Flexible benefits for smaller organisations

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Malcolm Bond
• MB Reward HR Solutions Ltd.
• For the CIPD Bristol Group,
• West of England Branch
• 22nd October 2008

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Or perhaps more correctly..
• Some strategies and ideas for providing greater
• flexibility, and ensuring cost-effectiveness in
  the reward
• package

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Issues faced by every organisation
• Retention of key talent
• Recognition of demographic changes
• Continuing competitive business improvement
• Ensuring delivery through individual (and team)
  performance and contribution
• and - Survival in the current economic conditions

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Firstly, a Group exercise -
• In groups of 8
• Nominate 3 individuals to provide your answers at
  plenary
• 20 minutes to discuss how each of your
  organisations currently rewards its employees
• Write down brief examples of organisations
  reward strategies
• Make a list of the reward items that are provided
  across the organisations your group represents
• How do your organisations typically communicate
  reward information to the employees ?

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Presenting information back to the plenary group
• Per team
• highlight examples of reward strategies
• describe the range of reward items
• describe typical reward communications

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Confused by the terminology ?
• Compensation Benefits
• -v-
• Total Remuneration
• -v-
• Total Reward
• Whats the difference ?

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Total Reward structure
MB Reward HR Solutions
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Total Reward structure including extrinsic
non-cash reward items
MB Reward HR Solutions
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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Reward Communications
• There is a fundamental HR challenge to consider
  before adding in any further costs !
• Many organisations simply dont inform their
  employees effectively about the full extent of
  the reward or compensation and benefits package
• So, assuming that there is a reasonably
  competitive reward package in place, effective
  communication to employees is critical, to ensure
  full understanding and appreciation

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Reward Communications how to
• New hires
• Offer stage review documentation does it
  explain CB/reward effectively ?
• Induction and on-boarding is CB/reward covered
  effectively ?
• Ongoing
• Total Reward Statements (TRS)
• For the smaller organisation (say, lt100), this
  can be done quite effectively on annual basis, by
  using a manual process (e.g. Excel/Word/pdf),
  and without having to resort to relatively costly
  online solutions
• Descriptive qualitative statements need to be
  written to market the intangibles
• Educate line managers (and HR colleagues)

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• We believe that we are not quite as competitive
  with our reward offer as we need to be
• What can we do to make our existing benefits more
  attractive, and/or add in benefits that are
  cost-effective ?

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Pay benefits marketplace some questions
• Have you checked the pay market ? If so, what
  methods and information have you used ?
• What evidence have you found in order to
  demonstrate that your organisation is not as
  competitive as it should be from the CB
  perspective ? (most MDs and FDs will want to see
  some quantitative evidence)
• Is there also any qualitative evidence supporting
  this ? e.g. exit interviews,
  employee opinion surveys, feedback from
  recruitment agencies, etc.
• If reward is a genuine employee retention / staff
  turnover issue, what are the total costs of
  recruitment, including the hidden or less-obvious
  costs ?

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Whats missing from the reward package ?
• what did the market check/survey reveal ?
• are there any national trends that indicate what
  our direction might need to be ?
• how does the filling of any of these gaps sit
  culturally with our organisation ?
• can we afford do spend money ? (can we afford not
  to ?)

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Cost-effective reward, and cost-effective
  delivery - some examples
• Benefits
• Voluntary Benefits
• Group Risk Benefits
• Pensions
• Cash Plans
• Employee Savings Accounts
• Holiday Trading
• Delivery
• Salary Sacrifice
• Flex

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Voluntary Benefits
• Voluntary Benefits (VB) is a method of providing
  employees with access to a wide range of discount
  and cashback deals with retailers, usually online
  via the internet
• VB is a relatively low-cost benefit for employers
  in the low tens of per employee
• VB can provide significant savings that can
  benefit all the employees immediate family, e.g.
  5 off of the weekly shopping bill can amount to
  a lot of money per year
• Internet-based system allows employees to access
  VB from home
• Employees can set up personal accounts and
  receive cashback either as cash, or spend on
  further purchases online
• VB providers update their sites on a weekly basis

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Group Risk/Protection Benefits
• Life Assurance (Death in Service)
• This is another relatively inexpensive benefit
  (typically, from low tens of
• p.a. up to 1.5 of payroll, depending on salary
  multiplier and employee
• demographics). Provides a financial safety net
  for an employees family in
• the event of death (sadly, this is all too
  frequent)
• Semi-flexible Insurance Benefits
• Some insurers offer a menu approach to
  protection benefits, that allow
• employees to increase or decrease benefits
  (within certain limits) according
• to their needs or appropriate to their
  circumstances.
• This approach provides a degree of flexibility
  around Life, Long-term Disability and
• Critical Illness insurances without ramping up
  costs excessively

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Pensions
• A significant number of smaller organisations
  currently offer only a Stakeholder plan, in most
  cases with no employer contributions.
• Apart from any ethical considerations, there is
  also a practical business impact arriving in 2012
  in the form of the new pensions legislation
  around Personal Accounts, that mandates for
  employer contributions at 3
• If this significant change is ignored, it could
  just be a straightforward budget shock to a small
  organisation in 2012, but also with the double
  whammy of being a missed HR/reward opportunity
  for the business
• Far better, surely, to proactively announce an
  improvement to the reward package in the form of
  employer pension contributions, rather than a
  reaction to legislation ?! Which scenario would
  employees perceive more positively ?
  Contributions can be graduated (say, at 1 p.a.)
  to avoid a cost impact in a single year. And
  Stakeholder -gt GPPP migration is typically very
  straightforward
• Finally, pension is able to be dealt with under
  salary sacrifice arrangements, providing NIC
  savings for both employer and employee

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Cash Plans
• Traditional full private medical insurance (PMI)
  plans are relatively expensive
• Whilst not a direct replacement for PMI, Cash
  Plans are an alternative, more cost-effective way
  of providing cover in the form of cash to pay for
  a wide range of medical support, including
  acupuncture, chiropracty and osteopathy, and
  regular treatment for pre-existing or chronic
  conditions, often excluded from PMI arrangements

• Optical, dental
• Osteopathy, physiotherapy
• X-rays, scans
• Health screening
• Confidential helpline
• Prescription charges

• Acupuncture, chiropractic
• Specialist consultations and related tests
• Surgical appliances, hearing aids
• In-patient hospital admission
• Maternity and paternity benefits

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Employee Savings Accounts
• Simply an in-house savings plan, allowing the
  employee to build up funds in an account, to pay
  for specific major items, e.g.,
• paying off student loans
• saving a deposit on a flat or house
• paying for additional training, or other learning
  and development opportunities

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Holiday Trading
• A benefit being increasingly used by employers,
  Holiday Trading allows employees to buy (and in
  some cases, sell) a proportion of their annual
  holiday entitlement, in recognition of work/life
  balance issues, providing employees with some
  flexibility with their holiday arrangements
• This is often part of a wider Flexible Benefits
  arrangement, but can also be provided in a
  stand-alone scheme
• Holiday Buying is able to be provided under
  Salary Sacrifice arrangements, providing NIC
  savings for both the employee and the employer
• Holiday Selling is simply an internal transaction
  between the employer and employee

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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Salary Sacrifice
• What is Salary Sacrifice ?
• Salary Sacrifice is a term often used for any
  arrangement where an employee chooses to give
  up (i.e. sacrifice) a portion of salary, and to
  take a lower cash amount in return for an
  additional or an enhanced benefit
• Salary Conversion or Salary Offset may be
  less-problematic titles
• A key by-product in some instances may be savings
  in Income Tax for the employee, and in NIC for
  both for the employer and employee. The nature of
  the savings varies by benefit type
• The original salary level is referenced or
  shadowed for contractual purposes
• HMRC state that a salary sacrifice happens when
  an employee gives up the right to receive part of
  the cash pay due under their contract of
  employment in return for the employers agreement
  to provide some form of non-cash benefit

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Flexible benefits for smaller organisations
MB Reward HR Solutions
Salary Sacrifice savings by benefit type
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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Flexible Benefits (Flex)
• What is Flex ?
• Flex is a formal and structured way of enabling
  employees to have choice in the benefits package,
  usually annually, although life events can be
  catered for throughout the year
• Viewing of Total Reward Statements, and the
  benefits selection process are usually online
• Employees are generally given a benefits value or
  allowance to use
• Online systems are quite expensive
• Can Flex be applied in smaller organisations
  (lt100) ?
• Yes, using paper and spreadsheets, and manual
  administration (we always used to do it this way,
  before the internet systems came along !)

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Flexible benefits for smaller organisations
MB Reward HR Solutions
Weve looked at

• The Pay Benefits marketplace
• Quantitative data
• Qualitative data
• A range of Benefits
• Voluntary Benefits
• Group Risk Benefits
• Pensions
• Cash Plans
• Employee Savings Accounts
• Holiday Trading
• Delivery mechanisms
• Salary Sacrifice
• Flex

• Terminology and definitions
• Compensation Benefits
• Total Remuneration
• Total Reward
• Total Reward structure
• Extrinsic and intrinsic reward
• Reward Communications strategies
• Offers and new hires
• Ongoing employee communications
• Communicating the intrinsic/intangible
• reward

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Flexible benefits for smaller organisations
MB Reward HR Solutions
Any further questions ?
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Flexible benefits for smaller organisations
MB Reward HR Solutions
Thank you for your time, I do hope that you found
this session useful
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Flexible benefits for smaller organisations
MB Reward HR Solutions

• Malcolm Bond has spent the last 14 years in
  senior reward management roles with ATT,
  Motorola, and Symbol Technologies, where he was
  International Rewards Director for Europe, Middle
  East Africa and Asia-Pacific regions.
• Latterly, Malcolm has been Head of Reward
  Benefits at PES Consultants in Bristol, and has
  also previously worked at Vodafone Group Plc and
  Clifford Chance LLP in interim reward leadership
  roles. He has wide-ranging experience of all
  aspects of rewards and benefits. Prior to
  specialising in reward, Malcolm gained extensive
  HR generalist experience in various industries,
  and spent six years as Head of HR for ATT
  Network Systems UK.
• MB Reward HR Solutions Ltd. mb.reward_at_btinternet
  .com