Solving The Benefits Maze

Solving The Benefits Maze Andrew Strathdee Director Corporate HR Partners Ltd

Old Stability Predictability Standard work patterns Loyalty Paternalism Job Security Linear Careers One-time learning New Change Uncertainty Flexible working Valuing Performance & Skills Self reliance Employment security Multiple careers Lifelong learning Employee perceptions are changing about the deal they have with employers

And the Employee view of the Deal is holistic – it all matters equally

And employers spend a lot of money on pay and benefits…

How much should they spend? • Dictated by a range of factors: • Market pressure where compete for staff • History (CEO Preferences !) • Cost • How well the company is doing • Employee demand

How much do we spend? • Typical company spends (as percentage of pay-bill): • Low Market 20 – 25% • Mid Market 25 – 35% • Upper market 35 - 45% • But where is pay-bill pitched in the market and what is the market stance e.g. High pay, low benefits?

So what kind of package should they be offering? • First they need to know • What is our market position? • What are we trying to achieve in terms of the three “R”s - recruitment, retention, reward etc? • What do our employees think of the current package?

Balancing benefits • Three issues to balance • Balancing benefits with employment cost • Balancing types of benefits (Risk with non risk, Core with voluntary, etc) • Balancing against the market (What will give a competitive advantage)

Balancing benefits • Seven Steps : • Research • Benchmarking • Choice • Communication • Education • Delivery • Monitoring

Research • How successful is the current programme? • Employee opinion survey data • Recent benefits survey 77% of employees valued benefits, but 42% thought they could be better • Take –up • How many people have taken up voluntary benefits? • Degree of use • For all types of benefits, which are being used and how much? • Employee needs – what do they tell you? • Any pressure points • Employee Demographics • Balance between benefits – pay vs benefits vs other elements

Benchmarking • What do other people do? • What survey data can I get, and is anecdotal evidence useful? • What should it cost? • How can I get a feel if what I am quoted is a good price or not? (Small companies often struggle!)

Provision of Benefits – some markers

How is current programme made up(as percentage of pay-bill)? • Sick Pay (10 days avge) 3.8% • Pensions (avge for DB/DC) 8.2% • Holidays (25 days) 9.6% • Cars/Allces (say 30% qualify) 5.0% • Medical Cover 3.3% • Life Insurance (4 times sal) 0.5% • PHI 1.5% • Critical Illness 1.0% • Other benefits 3.0%

Market Position Level of Life Cover Upper Quartile 4 times salary Median 3.75 times salary Lower Quartile 3 times salary Survey of over 600 Companies – Life insurance

Market Position Level of Life Cover Upper Quartile 4 times salary Median 4 times salary Lower Quartile 3 times salary Survey – Life insurance with DC Pension schemes

Group Percentage of schemes providing for Group Percentage of schemes with no charge to employee Percentage offering Dental Cover Director 90 91 12 Manager 92 88 12 Professional 90 81 12 Sales 83 76 12 Admin 80 70 10 Survey – Medical Insurance

Group Employee only Employee and Spouse Full Family Director 27 7 66 Manager 44 8 48 Professional 58 6 36 Sales 64 4 32 Admin 67 2 31 Survey – range of cover for Medical Insurance

Choice • Variety of choice - what can be offered and what do people want? How innovative are companies willing to be? • Flexibility – how radical? • What should be core? • Compliance issues • Tax – e.g. limits on contributions • Statute – e.g. minimum standards such as holiday entitlements • Administration • Cost

A note on costs • “NIC changes will create level playing field between pay and benefits” Chris Noon, Hewitt • “Small companies will not get good deals on voluntary schemes, insurers only interested in volume” (Cynical HR Manager quote!) • Insurers suspicious of self selection – they think only certain claimants will sign up • Flex may be better option as take up rates generally 3 –4 times higher • Look at specialist providers

A note on Flexible Benefits • Quotes • “Like the Yeti, often talked about but rarely seen” • “Like going to the gym, more people talk about it than do it!” • Recent survey showed: • 9% have done it • 5% in design • 28% have a plan under consideration • 22% have thought about but decided not to do it • 39% not considered it. (= 103%, rounded up!)

What do people flex?

Pool tables MTV Red letter days 4/40’s Cafeteria Dinners to go Public service time (youth coaching etc) Lactation rooms for new mums Parent beepers Family time in the cafeteria On site childcare advice On site services -Chiropody etc What about the non-traditional benefits?

Communication • How can we make it as easy as possible for people to find out about their benefits: • Offer some interactivity • Communicate in plain English • Use a range of methods as well as intranet • Face to face, singly or in groups • Brief Managers • Handbooks and leaflets • Provider Hotlines • Use third parties – IFA’s, providers – they can lend credibility

Education • Education on how to choose the best options • Life Event education • Family • Current status of family • Age • Longevity of Service • Compliance

Delivery • Delivery is crucial – check out references • E.g. Late payment of medical claims • Complicated administration • Lack of advice • Poor quality material (unclear rules for claiming, or too many exclusions) • Telephone Help-lines

Monitoring • Regularly check delivery processes and results • Make sure the package is up to date (Quote from C&B Manager “it’s not rocket science – we ask them!”) • Very often suggestions are not big things or even expensive – they just make life easier – e.g on-site collection and delivery of dry cleaning and ironing in one company

In conclusion • HR Managers need to be: • Clear about the business case • Knowledgeable about the market • Paying attention to the process • Looking at the big picture • Measuring the right things

Any Questions?

Solving The Benefits Maze