Flexible Benefits and HRO Add Choice for Employees and Options for Employers

Mercer’s What’s Working Survey found that one-third of European participants are seriously considering leaving their organization. This had me immediately questioning why. Does it have something to do with the employee’s benefits package? Probably not in the U.K. since 36% of respondents stated that their benefits package was the primary reason for staying at their organization.

In fact, 30% of survey participants in the U.K. said that their employer’s benefit package was the key reason for joining the company in the first place, up 5% since 2005. Across Europe including France, Germany, Netherlands, Spain, and Italy, the average percent of employees that are content with their benefits package is 50%, representing a general decline over the last five years.

The survey shows what employees value varies by country, culture, and age. While surveyed European employees have many common interests, there is variation by country. Employees in France and Italy were the most dissatisfied over many of the employee value proposition elements studied including base pay, benefits, and development opportunities. In most cases, score varied. For example, employees in the Netherlands were less likely to intend to leave and were satisfied with their benefits, but were dissatisfied with employer assistance in retirement plans and base pay.

With pressure on all aspects of workforce costs, including benefits, what is an employer to do?  One option is to add a flexible benefits program to increase employee desired choice while still controlling costs. Program designs include one or both of the following:

• Employer paid benefit “credits” that employees can use to select the choices most important to them
• Employee paid benefits available through the employer, payable with payroll deductions and usually at better prices than available in the general market.

While flexible benefits schemes have been slow to take off, the continued adoption rate will have a positive effect on flexible benefits service providers since internal HR departments tend to lack the skills necessary to administer these benefit choices successfully. According to Mercer’s European Survey on Employee Choice in Benefits, flexible benefits programs generally meet employer objectives (63%) and are well-received by employees (71%).

Using HRO to administer the programs reduces administrative cost and complexity for employers.  The number of European organizations outsourcing their flexible benefit plan has increased. Specifically, Mercer’s survey found the following:

• 36% of employers outsourced their entire flexible benefits program, up from 28% in 2009
• 33% use a combination of in-sourcing and outsourcing for their flex program, up from 23%
• 16% manage the flex offering in-house, down from 35%.

NelsonHall’s upcoming Targeting Benefits Administration market analysis report will indicate that growth opportunities for flexible benefits are very good as organizations look for an alternative to salary increases and bonuses while meeting the needs of increasingly diverse workforces.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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Benefits HRO and the Impact of Changing Benefits Trends

This week, we look into the world of benefits from the 10^th Annual MetLife Study of Benefits Trends. The long-running employee benefits research highlights the changes in trends due to the changes in the economy and their impact on the generations of employees.

Employer goals and objectives for benefits remain the same: control costs, attract and retain employees, and increase productivity. It is what employees, especially younger employees, value now that has been changing. And that may call for a change in strategies and approaches to maximize the dollars that employers spend on benefits.

Traditionally, younger employees were not very focused on long-term financial planning and retirement; now, 52% of those 21- to 30-year-olds are concerned about long-term financial security. Even though employees know that they must accept greater individual responsibility (63%) and are likely to face additional cost shifting in the future, nearly half (49%) of those surveyed say that because of the economy, they are looking to their employer to help them achieve financial protection through a range of employee benefits. The Generation Y percentage looking to the employer for help is even higher at 66%. Today’s employees of all ages are more aware than ever of the value of employer benefits, both traditional – like medical and dental – and voluntary benefits, where the employee may pay more or all of the cost. Take advantage of this awareness to increase communication, education, decision support tools, and even branding of the benefits you are providing.

Seventy percent of surveyed employers are planning to retain current benefit levels and only 10% may cut benefits, but 30% may need to continue cost shifting to employees. Few employers are planning to spend more overall on benefits, but employers are open to shifting priorities. For example, there are plans to increase the number of wellness programs and voluntary benefits offerings like long-term care, critical illness coverage, optional life coverage, and optional disability coverage.

Another reason why I wanted to bring this study to your attention is that it separates the employer data into progressive and standard. Progressive employers more attuned to changing employee needs – such as wanting more choices and life stage options – and likely to make adjustments to achieve cost control, attract and retain employees and increase productivity. This split is similar to other areas of HRO where one client wants the latest in transformation to optimize value and achieve business results and another wants improved technology and processes to lower costs and increase efficiency.

Employee benefits needs are growing, changing and challenged by uncertain economic conditions. All benefits HRO clients should expect to have a partner in adapting to changing conditions. Whether that means access to full-scale consulting for a revamp of benefits spend, policy, and offerings, or basic access to vendor research and client networking opportunities, what matters is the match of client expectations and the service provider’s ability to deliver.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.