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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