Another typical day on the road. I met yet another FTSE 250 company with their benefits all over the place. Pension schemes divided between a large Actuary and an IFA, Share scheme with a Share Administration provider, Risk benefits provided through one company and Medical benefits through another; separate providers for Voluntary Benefits, Childcare Vouchers, Bikes and Total Reward Statements; and an overall realisation, that the system is just not working.
Organisations seem to be battling some very major issues; the closure of DB schemes, spiralling costs of benefits, re-inventing the pay package to meet new hire expectations, re-negotiating the packages of current employees, managing complex eligibility requirements of historic employment contracts; the last thing they need is a web of supplier networks attempting to deliver against these requirements.
Employers appear to be coming around to the discovery that there are core benefits; savings, risk and health; that need to be provided to a certain level as a key responsibility to their staff; and then there are Employee Discount schemes that can stand alone in cyberspace for anyone who is interested.
Even after stripping out the chaff from the core though, they are not the simple things that could be administered off spreadsheets in the past.
The reasons for the increased difficulty are:
- Cost
- Complexity
- Change
Cost
Pensions were the first benefit to bust the bank, spectacularly! But the cost of most other health and risk products is spiralling as well to a lesser extent. Companies are also realising as they begin to consolidate benefits across the organisations that they may have multiple deals in place with a single health insurer, or are paying far too much for their life insurance. Interestingly, it is the rare company that actually knows the amount they spend on their benefits, let alone administration of those benefits. But all this is changing as the spotlight turns on to this part of the compensation package.
Complexity
Organisations are growing rapidly and often by acquisition. Over time, multiple levels of terms and conditions are created, usually quite invisible to the benefits department. As organisations begin to consolidate their benefits and analyse eligibility, the true complexity of the benefits emerge and the realisation that the age old methods of administering benefits cannot continue.
Change
Finally, in the post-DB era, companies are realising that they need to offer employees multiple methods of saving for retirement and this by definition means enabling employees to switch funds between Pension, Shares, Mortgage Repayment and other similar savings and risk products. This requires technology, availability of data, automated workflow and occasionally, manpower to grease the wheels.
Reward & Benefits departments are therefore focussing on re-evaluating their Benefits strategy and looking at three key objectives:
- Streamline eligibility and processes
- Consolidate benefits brokering, access and delivery
- Outsource as much of the delivery as possible
So in answer to the question, “Are we there yet?” the answer has to be a resounding “No”!
To learn more about how this is being done, email the author at girishmenezes@hotmail.com
Tuesday, 11 December 2007
Friday, 27 July 2007
Reward Strategy? Am I Bovvered?
The London Business School 'Human Capital Series', hosted Duncan Brown and John Campbell, on the 11th of July, to speak on the topic of 'Strategic Reward'. They had an interesting take on the topic.
HR text books, they said, can't help you with your Reward Strategy and clinical hot house models of Reward Strategy are a waste of time! This, coming from a man who has co-written one of the best books on 'Strategic Reward' in the UK over the last couple of years and from another who heads Reward for one of the largest financial institutions in the world, was a bit of a shock. But Duncan Brown and John Campbell were both very clear; if your Reward Strategy can't engage your employees, it is meaningless. People don't necessarily trust their employers. The paternalistic models of Employee-Employer relationships have all but died. And informing your employees that their Reward structure is changing fills them with dread, not expectation. So what exactly should we be doing in such a situation?
We have written a white paper summarising the discussions emanating from the event.
Email me at GirishMenezes@hotmail.com for a copy.
Sir Andrew Likierman and Vicky Wright will be speaking on the topic of 'Linking Employee Compensation to Performance' on the 1st of November. Drop me an email if you would like to be included on the mailing list for the registration form.
HR text books, they said, can't help you with your Reward Strategy and clinical hot house models of Reward Strategy are a waste of time! This, coming from a man who has co-written one of the best books on 'Strategic Reward' in the UK over the last couple of years and from another who heads Reward for one of the largest financial institutions in the world, was a bit of a shock. But Duncan Brown and John Campbell were both very clear; if your Reward Strategy can't engage your employees, it is meaningless. People don't necessarily trust their employers. The paternalistic models of Employee-Employer relationships have all but died. And informing your employees that their Reward structure is changing fills them with dread, not expectation. So what exactly should we be doing in such a situation?
We have written a white paper summarising the discussions emanating from the event.
Email me at GirishMenezes@hotmail.com for a copy.
Sir Andrew Likierman and Vicky Wright will be speaking on the topic of 'Linking Employee Compensation to Performance' on the 1st of November. Drop me an email if you would like to be included on the mailing list for the registration form.
Tuesday, 17 July 2007
Employee Benefits - Back to Basics!
As the dust settles on the NI/Tax-enabled Flexible Benefits frenzy that died a sudden death with the pulling of the HCI scheme in May 2006, a small group of UK Organisations continue to march toward offering their Employees choice. According to research commissioned by Employee Benefits Magazine and JP Morgan Invest this year, 25% of organisations in the UK with over 5,000 employees now offer Flex. Overall, companies offering flexibility to at least a proportion of their staff have increased to 27% from 15% three years ago. But this interest in Flex is now a controlled process, by a select group of companies, rather than the mad scramble we have seen over the least few years.
I personally speak to over 500 organisations every year and meet with approximately a third of the FTSE 350 annually and I see a clear change in the interest levels of these organisations and the reasons that are being put forward to implementing Flex.
In August 2005 we conducted research across the FTSE 250 to evaluate the drivers toward Flexible Benefits and the top three were all ‘Employer-focussed’:
- Employee retention
- Employer Tax and NI savings
- Capping of Employer benefit costs
Today, the drivers are all centred back on the ‘Employee’ and the twin drivers of Recruitment and Retention that kicked of the interest in Flexible Benefits in the 1990’s.
The Employee Benefits / JP Morgan Invest research lists the following issues shaping benefits strategies today:
- Improving perceived value of the benefits package
- Making benefits more cost effective
- Communicating benefits
- Desire to improve staff engagement
- Desire for flexibility
In fact, I have heard more about ‘Employer Brand’ and ‘Employer of Choice’ over the first 6 months of 2007 than the previous three years put together.
This is not surprising as Recruitment is now the top problem for more than half of all UK companies ahead of business strategy or management according to a new study by KPMG and the Recruitment and Employment Confederation and this is causing a renewed pressure to build ‘Employer Brand’ and re-look at Reward strategies.
This in turn is re-surfacing three key objectives:
- Offer Employees flexibility to choose their own preferred compensation & benefit package
- Increase take-home pay through group discounts and NI/Tax savings
- Communication of better value through ‘Total Reward’ and ‘Total Value’ statements
Employee flexibility
Of the 20 or so benefits that most organisations offer as part of their flex package, there are some clear winners and losers. The most popular benefits tend to be SAYE, Life Assurance and Private Medical. This appears to be equally fuelled by the importance Employees placed in the benefits as well as positive subsidisation of the benefits by Employers. This is usually followed by Catering Vouchers and Retirement/Investment benefits. Benefits that tend not to get such great take up are the nice-to-haves like Health Assessments, Car Parking and Lifestyle Management. Only the top 10 benefits on average get double digit take-up.
The biggest difference in benefit take-up rates are by age rather than sex, grade or income.
- Under 20 year-olds stick to staples like SAYE, Life Assurance and PMI choices and take the rest as cash
- Catering vouchers have a strong take-up by 20 – 40 year-olds
- Childcare Voucher take-up is expectedly highest in the 30 – 40 year-old group
- A sharp increase in interest in Retail Vouchers is usually seen in the 40 – 50 year-old age group
- The over 50’s had a significantly greater interest in retirement benefits
This clearly does indicate a strong positive-negative preference to specific benefits by certain age groups and lumping them all into a single regimented benefit set is unlikely to be valued by individual employees in the same way. Of course, providing the benefits means investing in technology, systems and processes that can administer these benefits easily and cost-effectively, as well as in communicating the value of the offering appropriately.
Expanding take-home pay
Historically, in the UK, there has been a strong focus on base salary. However, there is an increasing realisation that the two critical factors in terms of Employee compensation are ‘Cost to Company’ and ‘Employee Take-Home Pay’. Employees tend to calculate take-home pay as post-tax cash plus value of appreciated benefits.
In research we conducted this year, there were significant cash savings through employee discounts, as well as NI and Tax savings to Employees who were able to invest in Benefits of their own choice. On average, there was a £355 saving for each employee that equated to 1.2% of salary at the basic level. Larger NI and Tax saving interventions increased this by 1.3% to result in a 2.5% saving on average for each employee. This is a substantial saving in a year where average salary increases have been 3.6% from June 2006 to 2007 according to Voca and disposable income is shrinking rapidly in the face of rising consumer debt.
These sort of Salary Sacrifice based benefits and Voluntary Benefits based on Group Discounts are seen as very attractive to Employees, but only if offered within a unified Employer-based system with a solid communication process behind the initiative.
Total Reward and Total Value
Of course, the key to investing in sourcing these benefits, placing them in a unified system and allowing your employees to make choices around their selection, is ensuring that your employees understand the value of what has been given to them.
Two Employers I have met over the last couple of months with approximately the same Employee size had dramatically different result from their Flex initiative. One Employer got a 70% take-up rate for their benefit programme and the other had a take-up rate of less than 7%.
Communication was key to the first company reaching a 70% take-up rate and the other failing miserably in their attempt to benefits nirvana. Communication initiatives do not come cheap and cannot deal with these large issues if done in an ad hoc manner. It needs to be done in a sustained manner and focus on the larger picture of what is on offer, the advantages, the value of the discounts, as well as the NI and Tax savings received by investing in these benefits. Take-home glossy brochures, employee forums, expert advisors, Total Reward / Total Value statements and Modellers can all help bring the message home to each and every one of your Employees.
Conclusion
Most companies I am speaking to currently have already made these choices and are investing in solid Reward Strategy planning, selecting robust systems that can deal with the administration of these strategies in a low maintenance and automated manner, and kicking off communication programmes that can bring their employees along with them as they progress along the path of sharing the Compensation and Reward strategy with their Employees rather than focussing on a top-down vision of what Employees want and need. It’s really refreshing to get back to basics and deliver sensible Benefits Administration solutions that work.
If you would like to learn more about our research in this area or our delivery methodology for Benefits Administration solutions, do drop me an email at GirishMenezes@hotmail.com.
I personally speak to over 500 organisations every year and meet with approximately a third of the FTSE 350 annually and I see a clear change in the interest levels of these organisations and the reasons that are being put forward to implementing Flex.
In August 2005 we conducted research across the FTSE 250 to evaluate the drivers toward Flexible Benefits and the top three were all ‘Employer-focussed’:
- Employee retention
- Employer Tax and NI savings
- Capping of Employer benefit costs
Today, the drivers are all centred back on the ‘Employee’ and the twin drivers of Recruitment and Retention that kicked of the interest in Flexible Benefits in the 1990’s.
The Employee Benefits / JP Morgan Invest research lists the following issues shaping benefits strategies today:
- Improving perceived value of the benefits package
- Making benefits more cost effective
- Communicating benefits
- Desire to improve staff engagement
- Desire for flexibility
In fact, I have heard more about ‘Employer Brand’ and ‘Employer of Choice’ over the first 6 months of 2007 than the previous three years put together.
This is not surprising as Recruitment is now the top problem for more than half of all UK companies ahead of business strategy or management according to a new study by KPMG and the Recruitment and Employment Confederation and this is causing a renewed pressure to build ‘Employer Brand’ and re-look at Reward strategies.
This in turn is re-surfacing three key objectives:
- Offer Employees flexibility to choose their own preferred compensation & benefit package
- Increase take-home pay through group discounts and NI/Tax savings
- Communication of better value through ‘Total Reward’ and ‘Total Value’ statements
Employee flexibility
Of the 20 or so benefits that most organisations offer as part of their flex package, there are some clear winners and losers. The most popular benefits tend to be SAYE, Life Assurance and Private Medical. This appears to be equally fuelled by the importance Employees placed in the benefits as well as positive subsidisation of the benefits by Employers. This is usually followed by Catering Vouchers and Retirement/Investment benefits. Benefits that tend not to get such great take up are the nice-to-haves like Health Assessments, Car Parking and Lifestyle Management. Only the top 10 benefits on average get double digit take-up.
The biggest difference in benefit take-up rates are by age rather than sex, grade or income.
- Under 20 year-olds stick to staples like SAYE, Life Assurance and PMI choices and take the rest as cash
- Catering vouchers have a strong take-up by 20 – 40 year-olds
- Childcare Voucher take-up is expectedly highest in the 30 – 40 year-old group
- A sharp increase in interest in Retail Vouchers is usually seen in the 40 – 50 year-old age group
- The over 50’s had a significantly greater interest in retirement benefits
This clearly does indicate a strong positive-negative preference to specific benefits by certain age groups and lumping them all into a single regimented benefit set is unlikely to be valued by individual employees in the same way. Of course, providing the benefits means investing in technology, systems and processes that can administer these benefits easily and cost-effectively, as well as in communicating the value of the offering appropriately.
Expanding take-home pay
Historically, in the UK, there has been a strong focus on base salary. However, there is an increasing realisation that the two critical factors in terms of Employee compensation are ‘Cost to Company’ and ‘Employee Take-Home Pay’. Employees tend to calculate take-home pay as post-tax cash plus value of appreciated benefits.
In research we conducted this year, there were significant cash savings through employee discounts, as well as NI and Tax savings to Employees who were able to invest in Benefits of their own choice. On average, there was a £355 saving for each employee that equated to 1.2% of salary at the basic level. Larger NI and Tax saving interventions increased this by 1.3% to result in a 2.5% saving on average for each employee. This is a substantial saving in a year where average salary increases have been 3.6% from June 2006 to 2007 according to Voca and disposable income is shrinking rapidly in the face of rising consumer debt.
These sort of Salary Sacrifice based benefits and Voluntary Benefits based on Group Discounts are seen as very attractive to Employees, but only if offered within a unified Employer-based system with a solid communication process behind the initiative.
Total Reward and Total Value
Of course, the key to investing in sourcing these benefits, placing them in a unified system and allowing your employees to make choices around their selection, is ensuring that your employees understand the value of what has been given to them.
Two Employers I have met over the last couple of months with approximately the same Employee size had dramatically different result from their Flex initiative. One Employer got a 70% take-up rate for their benefit programme and the other had a take-up rate of less than 7%.
Communication was key to the first company reaching a 70% take-up rate and the other failing miserably in their attempt to benefits nirvana. Communication initiatives do not come cheap and cannot deal with these large issues if done in an ad hoc manner. It needs to be done in a sustained manner and focus on the larger picture of what is on offer, the advantages, the value of the discounts, as well as the NI and Tax savings received by investing in these benefits. Take-home glossy brochures, employee forums, expert advisors, Total Reward / Total Value statements and Modellers can all help bring the message home to each and every one of your Employees.
Conclusion
Most companies I am speaking to currently have already made these choices and are investing in solid Reward Strategy planning, selecting robust systems that can deal with the administration of these strategies in a low maintenance and automated manner, and kicking off communication programmes that can bring their employees along with them as they progress along the path of sharing the Compensation and Reward strategy with their Employees rather than focussing on a top-down vision of what Employees want and need. It’s really refreshing to get back to basics and deliver sensible Benefits Administration solutions that work.
If you would like to learn more about our research in this area or our delivery methodology for Benefits Administration solutions, do drop me an email at GirishMenezes@hotmail.com.
Thursday, 3 May 2007
'What's Strategy got to do with Reward' - a London Business School event
The London Business School 'Human Capital Club' is hosting their next 'Human Capital Forum' on the 11th of July from 19:00 to 21:00 focussing on the 'Alignment of Reward with Business Strategy'.
Moderating the event will be:
John Campbell, Director Rewards & Recognition, Citigroup Global Consumer Group EMEA and Former CIPD Vice President, International
Duncan Brown, PricewaterhouseCoopers, Former Assistant Director General CIPD, Author of 'Strategic Reward: Making it Happen' and LBS Alumnus
Key agenda items will be:
- Common problems Organisation's are having with Reward Strategy and Change
- Key areas successful companies are addressing to align Reward with Corporate Strategy
- Case studies of successful companies in the UK and Europe
- Key differences between successful and unsuccessful businesses
The Club gathers senior HR thought leaders at the London Business School every quarter to discuss specific topics of interest to the HR community and ask specific Academics, Practitioners and Consultants to host the event as moderators/thought leaders/case studies. We end each session with drinks and canapés and write-up the results of the discussion as a thought piece.
Please email me at GirishMenezes@hotmail.com for the registration form to sign up for the event. There is a £20 charge to cover expenses including drinks and canapés.
Moderating the event will be:
John Campbell, Director Rewards & Recognition, Citigroup Global Consumer Group EMEA and Former CIPD Vice President, International
Duncan Brown, PricewaterhouseCoopers, Former Assistant Director General CIPD, Author of 'Strategic Reward: Making it Happen' and LBS Alumnus
Key agenda items will be:
- Common problems Organisation's are having with Reward Strategy and Change
- Key areas successful companies are addressing to align Reward with Corporate Strategy
- Case studies of successful companies in the UK and Europe
- Key differences between successful and unsuccessful businesses
The Club gathers senior HR thought leaders at the London Business School every quarter to discuss specific topics of interest to the HR community and ask specific Academics, Practitioners and Consultants to host the event as moderators/thought leaders/case studies. We end each session with drinks and canapés and write-up the results of the discussion as a thought piece.
Please email me at GirishMenezes@hotmail.com for the registration form to sign up for the event. There is a £20 charge to cover expenses including drinks and canapés.
How much do you spend on Employee Benefits?
At a recent conference I attended at the Ritz, organised by B2E Solutions, ten heads of Compensation & Benefits from some of the largest UK organisations admitted that they did not know how much money they spend on Benefits Administration. In fact, we frequently we meet FTSE 250 companies who do not even know how many employees they have on a given day, let alone what the financial spend on these employees are.
Given that up to 50% of your cost base is likely to be your employee salary costs and over 10% of salary is tied up in benefits, it is becoming increasingly obvious that historic methods of administering the financial aspects of Employee Reward are not going to be acceptable moving forward. Fortunately, it is possible to integrate all of these seperate employee costs using fairly accepted best practice and easily available technology solutions.
In an organisation we visited last month a plethora of departments were responsible for benefits delivery. HR Shared Services managed the Payroll and Contracts of Management and Clerical staff, whereas Blue Collar workers were managed by local offices. Finance handled Pension contributions, Risk processed Life and Medical insurance and Procurement dealt with cars. Voluntary benefits were offered by an external organisation off their generic website. In such a situation, it would be a time-consuming and expensive project to understand take-up, preferences and cost analysis of particular benefits to the workforce and unsurprising how little HR knows about the Employee spend.
There is quite clearly a need to integrate all these disparate elements together, but where will you find the business case for such a project?
Know your Costs
A solution that can integrate all of the individual components of the Employee financial package for the purpose of Management Accounting is itself a hygiene factor today. It must be a prerequisite that HR should be able to capture and track Employee Costs by group and type in as near to real time as possible. At this stage the key factor in the decision process is the analysis of where all the various pieces of data resides and how easy it would be to interface or integrate the various processes to enable one-view of the Employee financial package. You could make various decisions about maintaining separate databases and software for the various parts of the package, or bringing them together within a single software application.
Demographic Profiling
Once a single view of the Employee financial profile has been created, it is then possible to profile your costs and the value it provides across the organisation. It is possible to benchmark take-up rates against other similar organisations and come to conclusions regarding the viability of certain benefits or a realisation that perhaps greater communication is required for others. Older workers for example have been found to prefer discounted shopping coupons for example. Understanding this value being created or destroyed for various parts of your organisation helps you create the appropriate emphasis during the recruitment cycle, as well as during Annual Enrolment.
Target Communication
Analysis of your benefit programme can aid in both the marketing of current benefits to appropriate segments of the organisation as well as help gauge the efficacy of new benefits that you may decide to introduce to the organisation. This is especially true in complex multi-company organisations with disparate interests across employee groups. For this reason, none of the voluntary benefit firms in the UK are actually turning in a profit. This is due to the emerging realisation that putting together a laundry list of badly marketed discounted offers on a non-company website is not sufficiently interesting enough to drive employee engagement and purchase. It is the well managed and marketed internal benefit programmes that achieve the compensation goals that we desire. In the earlier example, skewing communication about retail vouchers toward older employees could help ensure that they extract maximum value out of the benefits that you have negotiated for them. In another example, a major building company realised that marketing childcare vouchers in employee's homes as opposed to site-based communication enabled them to encourage take-up in 50% of the estimated eligible population.
Control/reduce benefit costs
Data mining of your benefit programme coupled with employee feedback can help evaluate the cost to benefit ratio of your various benefit programmes. This can ensure that you aren't spending excessively on certain products, where it isn't required or appreciated. Over £2Bn is spent every year on benefits in the UK and it is estimated that a fair proportion is wasted. In a major Financial Services company, individual employees could choose which members of their family they could cover with PMI and dental insurance but hadn't actually negotiated a per family member rate with the providers.
Conclusion
Given the large amounts of money currently being spent on Compensation & Benefits and the importance of Human Capital, it is only right that we turn our magnifying glasses on to the appropriateness of the benefit spend. It will however require some strategic thinking, an investment in technology and a change in processes before it is possible to actually be able to move toward the ideal of having a transparent benefit programme and the ability to slice and dice it into an intelligent reward programme.
If you would like to learn more about how to take control of your Compensation & Benefits spend email me at GirishMenezes@hotmail.com
Given that up to 50% of your cost base is likely to be your employee salary costs and over 10% of salary is tied up in benefits, it is becoming increasingly obvious that historic methods of administering the financial aspects of Employee Reward are not going to be acceptable moving forward. Fortunately, it is possible to integrate all of these seperate employee costs using fairly accepted best practice and easily available technology solutions.
In an organisation we visited last month a plethora of departments were responsible for benefits delivery. HR Shared Services managed the Payroll and Contracts of Management and Clerical staff, whereas Blue Collar workers were managed by local offices. Finance handled Pension contributions, Risk processed Life and Medical insurance and Procurement dealt with cars. Voluntary benefits were offered by an external organisation off their generic website. In such a situation, it would be a time-consuming and expensive project to understand take-up, preferences and cost analysis of particular benefits to the workforce and unsurprising how little HR knows about the Employee spend.
There is quite clearly a need to integrate all these disparate elements together, but where will you find the business case for such a project?
Know your Costs
A solution that can integrate all of the individual components of the Employee financial package for the purpose of Management Accounting is itself a hygiene factor today. It must be a prerequisite that HR should be able to capture and track Employee Costs by group and type in as near to real time as possible. At this stage the key factor in the decision process is the analysis of where all the various pieces of data resides and how easy it would be to interface or integrate the various processes to enable one-view of the Employee financial package. You could make various decisions about maintaining separate databases and software for the various parts of the package, or bringing them together within a single software application.
Demographic Profiling
Once a single view of the Employee financial profile has been created, it is then possible to profile your costs and the value it provides across the organisation. It is possible to benchmark take-up rates against other similar organisations and come to conclusions regarding the viability of certain benefits or a realisation that perhaps greater communication is required for others. Older workers for example have been found to prefer discounted shopping coupons for example. Understanding this value being created or destroyed for various parts of your organisation helps you create the appropriate emphasis during the recruitment cycle, as well as during Annual Enrolment.
Target Communication
Analysis of your benefit programme can aid in both the marketing of current benefits to appropriate segments of the organisation as well as help gauge the efficacy of new benefits that you may decide to introduce to the organisation. This is especially true in complex multi-company organisations with disparate interests across employee groups. For this reason, none of the voluntary benefit firms in the UK are actually turning in a profit. This is due to the emerging realisation that putting together a laundry list of badly marketed discounted offers on a non-company website is not sufficiently interesting enough to drive employee engagement and purchase. It is the well managed and marketed internal benefit programmes that achieve the compensation goals that we desire. In the earlier example, skewing communication about retail vouchers toward older employees could help ensure that they extract maximum value out of the benefits that you have negotiated for them. In another example, a major building company realised that marketing childcare vouchers in employee's homes as opposed to site-based communication enabled them to encourage take-up in 50% of the estimated eligible population.
Control/reduce benefit costs
Data mining of your benefit programme coupled with employee feedback can help evaluate the cost to benefit ratio of your various benefit programmes. This can ensure that you aren't spending excessively on certain products, where it isn't required or appreciated. Over £2Bn is spent every year on benefits in the UK and it is estimated that a fair proportion is wasted. In a major Financial Services company, individual employees could choose which members of their family they could cover with PMI and dental insurance but hadn't actually negotiated a per family member rate with the providers.
Conclusion
Given the large amounts of money currently being spent on Compensation & Benefits and the importance of Human Capital, it is only right that we turn our magnifying glasses on to the appropriateness of the benefit spend. It will however require some strategic thinking, an investment in technology and a change in processes before it is possible to actually be able to move toward the ideal of having a transparent benefit programme and the ability to slice and dice it into an intelligent reward programme.
If you would like to learn more about how to take control of your Compensation & Benefits spend email me at GirishMenezes@hotmail.com
Monday, 30 April 2007
Employee Reward and the 80/20 rule
At the last CIPD Reward SIG event, Duncan Brown presented some of the results from recent research he conducted at the CIPD. One of the key slides that caught my imagination was the time-value split between Reward Strategy and Reward Administration.
According to the research conducted by the CIPD ‘Supporting business strategy’ and ‘Developing reward strategy’ were ranked at 65% and 62% respectively in terms of ‘Most important’ to the roles of the respondents, but only 13% and 33% respectively in terms of ‘Time consuming’. On the other hand, ‘Reward Administration’ was ranked at a mere 18% in terms of ‘Most important’, but 63% in terms of ‘Most time consuming’.
As a Benefits Administration specialist I find this statistic quite amazing as this reflects a key problem I personally face when I go to market.
Since Benefits Administration is clearly not a priority for the Reward professional, it is difficult to get quality time to discuss the issues surrounding the topic and possible solutions. On the other hand however, Benefits Administration takes up a significant chunk of the Reward professionals time, so a little time spent up-front in trying to find a workable solution to the problem may enable him or her to focus more attention to the truly key issues of ‘Reward Strategy’ and alignment of Reward Strategy to business needs.
A second interesting observation, is that in recent research conducted by SBC Systems and our sister firm B2E Solutions, we discovered that of companies that offered more complex benefits, nearly 70% of FTSE 250 companies outsource all or part of their Benefits Administration. This should really be the perfect strategy for reducing the time spent on Benefits Administration down to the 18% allocation it deserves. But given that this is not the case, is this the time to explore a different option?
To learn more about how we help simplify and automate the administration of complex Benefit and Reward strategies, send an email to GirishMenezes@hotmail.com
Read a whitepaper on simplifying Benefits Administration here: http://employeereward.blogspot.com/2007/02/5-steps-to-benefits-administration.html
Read a copy of a study we completed on Benefits Administration trends and Best Practice here: http://employeereward.blogspot.com/2007/02/benefits-administration-in-united.html
According to the research conducted by the CIPD ‘Supporting business strategy’ and ‘Developing reward strategy’ were ranked at 65% and 62% respectively in terms of ‘Most important’ to the roles of the respondents, but only 13% and 33% respectively in terms of ‘Time consuming’. On the other hand, ‘Reward Administration’ was ranked at a mere 18% in terms of ‘Most important’, but 63% in terms of ‘Most time consuming’.
As a Benefits Administration specialist I find this statistic quite amazing as this reflects a key problem I personally face when I go to market.
Since Benefits Administration is clearly not a priority for the Reward professional, it is difficult to get quality time to discuss the issues surrounding the topic and possible solutions. On the other hand however, Benefits Administration takes up a significant chunk of the Reward professionals time, so a little time spent up-front in trying to find a workable solution to the problem may enable him or her to focus more attention to the truly key issues of ‘Reward Strategy’ and alignment of Reward Strategy to business needs.
A second interesting observation, is that in recent research conducted by SBC Systems and our sister firm B2E Solutions, we discovered that of companies that offered more complex benefits, nearly 70% of FTSE 250 companies outsource all or part of their Benefits Administration. This should really be the perfect strategy for reducing the time spent on Benefits Administration down to the 18% allocation it deserves. But given that this is not the case, is this the time to explore a different option?
To learn more about how we help simplify and automate the administration of complex Benefit and Reward strategies, send an email to GirishMenezes@hotmail.com
Read a whitepaper on simplifying Benefits Administration here: http://employeereward.blogspot.com/2007/02/5-steps-to-benefits-administration.html
Read a copy of a study we completed on Benefits Administration trends and Best Practice here: http://employeereward.blogspot.com/2007/02/benefits-administration-in-united.html
Friday, 2 March 2007
Is Flexible Benefits Worth the Trouble? - the 5 Levels of Complexity
According to recent research, 59% of UK organisations have or are planning to have a Flexible Benefits programme within the next two years. But 57% of employers believe that the cost of implementation and the complexity of administration are the biggest problems with setting up and running a flexible benefits scheme. So the big question on people’s minds when dipping their toes into Flex is whether ‘Flex is worth the trouble’.
Is Flexible Benefits worth the trouble?
Within organisations that my company has implemented Benefits Administration solutions, we have reached 70% employee engagement in terms of employee population who have changed their benefit mix in some way. At least one of our Clients has seen dramatic improvements in retention rates and over 50% of companies who have implemented Flexible Benefits claim that Flexible Benefits improves recruitment and retention figures. That indicates to me and my Clients that implementing Flexible Benefits is indeed worth the trouble.
However, in the rush to implement Flexible Benefits, we have found that the reason a number of companies face administration nightmares is that their focus tends to be solely on the superficial layer that is the choice of Benefits themselves, and forget some of the far more important factors that need to be ascertained around the administration of these benefits.
What are the key complexities to administer Flexible Benefits?
The 5 levels of complexity that need to be addressed as part of implementing Flexible Benefits are:
- Benefits mix
- Eligibility matrix
- Workflow design
- Data mapping
- Channel selection
Benefits mix
Most organisations spend a considerable amount of time, effort and money on selecting the Benefits in their Flexible Benefits mix. In fact, Companies are often days away from Open Enrolment when the benefit supplier’s change or an additional benefit added or subtracted from the plan. Demographic profiling of employees, focus groups, supplier selection panels, procurement negotiations and feasibility studies based on benefit take-up and NI/Tax savings are some of the tools used for this purpose. This is a critical first stage in the implementation of Flexible Benefits, however once completed, Clients tend to drop straight down to ‘Channel selection’ stage without bothering to fine-tune some of the other pieces in the puzzle.
Eligibility matrix
Almost every Client or prospective Client I have met tends to tell me that eligibility criterion in their company is really very simple. And on closer inspection, this is almost never the case. Benefit eligibility tends to be built up over time and based around changing employer-employee relationships, individual negotiations, mergers, acquisitions and disposals. As a result, the benefit eligibility matrix is usually extremely complex. Even post harmonisation, it takes an iron will, well structured templates, and a time-tested system to capture all of the eligibility exceptions that you will find across your company. Once you do however make the effort to create your three-ring binder containing your eligibility matrix, this suddenly gives you the power to intelligently interrogate choices made in the benefit selection process and thereby enables you the opportunity to reduce your overall benefit costs.
Workflow design
Once you have a clear idea regarding the benefits on offer and have mapped the eligibility criteria across your organisation, you will realise that a variety of sub-optimal historic workflow have been put into place to support the benefit selection process. The trick is to get away from historic decisions and look at the Benefits and supporting Workflow with an entirely new set of eyes. You would expect that the Consultancy paid to prepare your Benefit Case would have investigated the optimal workflow to support the process; however this is almost never the case. Once you have arrived at your best-practice Benefit Administration workflow, you can easily automate these via readily available software solutions.
Data mapping
Once you have the workflow sorted out, you can then go down a level and look at the data map that you need to put into place to make the solution work seamlessly. Where is the data stored, and how do you get it from one place to the other. SBC Systems routinely tests systems using live data as this flushes out corrupt data that could create mystifying issues if left unchecked. Data cleansing and the putting into place of strong processes to keep the data clean is a critical step to ensure the smooth running of your Benefits Administration system.
Channel selection
Only after thoroughly specifying the first four layers of complexity in the Benefits Administration process, should a company begin investigating channel options and the channel itself can be broken down into a variety of specific components.
The key components are:
Benefit selection mechanism – web / paper / telephone
Help & Assistance – Online help, Paper based communication and Tele-services
Back-end processes – Back-office systems for changing data, inputting paper enrolment, reporting and event management
Change control – Design, delivery and testing of annual enrolment changes and mid-year changes
Delivery – Outsourced, Externally hosted, Internally resourced
Conclusion
Flexible Benefits has proven itself as a tool for employee engagement, recruitment and retention to a significant percentage of UK Organisations. We appear to be now moving into the second phase where organisations are being forced to implement Flexible Benefits due to competitive pressures and the need to be seen as the ‘Employer of Choice’. There is a very real concern though that administration of Flexible Benefits is not easy and there is a need to do a far more thorough audit of the Benefits Administration processes rather than just focussing on the Benefits themselves. Since the UK Flex market is reaching maturity, it is possible to find organisations who have successfully implemented Flexible Benefits in organisations like yours, and it is therefore possible to tap into their knowledge of best practice prior to implementing Flex. Finally though, it must be remembered that auditing these processes that lie beneath the benefits requires a greater investment than is now being made by most companies.
Hope this article helps you in your next Benefit Administration project. If you would like to know more about the work we do in this area or you want to do an audit of your own Benefits Administration system contact us at GirishMenezes @hotmail.com
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