In our previous article we provided a brief overview of the various types of workplace benefits that are available to employers. Here, we take a more in-depth look into flexible and voluntary benefits schemes and the ways in which these can be implemented.
Flexible and voluntary benefits packages are increasingly viewed as an effective way to address employee diversity, offer greater choice and improve the cost-effectiveness of the overall workplace benefits package. They provide a way for employees to buy or sell benefits to suit their individual needs.
However, one of the key factors that impacts the success of any employee benefit scheme is the relevance of the options provided. Many organisations opt to conduct an employee survey ahead of implementation to ensure that the options offered are fit for purpose and in line with employee expectations. This will also help to refine which options are made available and avoid overcomplicating the scheme which may deter employees from engaging with it altogether.
In practice these can be used simultaneously by the same organisation. Benefits can be introduced on a voluntary basis to test the popularity, with a view to switching them to a flexible benefit in the future. Business can also split benefits into either of these categories.
With flexible benefits, it is commonplace for an organisation to agree a core set of benefits which, although they can be adjusted by the employee, will form the basis of the benefits package. These can include pensions, holidays, life and/or critical illness insurance.
Beyond core benefits, employers can look to introduce a number of additional flexible benefit options, similar to those that might also be offered on a discounted basis in a voluntary scheme. These include, but are not limited to, health benefits, such as private medical insurance, financial benefits or lifestyle/leisure benefits e.g. gym membership.
Schemes can show the value of a benefit as either a monetary value or convert it into points, similar to a loyalty card. Each benefit is allocated a value. Employees can then choose how to spend their allowance across the various benefits on offer.
Regardless of whether a cash or points system is used, employers must make a clear distinction between the notional salary and the final value of salary that is actually paid in the year.
In today’s technology driven environment, most businesses introducing a new workplace benefits scheme may choose to do so via a computerised administration system. This can be via an organisation’s existing intranet or through a new online system. This option allows employees to model their own choices and can cut down administration time and costs for the employer. Whilst paper-based packages are available, they can become quickly outdated and costly to update on regular basis.
Since 6 April 2017, many of the tax and national insurance advantages that were gained via benefits offered via salary sacrifice (or an optional remuneration arrangement – OpRA) have been withdrawn so employers are wise to check, in advance, what the tax implications are of any benefits they are considering. However, bike to work schemes and ultra-low emission company cars are still eligible.
At Finura, we can help your business to ascertain which options are most relevant to your industry and lean on behavioural finance research to determine how your employees may view the perceived benefit of any package that you are thinking of implementing. For more information, please contact us.
Articles on this website are offered only for general informational and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.
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