale, business development director at Staffcare, says: “Flex is still associated with the traditional. What people want is anytime enrolment. It’s no longer technologically difficult – it’s just a change of mindset. Flex still doesn’t have the connotation of being a portal, but it should. There’s no point making benefits a disjointed journey.”