Maximising your benefits financing in the new world15.09.20
Global Benefits Director
As we begin to realise the long-term financial cost and impact of Covid-19, there is a strong consensus from global HR and Reward leaders that our employee benefits financing will be shaken up. At the very least, most organisations are expecting budget cuts, so pay rises and bonuses will be limited, meaning employers will need to do more with the global employee benefits they already have in place (which includes drawing focus to their overall package and making use of TRS; more on that here.) But do not fear; by widening the existing options available to your employees, you can ensure your global benefits package is both competitive and relevant.
So how can you balance benefits choice with benefits budget?
The topic of benefit funding has been at the forefront of conversations over the past few weeks, so it’s a good time to look at how some global reward leaders balance the need to provide employees with choice, with budget restraints.
The traditional employer-paid benefits model remains the most popular choice in many locations, especially with core benefits such as retirement, health and life/accident.
To maximise the value of these benefits, employers can put more power in employees’ hands, and implement more flexible versions so that employees can upgrade at their own cost or, if possible, with some subsidy. This tends to be very popular where a basic level of health cover is mandatory, allowing employees to flex up if required. Or perhaps where the cost of insurance is high, and the objective is to provide core cover for employees to chose what they and their family need.
This is a great way of providing employees with choice, without committing to further costs.
Utilising employee benefits technology to offer alternatives
With the use of a platform and the subsequent reduction in the administration burden, employers can free up time and resource to accommodate alternative approaches. For example, we recently worked with one organisation to implement a bonus-type allowance in the Netherlands (known locally as holiday allowance: a gross payment of 8% of total annual salary which is usually built up during the employment period of June to May) as a way of providing employees with a cash pot. This fund can now be accessed by employees through their employee benefits platform, and is used on an array of benefit options that include bike to work, pension contributions, extra holiday and gym membership.
This allowance amounts to the expected 8% of total annual salary that the company is required to pay annually as a holiday fund. In addition to spending this on benefits, employees also have the choice to take this as a lump sum payment should they wish instead.
This ‘guaranteed’ bonus or lump sum payment is quite common; Belgium pays a holiday bonus of 85% of monthly salary around May time too.
Although often paid around Christmas time, there are many countries where a 13th or 14th month salary is provided. Spain, Germany, Switzerland, Italy, Argentina, Japan and China all have some form of this approach, so this could work elsewhere in the world too!
Using flex funds responsibly
Over the past few months, we have seen a rise in queries and investigations into the use of flex cash pots. While already prevalent in some locations - especially in parts of Asia – there is real potential for growth here, as it’s popular with employees because it gives them more autonomy. By providing employees with a cash pot in which the company provides a lump sum, they can choose the benefits that are right for them and their lifestyle. Most employers recognise the need, however, to give guidance or provide a core level for protection and future planning; there is still the need for clear communication and education alongside flex funds, so that employees still choose to allocate this money to retirement funds and insurances.
Of course, this won’t work everywhere - especially in regions where benefits are already of low cost to the company because of the state prevalence or limited provider options. Often, however, we find that employers can be clever with their core benefits, as offerings such as life cover can be increased using a flex fund to meet an employee’s needs.
In a similar way to flex funds, employers can maximise their benefits value through flexible spending accounts. These have been common in some locations (like the USA) for some time. It differs from a flex fund in that spending accounts are typically paid into by employees - usually on a monthly basis - to save money. This sum of money can then be used for specific expenses depending on the parameters set by the company and/or the provider. For example, it may be to offset against health-related expenses not covered by a medical plan. Or it could be used for childcare, school fees and even holidays or one-off purchases like a bicycle. Employers may also contribute, developing into a sort of hybrid solution of spending account and flex fund.
Spending accounts and employee wellbeing
We have seen how companies are keen to implement wellness strategies giving employees access to more choice than gym membership. A wellness fund provided via flexible spending account can be a cost-effective way of promoting a health lifestyle. This a low-cost yet high-value benefit to employees. As an integral part of a global strategy, this can be used to offer local variations so as to remain relevant to employees – for example, in the Nordics, these types of accounts often cover saunas. Whilst gym or sports club membership would be expected almost everywhere, alternatives could include running equipment, spa days, massages and acupuncture, depending on employee demand.
Spending accounts, flex funds, and flexible working
With increased, prolonged working from home, some companies have used this wellness benefit as an opportunity to support employees working from home. Expenses that contribute to the wellbeing of the employee have included a host of activities and equipment; virtual gym or yoga classes, virtual doctor consultations and refunds for home equipment such as chairs, screens and in warmer climates, air conditioning units. For those still needing to commute, some employers have reimbursements available for taxis so that employees can avoid taking public transport - especially during peak times.
With the pandemic still looming over us, all is not lost! You can still offer meaningful, valuable benefits to your employees across all territories, and set yourself apart from your competitors who may be cutting back on their rewards altogether. Offering more flexibility and choice in your global employee benefits doesn’t have to cost you more; it just takes some innovation.
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Paul joined Benefex from Mercer in 2019 with a wealth of international benefits experience, having worked with a large number of high-profile, multinational clients to review their approach to global talent and reward. He leads Benefex’s global benefits delivery team and he’s doing an excellent job of it, if we may say so ourselves. He is skilled in international risk assessment and management, legislative compliance, trend research, cross-border claims, and customer relationship management. AND, he can speak fluent French, mais oui!