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benefitsconnection Insight, strategy and best practice in voluntary benefits from Asperity Issue 7 October 2009

• Having it all: Accessibility and Style

• Non Financial Reward in a Recession


Welcome In this issue, we look at a number of areas of the benefits market that have changed or are likely to change in the short to medium term. Pensions are a high profile area, mostly for uncomfortable reasons. Change here is both at the fledgling end of employer-led pension schemes where a stakeholder pension is currently the only option, to multi-nationals where final salary pensions impact on corporate value. Macro-economic issues make themselves felt further down the benefits food chain as well. Employers are weighing up if cycle to work and car schemes by salary sacrifice are central to a sustainable transport agenda. The well-publicised shortage of NHS dentists and concerns about NHS waiting times for nonurgent care feed into workplace schemes for medical, dental and optical plans, whether employee or employer paid. And some employee discounts schemes look very different from a few years ago. 5% off at supermarkets? 10% off electricals, even sale prices? £90 Cashback on a mobile phone? Employers wouldn’t have recognised these offers even 2 or 3 years ago, but if your discounts scheme doesn’t have them now it is outdated and will be underused. Because what doesn’t change is that everyone likes a saving. Yours sincerely,

Contents

2. 3. 4. 6. 8.

Editorial

How Benefits Have Changed A look at the development of employee benefits. The Discount Mirage: How to Avoid the Smoke & Mirrors Designing a Discount Scheme

Employee Benefits at TUI UK & Ireland: A Case Study Has HMRC Called 'Time' for Vouchers in Flex? Recent VAT decision spells the end of some of the advantages for employers Having it all: Accessibility and Style

10.

Are access for all, usability, compliance, relevance, choice, branding and ‘wow factor’ mutually exclusive?

Benefits Matter Even More in a Recession

11.

A brief guide to the importance of benefits as a complement to cash reward in recessionary environments.

Glenn Elliott MD, Asperity Employee Benefits glenn@asperity.co.uk

Visit www.asperity.co.uk for more information, exclusive access to our employer’s VIP website and to request our new Employer’s Information Pack. All information correct at the time of writing and subject to change without notice. Asperity Employee Benefits Ltd, 90 Westbourne Grove, London, W2 5RT. Tel 020 7229 0349 www.asperity.co.uk email: benefits@asperity.co.uk © Asperity Employee Benefits Ltd 2009.

02 Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk


How Benefits Have Changed A look at development in employee benefits. By Alice Hovington, Step Enterprises Over the past fifteen years or so, employers have needed to take a fresh look at core benefits whose paternalistic ethos was established by the great industrialists of the past. They built homes and places of worship and recreation for their workers, provided education for their children and left the stunning legacy of Bourneville and Port Sunlight. The idea was that you worked for your employer from cradle to grave. Core benefits such as final salary pension, lifetime medical and critical illness insurance cover, death in service benefit and so on were built on an unwritten contractual assumption of enduring mutual loyalty between employer and employee. That helped to make the economics work, coupled with the fact that access to these benefits was often a privilege that could only be secured through rank or years of service. As loyalty broke down, the workforce became more mobile and equality of provision took root, it became clear that core benefits were both expensive to provide and irrelevant to large swathes of the employee population. Flexible benefits were seen as one way to address these challenges, allowing employees to choose and build a reward package that suited them, sometimes using a proportion of the pay pot. Employees benefit from their organisation’s purchasing power at the expense of bearing the economic risks attaching to the underlying benefits products. For employers who have to withdraw or reduce the cost of core benefits, flex is a good place to begin. Employers without a ‘pot’ from which employees fund flex, turned to discounts schemes. Financial services providers created ‘voluntary’ benefits around the turn of the millennium as a channel for insurance and banking products. The idea was to offer employers, free or virtually free of charge, a restricted range of everyday discounted shopping alongside a suite of loan, mortgage, insurance and credit card products.

Employers are no longer going to look after their employees from cradle to grave. But they can facilitate choice and control. There are upsides and downsides to both.”

What could be better than a captive market where your financial products were the only ones available to employees participating in a benefits scheme? The only problem was that the financial products in these schemes were not particularly competitive, so employees did not take the next step of looking at the discounts available on the non-financial lifestyle products. The position of the shopping products was undermined by the payment of supplier commissions. The irony of this was that whilst management information provision to employers and employee communications were poor and infrequent (except where suppliers offered incentives for competitions), the tracking systems employed to collect commissions from suppliers were highly developed. The model was not going to work in the long term. Some providers have disappeared, others hope the ‘smoke and mirrors’ of dressing up sales channels as a discount will work, and same focus on niche product provision. It seemed that in the absence of a complete rethink of the business model, it was death by a thousand cuts for voluntary benefits. There is an alternative. According to Glenn Elliott, Managing Director of Asperity Employee Benefits. “We realised that voluntary employee benefits could only work well if the benefits scheme mirrored the shopping experience of the employee in real life with well known product and service brand names, no artificial restrictions and 100% of supplier commission passed back to the employee”. Add to that, the provision of credible employee communications backed up with employer access to real rather then “illustrative” evidence of employee engagement and you have the seeds for a lushly attractive universally available employee benefit. Especially so, when Integrated Voluntary Benefit product provision can include childcare vouchers, cycle to work, medical and dental cash plans, and discounted shopping vouchers and cards capable of being topped up on an ad hoc or regular standing order basis. Employers are no longer going to look after their employees from cradle to grave. But they can facilitate choice and control. There are upsides and downsides to both.

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The Discounts Mirage: How to Avoid the Smoke & Mirrors Designing a Discounts Scheme By Melanie McKay, Head of e-Commerce & Supplier Relations, Asperity.

There are a number of different business models for setting up a discounts scheme. In this article, we take a look at some of the areas to consider carefully when making your choice. 1. Balanced presentation of Affinity Schemes and EPPs The largest Affinity Schemes and Employee Purchase Plans (EPPs) in the UK are mainly in the field of general electronics and computer hardware or software. They offer discount rates which look very attractive, with headlines rates of up to 40%. The programmes are readily available to major employers and benefits providers. They are useful for some purchases but it is important to set them in context and provide a balance of other offers for the same goods. TV’s and electrical items are often heavily discounted from manufacturer RRPs in the high street and online which means that even with the EPP discount, the same product can be found cheaper in the general consumer space. Some manufacturers, however, rarely discount from any source even online, so the discounts on offer are genuinely worth having. So Affinity Schemes and EPPs do have a place but it is important to note that 10% off at a major electrical store is often a better deal than 40% off from the manufacturer’s website direct.

2. Clear positioning of employee-only deals

10% off at a major electrical store which is already competing hard on the high street is often a better deal than 40% off from the manufacturer’s website direct where they may be selling full at RRP.“

A basic premise of an employee discount scheme is that the overall scheme and as far as possible all the individual offers are better than deals available to the general consumer. It is not possible to guarantee that there is not occasionally the same or a better offer available to consumers, but it is important to make sure a benefits scheme is not just promoting retailers’ ordinary consumer pricing. Some discount web-retailers specialise in end of line goods, catalogue returns and other products that manufacturers need to shift. They offer consumers a savings of up to 80% on end of line merchandise from top brands but are not exclusive to employee sites. If an employee discount site passes “up to 75% or 80% off” as a special employee deal when it’s actually the same price that everyone gets, it causes bad feeling when it inevitably gets out and can be damaging to an employer brand.

04 Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk


3. Focus on everyday savings

5. Honest representation

Good savings at retailers people use regularly, such as 10% at department stores or 5% at supermarkets, are more valuable to employees that initially more impressive headline savings such as 40% off one type of holiday or item. A good scheme needs both.

The key to running a really successful scheme and keeping longterm employee commitment is to be honest about the offers and not to oversell. No one likes being duped into thinking things are better than they actually are. As the old saying goes, when choosing a discounts scheme “the devil is in the detail”.

4. Watching out for dead or false offers Web-based or phone-based offers which are out of date or look like an offer but fail on closer inspection devalue a scheme for employees. Providers need to be vigilant about deleting or restoring broken links, and employers need to evaluate at an early stage in the selection procedure if a site is bulked out with ‘false’ offers.

The gloss of a glitzy website wears very thin if the offers aren’t real or don’t work.“

At face value, a website may look well designed with strong graphics and useful features, but if the depth and quality of offers is lacking the scheme will not be successful. It needs substance as well as style. The gloss of a glitzy website wears very thin if the offers aren’t real or don’t work.

About Melanie McKay Melanie McKay is Head of e-Commerce & Supplier Relations at Asperity Employee Benefits responsible for relationships with retailers and ensuring Asperity has the best offers possible. Melanie’s background is in retail e-Commerce, primarily in the US, and more recently in the UK.

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Employee Benefits at TUI UK & Ireland: A Case Study Interview with Dione Mathias, Reward Manager, TUI UK & Ireland TUI UK & Ireland is an international leisure travel group serving more than 30 million customers. Headquartered near Gatwick airport in the UK, the Group employs approximately 1700 people in the UK and Ireland with a wide variety of job roles including pilots and holiday reps as well as office and airport-based staff. In this issue, Dione looks at a number of reward issues.

T

UI added Asperity’s Reward Gateway discounts service to its benefits portfolio early in 2009. Coming under the existing benefits brand, the discounts website and portfolio is branded ‘berewardedmore’.

Why did you decide to offer staff benefits and what exactly do you offer? “Our overall reward strategy is one of total reward. A core element of this is to ensure we offer a comprehensive benefits package to attract and retain employees. The scope and flexibility of the TUI UK & Ireland offering is a major point of difference between us and, not just our competitors, but other FTSE 100 employers. A key part of our benefits offering relates to travel benefits and in particular our holiday concession scheme, which provides money towards TUI Travel plc holidays. This is a core advantage for our employees and a strong retention tool for us. It engages our people with our brands and ties in with our vision for customer service. On top of holiday concessions TUI’s benefits package includes an all employee share plan, pensions, life assurance, childcare vouchers, great annual leave entitlements, employee discounts, long service awards, and other travel benefits relating to our products. In addition for certain roles we offer car allowance, permanent health insurance and private medical insurance.”

What kind of uptake have you had and what have been the effects of this on your organisation in terms of staff motivation, retention and recruitment etc? How do you measure success? “We are really pleased with the number of employees taking advantage of our benefits. Our VB programme had engagement of 36% before the end of the first 3 months and and we are receiving really positive feedback from our people. In terms of measuring success, as well as looking at retention rates we will also measure employee engagement through an annual all-employee survey which has specific questions on reward and recognition so that we can really understand how our people feel about their benefits. Regular pulse surveys are conducted throughout the year, we evaluate and analyse the results and adjust our strategies and communications as appropriate to make sure that what we offer is truly of value to our people and, equally important, that they are aware of what is available to them.”

We are really pleased with the number of employees taking advantage of our benefits. Our VB programme had engagement of 36% before the end of the first 3 months”

06 Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk


Has this helped divert focus among staff away from the recession? Has productivity improved as a result?

Why did you go down the route of voluntary benefits rather than providing staff with bonuses?

“I think that the news media means that the recession is never far out of mind. We believe that we offer our people a great range of benefits and encourage them to take advantage of this. An average employee can save around £500 on their holiday through our concession scheme and for many that is the difference between getting away on holiday and not. The employee discounts and childcare voucher portion of the benefits package offers savings on everyday expenses. Discounts including 5% off at Asda and Sainsbury’s means our people have more “disposable” income at a time when many are struggling to make ends meet.”

“We don’t view this as an either/or situation. We have a strategy of total reward and our voluntary benefits offer is a key element of our benefit package – it didn’t replace bonuses or incentives in the areas of our business that these already apply and we continue to offer these. Our VB programme is available to all our TUI UK & Ireland employees regardless of their role, it complements our wider package and enables us to offer a wide range of benefits that appeal to the different groups that make up our company.”

Has the cost of this scheme been outweighed by the benefits?

“The majority of the actual administrative burden has been absorbed by suppliers. This allows us time to focus on the management information we receive and adapt our strategy to better engage employees.”

“We view employee benefits as a critical investment for our people. Offering a comprehensive employee benefits package is complex and has cost implications, but we’ve worked hard with suppliers to ensure we’re getting value for money, making retention and reward much more cost-effective, whilst providing our people with tangible benefits that are relevant to their lifestyle.“

How much of an administrative hassle was this for you?

We offer our people a great range of benefits and encourage them to take advantage of this.”

What were the technical challenges you had to overcome regarding setting up a voluntary benefits scheme? “Many of the technical challenges usually faced when setting up at VB scheme were addressed following the merger in 2007. Integrating benefits, harmonising terms and conditions and then communicating the change to employees was a huge project. Reminding employees of their benefits and communicating with them on an ongoing basis became a key focus. We have a strong employee brand and internal communications strategy, these enable us to communicate all our benefits effectively and support our total reward strategy.“

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Has HMRC Called 'Time' for Vouchers in Flex? Recent VAT decision spells the end of some of the advantages for employers. By Charlie Murphy, Finance Director, Asperity.

HMRC’s recent positioning on the treatment of VAT recovery surely presages the death-knell as a flex distribution channel unless the European Court of Justice comes to the rescue.”

Discounted vouchers in flex and VB Typically, flexible benefits products fall into two categories. Either they are tax efficient, such as childcare vouchers and bikes, or they are insurance products such as life and critical illness. Shopping vouchers often appear because they are procured on discounts that reflect economies of scale in purchasing. But those economies are no different for a voluntary benefits provider than they are for a flexible benefits provider. And shopping vouchers in flex schemes are inflexible, largely because of IT considerations.

Why put vouchers in VB? When several retail store chains collapsed at the end of last year, many employers found themselves saddled with two uncomfortable consequences. Firstly, expensive IT changes to adapt flex platforms for the forced changes. Secondly, irritated employees who had been saving their vouchers over the year for Christmas expenditure only to have their hopes of a successful foray into Woolworths or Zavvi dashed. Purchasing vouchers from a voluntary benefits provider should mean employees get clear information at the point of sale and a refund guarantee.

With VB, employees buy vouchers when they want them rather than committing to a year of fixed amounts, so if a retailer has to be deleted or a discount level amended, a voluntary benefits provider can do that immediately and at no charge to the employer. Look for an operator that stands behind its vouchers for a reasonable period after purchase so that employees are not left in the lurch by sudden bad news on the High Street. VB providers with the capability to process top-up card orders of any amount on any day of the week leaves flex benefit provision floundering in its wake. In a good VB scheme, power for voucher purchasing decisions is with the employee.

Recent HMRC view And if you had any lingering doubts on the place of shopping vouchers within flex schemes, HMRC’s recent positioning on the treatment of VAT recovery for vouchers purchases under flex or salary sacrifice surely presages the death-knell of this form of distribution unless the European Court of Justice comes to the rescue. That seems unlikely, so moving vouchers out of flex into VB is a simple, cost-effective answer to the dilemma.

08 Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk


Having it all: Accessibility and Style Are access for all, usability, compliance, relevance, choice, branding and ‘wow factor’ mutually exclusive? By Kishan Hickman, Development Manager, Asperity. Apart from any legal obligation to do so, there are good reasons to make a website widely accessible, and this doesn’t have to come at the expense of design and content. Asperity’s Reward Gateway is fully W3C compliant. This means it meets the web content accessibility guidelines of the World Wide Web Consortium (W3C), which is the main international standards organisation in this area.

Why make websites accessible? • Users with a visual disability or colour blindness may be using a refreshable Braille display or find if difficult to see small text, so fonts need to be adjustable • Some people will visit via screen readers or text-only browsers meaning images are not always displayed, so text equivalents are important • Not everyone can use a pointing device such as a mouse and will therefore only use their keyboard to navigate around • Not everyone uses a browser that supports Java, Javascript, Flash, or ActiveX controls • People like to use different browsers so a website needs to load and display properly in IE, Firefox and Safari. Working W3C standards into “good design” means having regard to basic principles such as ease of navigation and having the right information in the right place. It’s also important to minimise the

amount of data entry an employee has to repeat – so pre-filling known details for different benefits, for example, makes things easier for employees and enhances the credibility of a benefits scheme. Then there are 2 other areas where good design can make a significant impact: employer-branding of every aspect of a website and individual customisation of the key pages. These almost sound like they should be mutually exclusive but they very definitely are not. Employer-branding is about logos and colours, images and banners which reinforce the value of the employment relationship and give the employee confidence in the benefits site. Individual customisation means employees can set preferences for their own lifestyle, organise the offers they use most frequently, set reminders and choose favourites. Based on a ‘widget’ style, Reward Gateway 4 which is being introduced from October 2009 allows significant individual customisation. Using a short, optional checklist, employees can, for example, turn off mobile phone offers until theirs is due for renewal (although they will still be available if required for friends or family), put their choice of retailers on the home page and prioritise offer categories they use most often. Underlying all of this of course is the right balance of copy and images, colour and plain text. Your benefits website needs style and substance and maximum accessibility, so look for a product that is visually pleasing, full of great offers, well laid out with the right information for decision-making - these attributes are complementary, not ‘either / or’.

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Benefits Matter Even More in a Recession A brief guide to the importance of benefits as a complement to cash reward in recessionary environments. By George Farrow, Service Delivery Director, Asperity. They might seem an easy target for cost reduction initiatives but with cash being the most expensive way to remunerate employees, HR professionals need to defend employee benefits and be smarter in their application. Stuart Hampson, outgoing Chairman of John Lewis, remarked “although executive pay is an easy target for politicians, our attention could be devoted less to fat cats and how we make thin cats fatter”¹. So whilst many employers have frozen pay awards, they are compensating by modernising their benefits offering by improving low-cost options and making the overall rewards package work harder for employer and employee alike.

Review current provision Recession makes it even more important for reward strategy to facilitate the retention of talent, align reward priorities with business goals, drive better business performance and to stimulate individual performance. When it comes to benefits, recessionary strictures have encouraged more resourceful and innovative responses at the expense of the big-bang consultancy led approaches of the past. However good you are now, you can still be more resourceful. And if you are not already a shining star on the benefits front, there has never been a better time to get started. You can do that with a review of what you have now: • Do you know how much you are spending on employee benefits? • Do you communicate your benefits well? e.g. not just on the day you launched them and not just to office-based staff. • Do you know whether your employees value them? • Are you still administrating using paper based systems? •

Are you using quantitative methods of measuring the success of your benefits package such as cost savings generated, effect on employee retention and effect on recruitment costs and not just take-up rates and general employee feedback?

Whilst 79% of employers believe their benefits package provides value for money², over two thirds qualified their response by “to some extent” meaning there is plenty of opportunity to be exploited. Achieving success means understanding perceived value by employees and consistent communication – even on the most obvious benefits such as childcare vouchers which offer employee salary sacrifice savings of up to £1195 p.a. It’s worth spending some time and money to do this. Turning to childcare vouchers again, these will save up to £373 p.a. per employee in employers National Insurance contributions and parents will consider this a valuable benefit.

¹

with cash being the most expensive way to remunerate employees, HR professionals need to defend employee benefits and be smarter in their application.”

Join today There is a whole panoply of benefit choices to consider, ranging from pensions to life assurance and critical illness cover. However, if you have no benefits, or your existing package needs some fizz, look for cost effective benefits that won’t break your budget. For employees looking for immediate returns from their benefits choices as opposed to assurance in respect of events unlikely to occur at all and in any case way past this recession, benefits which make a positive and immediate difference to the management of their household expenditure are particularly welcome. A few pounds per employee per annum (paid by the employer) will get a totally independent discounts, Cashback and discounted shopping voucher scheme branded to your specification with a full communications campaign included. A typical family of four could save at least £260 p.a.³ on shopping bills and £250 p.a.4 on insurance . That amounts to a 5% tax-free pay rise for employees on minimum wage or 2% on the national average wage . And that’s before they start benefitting from the other 1000+ suppliers offering savings on cars, holidays, electrical goods, gifts etc.

10 Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk


employees looking for immediate returns from their benefits choices as opposed to assurance in respect of events unlikely to occur at all and in any case way past this recession, these benefits which make a positive and immediate difference to the management of their household expenditure are particularly welcome”

Cycle to work You don’t need to set up a flexible benefits scheme to offer cycle to work. As part of an integrated voluntary benefits scheme, employees can sign up any time they want during the year to get the bike they need. They can save up to 51% via salary sacrifice. Employers save National Insurance contributions and underline environmental, sustainable transport and wellbeing agenda.

Childcare Vouchers Despite recent changes to remuneration for women while on maternity leave, making risk-modelling of childcare vouchers a prudent precaution, the tax savings for employees and NI savings for employers on childcare vouchers are still significant. After pensions, they offer the greatest potential for cross-funding of other benefits and every employer needs to seriously consider including this in their benefits portfolio.

Healthcare cash plans Making it easy and cost-effective for employees to recover the cost of routine dental, optical and other treatments is another valuable benefit to have in the portfolio. From £10 a month, an employee paid healthcare cashplan provides cover for optical, dental and hygienist treatment, including lenses and check-ups, therapies such as acupuncture, osteopathy and physio and MRI, CT and PET scanning if needed. An small additional premium for private treatment for 60 non-urgent operations makes a cash plan a sensible choice for employees who buy it themselves and a good alternative to PMI for employers. In conclusion, surviving and thriving in a tough climate means your employees need to be actively on your side, not just turning up. A reward strategy that is simple and effective helps. Don’t wait and see what is going to happen to the ecomony. Take stock and then take some action. 1.

Reported in e-reward – May 2009.

2.

www.hrzone.co.uk - May 2009.

3.

Assumes £100 per week shopping bill using a 5% discounted voucher.

4.

assumes a 2 car family purchasing home, contents and car insurance.

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EMPLOYEE DISCOUNTS

CHILDCARE VOUCHERS

CYCLE TO WORK

MEDICAL, DENTAL OPTICAL


Benefits Connection: Issue 7, October 2009