Read why flexible benefits don’t always have to be online
By Steve Hemsley
Whether it is reading books on a Kindle or buying groceries online, the technology industry has long proclaimed we are heading for a paperless society.
When it comes to communicating and then administering something as important as flexible benefits, HR directors can find it hard to resist the temptation to switch to an online solution.
From a time-saving point of view, changing to a web-based system should make perfect sense, because one of the reasons for dumping paper is to shift some of the back office admin work onto the employee. And why wouldn’t someone want to spend some of their free time looking at an online benefits portal? After all, 85% of employees rate benefits as ‘important’ or ‘very important’, according to the CIPD.
Yet any benefits program is only successful if it engages staff by making it clear what is being given, why, how benefits will work and when new ones will be introduced.
Charles Cotton, adviser for performance and reward at the CIPD, says at first glance technology may appear to make schemes easier to administer and communicate – and in some cases cheaper. But, he argues, HRDs must think carefully before committing to what could be a hefty, long-term investment.
“Ultimately, an employer must consider how having flexible benefits supports what it is trying to achieve and what it needs from its employees,” says Cotton. “If the benefits scheme is relatively simple, then paper is perfectly fine and the HR team will not gain anything from switching to online. In fact, data can go missing or be incorrectly inputted and the HRD must decide if he or she is happy for the information sent electronically to be accessed by a third party.” Even when paper folders are consigned to history, there still remains an administrative burden. The HR team must study and respond to the data reports being generated, for example.
Traditionally, HR has worked closely with the payroll and the internal communications teams to communicate flexible benefits.
A switch to online can complicate the working relationship, because the IT department and a third party technology provider become involved.
HRDs can also underestimate how long it will take to implement a technology solution (up to six months) and the ongoing costs involved during the length of a web-based contract (often three years or more).
Claire St Louis, HRD at digital marketing agency Essence, whose clients include Google and eBay, agrees with the CIPD and urges HRDs not to rush into technology for technology’s sake.
She says technology can be a barrier to some staff understanding and engaging with the benefits on offer, especially in companies where employees do not work in front of computers, are on the road, on the shop floor or in various manual roles.
“Many companies wrap themselves up in HR processes, ultimately forgetting the reason why they are doing them,” says St Louis. “Benefits are there to retain, motivate, attract and maintain competiveness and, in many cases, people-based internal communications and paper administration is still the right way to go.”
Kuljit Kaur, head of business development at the Voucher Shop, says organizations must certainly not ignore the importance of internal communications and the power of having HR staff and specialists available to explain how and why particular benefits exist.
“People are naturally cynical and think there must be a catch when it comes to benefits. A more ‘people-based’ approach allows you to communicate why this is not the case,” says Kaur. “Using real people as advocates of particular benefits to talk to other staff face-to-face works better than just sending an email telling people to log on to a website to view benefits. Technology assumes people will make the effort to find out more.”
Even Matt Waller, CEO at online provider Benefex, accepts that for some organizations a paper system can be cheaper, remove reliance on involving third parties and enable more control internally. But, he points out that an online option allows data to be centralized and makes it easier to communicate benefits to large numbers of employees.
“For businesses that want a flexible benefit or total reward scheme to reach as many people as possible in the most time- and cost-efficient way, technology has to be the way forward,” he says. “Benefit selection errors can be corrected more quickly and paper document hell is avoided when informing payroll and benefit providers.”
Matt Duffy, head of online benefits at Lorica Consulting, backs him up, although he agrees that technology is not right for every organization. “Online is a simpler solution for an increasing number of companies, although when setting up a flex scheme there is less of a build phase with paper,” he says. “However, what actually takes the time is devising the rules and working out who is eligible and what the rules are. Companies still have to do this, even with a paper system.”
In reality, this is not a black and white issue between paper and internal communications or online. Most organizations now adopt a multi-channel approach, supporting an online system with various forms of offline communication.
Even at technology giant Telefónica O2, paper has not been abandoned completely. It supports its tailored online benefits system with leaflets posted to an employee’s home address. There are also benefits roadshows.
Telefónica rewards manager Kirsty Read says offline communication uses simple messaging to draw people into the website, where they can discover more detailed information on complex areas such as salary sacrifice and tax.
“We have actually re-introduced the paper leaflet after a five years’ absence,” says Read. “Staff told us they wanted a range of different communications relating to benefits. If they receive a leaflet at home, they can start to think about their benefits and discuss them with their family.”
A multi-channel approach is supported by Thomsons Online Benefits’ MD, Chris Bruce. “This is about ensuring that even with an online solution, staff can still talk to real people at workshops and clinics and read paper benefit guides alongside the online content,” he says.
While it can make sense for larger employers to move online, many SMEs are concerned about the cost of the technology and perceive it as complex.”
Julia Turney, head of benefits management at Jelf Group, says a flexible benefits system can certainly work without technology, particularly in small companies that have simple salary exchange benefits without complicated calculations.
“The administration side of things tends to be the deciding factor for companies moving to an online system, but technology alone will not engage staff with benefits, even if it makes the HR department’s job easier,” says Turney.
Benefits consultancy Mercer has teamed up with software firm Sage Employee Benefits to develop packages for organizations with fewer than 100 staff. SMEs are offered an online portal, but employers still have access to Mercer’s specialist advisers.
“Technology is not always the answer,” says Matthew Forrest, head of services at Sage UK. “Many SMEs want to offer benefits and can do so with paper-based and telephone support. This product allows owners of small businesses to manage a flexible benefits package at an affordable price, shaped to their needs.”
The technology providers’ message that online is best does seem to be winning over SMEs, with an increasing number ditching their paper systems. This trend is likely to accelerate as benefits packages become more complex and employers prepare for the phased introduction of auto-enrolment pensions this year.
Law firm D Young has 180 staff in London and Southampton and switched from paper to a predominantly online system in June 2011, with the help of Thomsons Online Benefits. An employee survey in December revealed staff are more aware of the benefits available to them now than they were under the paper system.
“In the first year, we used paper-based marketing to communicate the online benefits system, but in year two we will do this online with an e-brochure,” says D Young HR manager, Jennifer Mead.
One company in the process of switching to online is Sumitomo Electric Wiring Systems, based in Staffordshire. Its HR manager, Liz Brown, says the move from paper will take place on 1 April.
“We are introducing flex benefits and felt online was a more efficient and flexible option, as we wanted something people at our different UK sites could access easily,” she says. “Until now, a paper system has been adequate for the salary sacrifice and other benefits we offered our 230 staff, because there was not much data to deal with.”
The technology companies will vigorously fight their corner to demonstrate that organizations running benefits programs can miss out by not moving online. Savvy HRDs, however, will only switch from paper when the time is right.
Northern Rail: paper trail
Should Northern Rail retain the franchise to run train services across the north of England, it will look to move from a voluntary to a flexible benefits system, but it won’t ditch paper.
This 50:50 joint venture between Serco Group and Abellio, formed in 2004, has 4,800 staff scattered across the north, and most employees are drivers, conductors or engineers and do not have access to company computers.
An employee survey in 2009 discovered a low satisfaction rate regarding its benefits scheme, which is a combination of voluntary benefits and an employee assistance plan (EAP), as well as salary sacrifice, free travel and a final salary pension.
Northern Rail compensations and benefits manager Paul Stephens(pictured left) says communication was an issue, so the company introduced a benefits booklet and increased coverage of the scheme in its staff magazine, Your Northern, sent to every worker’s home address. There is a telephone helpline and benefits roadshows are held at different depots.
“The culture of our business is paper-based and people still like to receive hard paper copies of anything to do with their job,” says Stephens. “The difficulty with a booklet is that things can change and the content can become out of date quickly, but staff like to get paper copies of their total rewards statements, for instance.”
Despite its traditions, Northern Rail appreciates the advantages of moving some of the administration online when the flex scheme is introduced and it is working with benefits provider, Personal Group.
Stephens wants to encourage staff to check the internet at home, but many paper aspects – such as the magazine coverage as well as the telephone helpline – will remain.
“We fear we will lose the engagement levels we have generated since 2009 if we move everything online – and we cannot afford to do that,” Stephens says.
Hilton Worldwide: engagement online
Sean Thomas, cluster HR director at hotelier Hilton Worldwide, says he could not run the company’s benefits scheme without technology. In fact, he says it would be “a nightmare”.
He is convinced paper-based schemes will die out within a few years and everything relating to employee benefits will be online, especially in large organizations.
Many of Hilton’s thousands of staff globally are young and have an expectation of a technology solution. For the HR team, it makes administration simpler and the reports the online platform generates mean the scheme is more effective, according to Thomas.
“We can see from the click through rates what things people are interested in and what is not so popular and react to that in a timely fashion.
“I believe that without technology, communicating when the benefits window is open would be harder. We send regular emails, although we do support this with posters around the offices.”
He says that, as a US-centric organization, the whole group has to adapt to ideas and technology coming out of the US designed to help the business.
“Without this technology, I do believe it would be much harder to communicate our benefits to staff and they would be much less engaged with them.”
There can be confusion among employers about whether a flexible or voluntary benefits scheme is right for their organization. A flexible scheme lets employees choose the benefits package that best suits their lifestyle and personal circumstances. They may prefer tax-efficient benefits such as childcare vouchers or to make salary sacrifices to boost their pension.
Flexible or voluntary?
Flex is a good way to bring consistency across a group of companies, as part of a harmonization process, or to tailor benefits to staff if a workforce is diverse.
Staff can usually change their core benefits once a year, during what is known as a ‘benefits window’ and, whether it is a paper or an online solution, employees can see a menu of benefits and the price of each. They usually receive a ‘total rewards statement’ outlining their total remuneration.
An employer can make a scheme as flexible as it wants to, so staff feel valued. Ultimately, a well thought out flexible benefits package can help to retain and attract talent.
Companies often add additional voluntary benefits, which are products and services staff can buy, at a discount. The main difference between voluntary benefits – such as retail discounts or gym membership – and flexible benefits is that they are paid for by an employer allowance or benefits pot, or their own salary, through payroll.
Many employers use the tax and national insurance savings gained from introducing salary sacrifice benefits to fund the cost of administering a voluntary benefits discount program.