Flex Consulting

Services

	Services
	Flex Consulting
	What is Flex?
	Business Drivers for Flex
	Introducing Flex
	Pan-European Flex

There is no 'right' approach to introducing flex. A number of key factors including budgets, recruitment and retention needs, and the desire to control data by keeping administration in-house rather than outsourcing, influence the speed at which different organisations move towards greater flexibility.

Our approach to implementing flex typically includes the following phases:

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The importance of communication

Much of the success of the flexible benefits plan depends on an appropriate communication strategy. It is vital to ensure that each employee group receives clear and consistent messages and that nobody feels left out. We work with our clients to ensure that the most appropriate media are used to meet business requirements.

The communication strategy is much more than simply developing a booklet. It is important that employees' expectations are managed and that flex is successful in changing or reinforcing employees' perceptions about the organisation. The new package will therefore need to be marketed as much as communicated.

Typically, we work with clients to develop their communication strategy and support them in the following:

• Agreeing communications objectives and measures for success

• Assessing specific communication requirements (by location or employee group) which might determine media channels and timings

• Ensuring that communication is integrated with other initiatives to deliver a consistent message in a streamlined manner

• Developing a range of tools to build awareness and manage expectations

• Assisting in drafting communication materials

• Developing the brand/identity

• Monitoring the success of the programme and modifying the strategy as appropriate

• Developing an ongoing marketing/communication strategy to ensure continued interest in the flex programme.

The key to delivering a successful flexible benefits programme is in the effective use of technology and in ensuring that everything that can be automated, is automated. Essentially, administering flex is all about transferring data between employees, the administration system, HR systems and external benefit providers.

Technology is having a major impact on the delivery of flexible benefits through the growing use of web-based applications which are leading to increased member self-service. The continued pressure to minimise/reduce costs while maintaining consistent quality and service standards will inevitably lead to an acceleration in the use of member self-service and end-to-end automation, to reduce transactional costs and ultimately overall costs. From a member’s perspective, being able to access details of their flexible benefits from different locations (e.g. work/home) outside standard business hours is a distinct advantage and is becoming a ‘must have’ facility. It can also raise the profile of the benefits being provided by the organisation, leading to increased employee satisfaction.

There are a number of considerations around how the flex plan should be delivered. Whether to take the administration in-house or to outsource all or some of the administration function to a third-party provider is a key decision. It is worth noting that some organisations decide to outsource their administration for the first year, taking it in-house thereafter. In terms of selecting the most appropriate provider, we offer a vendor selection service to help clients identify the administration solution which best meets their requirements.

As well as offering a vendor selection service Watson Wyatt also provides its own third-party administration services. Our outsourced flex administration service (e-flex) is provided by our Benefits administration practice based on software provided by our partners Vebnet. The key advantages of this system are:

• Global access and intuitive web-based enrolment

• Fast and efficient system implementation and maintenance

• Secure and painless data exchange

• Easy to adapt for corporate branding

• Flexible to cope with future change.

e-flex enables us to set up and administer benefit designs without the need for core system customisation. This means that the initial set-up and any subsequent changes can be achieved quickly and at minimal cost.

The impact of flex is far-reaching and will affect many areas of our clients' businesses. It is therefore important to identify ways in which flex can be used to enhance other areas of HR and the wider business. The diagram below illustrates some of the business activities/areas which could be impacted by flex.

The introduction of flex provides companies with a number of additional advantages, including:

• Providing a cost-effective reward portal

• Acting as a hub for other HR administration related activity, using core functionality to streamline current administration practices - improving data management and automation, thus reducing the need for back-office support

• Producing annual benefit statements in conjunction with Total Reward Statements (TRS) or showing online investment accounts

• Providing targeted benefits communications to different groups of employees/ex-employees

• Supporting in the management of employees and their career progression

• Providing organisations with a cost-effective and comprehensive benefits management system rather than simply a flex administration tool.

There are many ways in which organisations can make savings through the design of their flex plan. Perhaps the most topical of these is the restructuring of current pension arrangements in order to take advantage of National Insurance Contribution (NIC) breaks afforded to employer pension contributions.

Employers and employees pay NICs irrespective of pension scheme membership. Employers pay NICs on employees' total earnings above a minimum level and employees' contributions are no longer capped; 1% NICs are now payable on their earnings in excess of the Upper Earnings Limit.

It is therefore possible to achieve significant reductions in NICs by changing the contribution structure of the pension scheme. If employees 'sacrifice' salary (through flex, for example) instead of making employee contributions, then this has the effect of reducing NICs for both the employee and the employer. For example, you could make a 5% employee contribution pension scheme non-contributory and reduce basic salaries to 95% of their current levels. Broadly speaking, organisations have the potential to reduce their NIC bill by around 0.4% - 0.6% of pension payroll by taking this approach. Equally employees might also see a reduction in their NICs.

In addition to pension, savings can also be made by incorporating other benefits into the flex plan design that can be delivered tax and NI efficiently, such as home computing and childcare vouchers.

In each of the above cases, if an employee chooses a particular benefit, the employer no longer has to pay NIC on the salary used to purchase the benefit.