Flexible benefits

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16 / 4 / 2014 Midnight

Flexible benefit schemes are formalised systems that allow employees to vary their pay and/or benefits package in order to satisfy their personal requirements. A comprehensive total reward strategy will include a diverse range of tangible and intangible benefits to reflect the diversity of the workforce.

A 'one size fits all' fixed reward offering will only appeal to a limited percentage of the workforce. In the current economic context, employers are trying to improve employee perceptions of rewards with no or little additional cost. Offering greater flexibility and choice is an important means of achieving this as is effectively communicating the full extent of your reward offering. Communication and implementation will be examined in phase three of the toolkit.

An introduction to flexible benefits

We have worked in partnership with Benefex, an award-winning reward and benefits solutions provider, to create a document that outlines approaches to flexible benefits. The document provides an overview of the range of flexible benefits available and the key areas to consider, whether you are adapting your current offering or looking to adopt a new scheme.

What are the advantages of flexible benefits?

There are a number of advantages to flexible benefits including:

  • appeal to a diverse workforce
  • aid recruitment and retention
  • reinforce organisational culture and values
  • support employee engagement
  • improve understanding and perceptions of the value of the reward offering.

What are the flexible benefits national trends?

In order to compete in the recruitment market it is important to be aware of the reward offerings of competitors. There are a number of key trends in flexible benefits at present, such as:

Flexibility and choice

Over half of large UK employers offer their staff flexible benefits with the most common benefits including additional holiday, childcare vouchers and a pension scheme. A list of the most popular flexible benefits in UK is illustrated here.

In the past, organisations have offered a limited fixed benefits package that was identical for all staff. As such the benefits would only appeal to a limited section of the workforce. There is an increasing trend in employers introducing a great range of flexible benefits to meet the needs of a wide range of staff groups; focusing not only on the types of benefits available but how these are communicated, accessed and administrated. 

Salary sacrifice scheme

There is an increasing uptake of salary sacrifice options, offering tax savings for the employee and employer. Generally the tax situation on benefits choices has become clearer and HM Revenues & Customs (HMRC) provides clear guidance.

The Government has published its response to the Tax-Free Childcare consultation detailing how Tax-Free Childcare (TFC) will be launched from autumn 2015. Further information is available on our Proposed changes to tax-free childcare page or you can email any queries to reward@nhsemployers.org.

It should be noted that the new 2015 NHS Pension Scheme will have important implications for members and employers in relation to salary sacrifice arrangements. You can find out more on our salary sacrifice page.

Anytime choices

Employers often limit access to benefits to certain windows during the year. For example, staff may only be able to access the cycle to work scheme on an annual basis rather than at any point during the year. In the past these restrictions have been due to HMRC guidelines and business administration processes. HMRC have now explicitly permitted salary sacrifice changes to be 'anytime choices'.

Voluntary benefits

Voluntary benefits are usually offered as part of a flexible benefits package enabling employees to pay for an additional benefit but at a lower price than they would be able to purchase it externally. Examples include home computers, mobile phones, financial advice services and retail shopping vouchers.

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