Employers that use flexible benefit
schemes are noticing reduced costs, and engagement is benefitting as a result.

Nearly one in four employers has
reduced their benefit costs by introducing a flexible benefits scheme,
according to a survey of UK employers conducted by Mercer.

A total of
55 percent of respondents believed that setting up a flexible benefits scheme
would actually increase their costs. Yet 39 percent of those with flex schemes
said their benefit costs were lower than they would have been without a flex
scheme, while 45 percent said their costs had been unaffected.

“When put
into practice, flex can be an effective vehicle for managing and reducing
company costs. This is done by putting a limit on employer contributions to
employees’ benefit packages. As costs increase, employees can elect to reduce
their benefit levels, increase their own contributions or switch to another
benefit,” said John Puddephatt, senior consultant at Mercer.

“Employers
can also make benefit adjustments that help to reduce tax and National
Insurance contributions. Examples are salary sacrifice programmes for pensions
and other benefits,” Mr Puddephatt added.

Only
11 percent of respondents to Mercer’s survey said that the most important
reason for introducing flexible benefits was to reduce or control the company’s
contribution to benefit costs. Mr Puddephatt commented: “From this research,
and evidence from our own client work, we believe flex should
be given higher priority as an option for managing company costs – given most
companies are looking to make further cost reductions in the year ahead.  

In the
survey, a total of 33 percent of employers said that they aimed to reduce their
current benefit spend in 2010, while 45 percent said they planned to reduce
benefit cost increases over time.