Insight, strategy and best practice in voluntary benefits from Asperity Issue no.4
Make your Voluntary Benefits into a One Stop shop
What are the alternatives if you’re not ready for full flex?
How VB can help employees in tough times.
Welcome
Contents 02. Editorial
03. Keeping flex fresh - How to stop your flexible benefits portfolio going stale
04. Integration - the perfect halfway house
Commentators on complex – and even not so complex – issues frequently highlight the need for services to be ‘joined up’, talking about ‘multi-agency co-operation’ and ‘one-stop shops’. It’s helpful therefore for employers to apply this to their benefits schemes because even the largest, geographically fragmented organisations need to give their employees a sense of cohesion and identity. The pay and benefits arena is a good place to demonstrate a whole-company, seamless approach to reward.
There are two particular areas in which it is possible to transform employees’ perceptions of their employment package – one is in the communications programme and the other is in ease of access to voluntary and other non-salary benefits. Integrated communications with cross-pollentation of various benefits embeds the non-salary elements of the employment contract as part of a joined-up benefits strategy and a ‘one-stop website’ with links to all benefits promotes the employer’s brand and encourages engagement.
I hope you find this edition of Benefits Connection useful in considering how your benefits portfolio could be expanded and integrated.
06. The business case for employee benefits: Fat Diamonds are an employer’s best friend
08. What does “Integration” in VB look like?
09. Salary Sacrifice Can be complicated but worth it
10. Smoke & Mirrors “When is a discount not a saving?”
12. Adding value to their bottom line: Helping your employees’ take-home pay go further
14. FAQs Yours sincerely
Glenn Elliott MD, Asperity Employee Benefits glenn@asperity.co.uk Request our new Employers information pack at www.asperity.co.uk for more information and exclusive access to our employers VIP website
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All information correct at the time of writing and subject to change without notice. Asperity Employee Benefits Ltd, 90 Westbourne Grove, London, W2 5RT. Tel 020 7229 0349 www.asperity.co.uk email: benefits@asperity.co.uk © Asperity Employee Benefits Ltd 2008. All trademarks and registered trademarks and logos are the respected property of their owners.
Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
Keeping flex fresh
How to stop your flexible benefits portfolio going stale By George Evans, Sales Director of Ten Lifestyle There are a number of drivers for organisations to introduce a flexible benefits scheme: amongst other things, it might be as part of a smoothing process following a merger or acquisition, to lead or match competitor employers in a tight labour market where employer brand is a differential in attracting talent or just to add interest and value to an employment package. Whatever the reason, ideally a flex scheme needs a balance of ‘hygiene’ products which employees will expect to feature and some more innovative ones which may be piloted and dropped or become established features. The most popular benefits to be offered in a scheme have remained constant over the last few years, although they have jockeyed for position between themselves. Buying and selling holiday and private medical and dental insurance remain among the favourites. So a sound employer probably wouldn’t want to change these - unless it was to move the private insurance into a core benefit or if the ability to buy and sell holiday is made less attractive by the new statutory minimums coming in April 2009. And if that’s the case, what else might replace these bedrocks or be included to make a flex scheme fresh but not frivolous?
Other products in flex schemes are diverse, including wine, carbon offsets, tax return and will writing services, various insurances and roadside assistance. Not all of these will be suitable for or worthwhile for all employers but it is worth considering offering some options in flex that employees might like to know are there as a possibility, even if they don’t take them up – the aspirational benefits, the Jimmy Choos of flex. A good example of an aspirational benefit, highly valued by those employees who take it up, is a concierge service. Usually only employer-paid as a core benefit to free up the time of very senior people, concierge has real value for a much broader spectrum of employees by giving access to services that would otherwise be time-consuming and stressful to source independently. A flex scheme is a great way to add this interesting choice at a significant saving on the off-the-shelf rate. So there are ways and means to keep flex fresh and remind employees of the value of their employment package.
benefits offered in a flexible benefit scheme Additional Holiday
54.71%
Childcare Vouchers
52.35%
Dental Insurance
37.06%
Tax Free Bicycles
34.71%
Private Medical Insurance
34.71%
Critical Illness Insurance
28.24%
Medical Screening
28.24%
Travel Insurance
25.88%
Figures courtesy Thomson Online Benefits from their Employee Reward Watch 2008 survey.
Benefits Connection from Asperity
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Integration: the perfect halfway house By Helen Craik, Operations Director Asperity If you’re not quite ready for flex or, for various reasons to do with size, demographics and industry, won’t ever have a ‘flex friendly’ benefits portfolio, and TRS is still more aspirational than realistic what is out there that will make your employee benefits proposition more cohesive without too much time and trouble?
When deciding what is available to ‘flex’, organisations have to address questions like: is medical insurance part of our package as an employee benefit, or for the employer to get employees treated as fast as possible and back to work? Flex is likely to work best when it is a planned, strategic initiative; two years to implementation is not unusual.
Integrated Voluntary Benefits. In this article we look at what we mean by ‘integrated voluntary benefits’ (IVB) and why this is both an attractive option on its own and a stepping stone to full-blown flex or TRS if required. IVB is not just a nice to have, it’s a really important part of a reward strategy. Finding the right time and mix for flex. ‘Flexible benefits’ (‘flex’) describes a system for allowing employees to choose benefits additional to salary from a flex allowance or pot. This allowance may be allocated by the employer as a percentage of salary, or created by trading one benefit for another. So an employee might shift the level of a benefit up or down (e.g. lower band company car but with full range of accessories, or lower level life insurance but for self and partner). Alternatively, employees may be able to exchange salary for benefits (e.g. sacrifice up to £55 a week from salary for childcare vouchers) or exchange benefits for salary (less leave, more pay). In practice there are costs to introducing and administering flexible benefits. It’s not a goer for every organisation; according to the CIPD only around 1 in 10 organisations has a flex scheme and many of these are in private companies with more than 5,000 staff¹ . So while an organisation may be attracted to the idea of flex, it will need to time the introduction carefully and may seek a halfway house whilst on the way. Sometimes the halfway house can actually be the best final destination.
With a single website, a single employee helpdesk and a single employee communications plan covering Employee Discounts, Childcare Vouchers and Cycle to Work, Integrated VB can go a long way to meeting the desire to provide a portfolio of benefits to staff without a full blown flex scheme. In many schemes, employees can only flex once a year which is administratively easier but restrictive for employees. If a Cycle to Work scheme, for example, is part of the flex menu an employee might not want a bike during the, usually April, flex window but may want one in July when the opportunity to flex is 9 months away. What is Integrated Voluntary Benefits? Voluntary Benefits are employee paid. The employer provides access to the benefit and pays for administration, communication and support but doesn’t pay for the benefit itself. Discounts schemes are a great vehicle for other voluntary benefits - they are easy to understand and appeal to nearly everyone. It makes sense, therefore, to integrate an attractive discounted shopping benefit with the harder to communicate, less obvious CCV and CtW benefits, and other voluntary benefits, such as bus travel or season ticket loans. As employers and employees both look hard at making earnings go further against a
backdrop of economic tough times, effective use of integrated VB has the potential to have a significant impact on an employee’s disposable income. Integrated VB provides 3 areas of differentiation from offering the separate benefits as stand alones. 1. Ease of access for employees: CCV, CtW and discounts schemes do not add to an employer’s costs if more rather than fewer employees take them. So employers should be maximising engagement with these options. IVB does not need a ‘flex window’ so – and this is important in encouraging take-up of salary sacrifice arrangements – employees can sign up for a new bike (or any other VB) at any time during the year. All employees understand ‘discounts’ and in a well-run discounts programme, engagement will be high because employees have to make purchases day-to-day. So providing a single website or phone line to access discounts and all other VB, with a single login, together with registration criteria that ‘pre-recognise’ an employee moving from discounts to more complex salary sacrifice arrangements with a single helpdesk for enquiries and a single VB gateway – why would an employer go for any other route? There has to be a powerful reason to fragment VB rather than providing streamlined, employee-friendly, integrated access. 2. Integrated, single-branded communications: Obvious and yet often overlooked or done badly. Start from square 1, day 1 – an employee’s employer offers employee benefits and this is a good thing. But if this is messily communicated, looks disjointed and doesn’t have a single point of reference, take-up will suffer. VB either costs the same regardless of take-up (e.g. discounts schemes), so maximising exposure to the benefit is a win-win, or brings savings to employer and employee (e.g. salary sacrifice) so
¹ - CIPD Reward Survey 2007.
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Abbreviated from Helen Craik’s White Paper; download full copy at http://www.asperity.co.uk/whitepapers
Typical costs - 2000 employee organisation Separate, stand-alone providers
Integrated VB provision Discounts
Assume £7 per employee per year: Cost to employer = £7 x 2,000 = £14,000
Assume £8.50 per employee per year: Cost to employer = £8.50 x 2,000 = £17,000 Childcare Vouchers
1% Takeup = 20 employees Assuming an average £200 per month per employee voucher value, annual saving in employers NI approx £5,232. Provider admin charge at 4.5% of voucher value = £2,160. Net impact of Childcare = £5,232 - £2,160 = £3,072 Profit
4% Takeup = 80 employees Assuming an average £200 per month per employee voucher value, annual saving in employers NI approx £20,928. Provider admin charge at 6% of voucher value = £11,520. Net impact of Childcare = £20,928 - £11,520 = £9,408 Profit
Cycle to Work Nominal savings in NI, say £250
Nominal savings in NI, say £750 Net cost to organisation
£14,000 – £3,072 - £250 = £10,678
£17,000 – £9,408 - £750 = £6,842
This table shows how increased takeup in salary sacrifice benefits, particularly Childcare vouchers more that offsets any additional costs in delivering integrated voluntary benefits. Integrating benefits should drive takeup through a more efficient, better delivered integrated communications plan, a more complete offering to employees and cross-promotion between employee discounts and Childcare vouchers.
win-win again. Tell your employees what you’re offering in a clear, single integrated message and watch engagement increase. 3. Ease of administration for employers: “Why pay a dog and bark yourself?” It may not be an attractive phrase but it’s apt. Why introduce a CCV scheme with complex, time-consuming admin, undoing the value for you as an employer and detracting from the value to the employee because it is not streamlined and cohesive. Ease of admin is essential for VB. If it causes you unnecessary workload (some input is necessary because salary sacrifice impacts on payroll and contracts) the small beads of resentment will erode the scheme’s value. Integrated, seamless account management for all VB for the employer and a single point of contact for all VB for the employee. Sounds obvious; it is.
Are there any drawbacks to integrated VB?
Does this mesh with TRS?
It is possible to source discounts, CCV, CtW and other VBs each from separate providers and for the cumulative cost, on the surface at least, to be less than the inclusive cost from an integrated system. But the ‘savings’ that appear at pitch stage are likely to be illusionary. Maximising take-up of your VB portfolio is the most important consideration.
TRS means Total Remuneration Statement to some employers, probably the minority, and Total Reward Statement to others. TRS is often seen as the step after flex, although it is probably easier to introduce and has less complex foundations, highlighting the full value of the employment package. If employees ‘don’t know what they’ve got til it’s gone’ aren’t you as the employer mainly to blame for that. Come on, blow your own trumpets!
If integrated VB was more expensive per capita but increased CCV take-up to just 4% and CtW take-up by 10 people, the calculation would be in favour of integration with greater savings in employer NI than the increased third party administration costs.
IVB sits nicely with either definition of TRS. If TRS is already embedded in the organisation, you can ask your integrated VB provider to supply details of savings for each employee for inclusion in the TRS or, if TRS is not yet implemented employees will anyway be feeling the effect of integrated VB in their take-home pay and subsequent disposable income. Integrated VB: the final frontier and the perfect halfway house.
Integrated Single branded communications
Benefits Connection from Asperity
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The business case for employee benefits: Fat Diamonds are an employer’s best friend By Helen Craik, Director of HR Policy, Asperity Employee benefits help to lift the employment relationship out of the merely transactional. Finding the benefits with the best cost/return ratio is not an exact science but the Fat Diamond model helps. Plot cost, hassle and value of benefits and it is visually striking which ones offer the best prospect of great return, as measured by employee engagement, satisfaction and stretching of salary, for the least outlay. You can download the full text and background to the Fat Diamond model from our website at www.asperity.co.uk.
Fat Diamonds: Always
Thin Diamonds: Rarely LOW
Value to employee HIGH
Financial cost
HIGH LOW LOW
• • • •
LOW Financial Cost LOW Hassle Cost HIGH value to the employer HIGH value to the employee
HIGH
Value to employer
HIGH
LOW “Hassle”
LOW
HIGH LOW
HIGH
LOW
HIGH Financial Cost HIGH Hassle Cost HIGH value to the employer HIGH value to the employee.
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HIGH
HIGH
• • • •
LOW Financial Cost LOW Hassle Cost LOW value to the employer LOW value to the employee
cost
Despite their low cost, the low value to both employer and employee makes these rarely a good use of time to bother implementing.
Question marks: Need careful thought LOW
HIGH
Value to employer
HIGH
LOW “Hassle”
LOW
Value to employer
Financial cost
Value to employee
HIGH LOW
LOW “Hassle”
Squashed Diamonds: Sometimes
• • • •
HIGH
cost
Benefits that fit this profile should be offered by every organsiation these are the easy ones
LOW
Value to employee
Financial cost
cost
Valued and valuable but expensive. Have them if you can afford them and are in a competitive market for staff that demands this approach.
Value to employee HIGH
Financial cost
Value to employer
HIGH LOW LOW
HIGH
HIGH
LOW
“Hassle” cost
Question Marks are non-uniform and can combine any attributes, These benefits need careful thought to make sure that you can implement them in a way that delivers employer value.
Abbreviated from Helen Craik’s White Paper; download full copy at http://www.asperity.co.uk
Ex.1: Employee Discounts A Fat Diamond Employee savings can easily run into hundreds or thousands of pounds and uniquely, discounts can be used by all staff rather than just some
LOW
Ex.4: Employer-Funded pension A Squashed Diamond
Financial cost
LOW
Inexpensive: A few pounds per year per head
Value to employer
Value to employee HIGH LOW HIGH
LOW
Easy to implement: Little or no payroll integration and little work for HR other than directing employee communications
HIGH
High employee engagement and a high-profile ‘feel good’ factor leads to high value to the employer
HIGH
LOW “Hassle”
HIGH LOW LOW
HIGH
LOW
HIGH
Employer’s NI savings and being seen to support healthy and green travel gives good employer value
More hassle than discounts due to payroll integration, but less hassle than Cycle to Work as no leasing or credit agreements
HIGH LOW LOW
Value to employees is often good, but this will depend on the age of your workforce - younger staff will value this less.
Fairly easy to put in place so good marks on the “hassle” index
LOW
Employer’s NI savings and being seen to support working parents leads to high employer value
cost
HIGH
HIGH
cost
Ex6: Dental / Optical Insurance A Question Mark
HIGH
LOW “Hassle”
Value to employer
LOW “Hassle”
Value to employer HIGH
A well understood benefit that helps get employees back to work so good employer value
HIGH
Savings, not cost due to employer’s NI savings so max points here
LOW
Great at retaining people but retains indiscriminately which means not the perfect employer value figure.
Financial cost
Value to employee
Financial cost
HIGH LOW
HIGH
PMI is not cheap as a core benefit but other options are available..
Ex.3: Childcare Vouchers A reasonably Fat Diamond Only used by some employees but up to £1000 per year value for those that do
HIGH
Complexity, regulation, administration and having to answer questions from employees lead to high hassle, often tempered through outsourcing LOW “Hassle” cost
LOW
Hassle due to payroll integration, leasing of bikes, credit agreements and having to handle leavers leads to moderate hassle factor LOW “Hassle” cost
HIGH
LOW
Ex.5 : Private Medical Insurance A Question Mark
Value to employer
HIGH
Value to employee
HIGH LOW
Savings, not cost due to employer’s NI savings so max points here
Value to employee
Value to employer
HIGH
Financial cost
Only used by some employees but good value with savings of up to £500 or so
Very high financial cost for an employer funded noncontributory pension
Value to employee
cost
Ex.2: Cycle to Work: A reasonably Fat Diamond LOW
Exceptionally high value to employees (as long as they understand it), secures this benefit its place in the squashed diamond list
Financial cost
Financial cost
Cheaper than PMI but costs add up as a core benefit
A well understood benefit that helps get employees back to work so good employer value
Value to employer
Value to employee
HIGH LOW
HIGH
LOW
Arguably less value than PMI but with dental costs increasing this may be changing?
HIGH
HIGH
Fairly easy to put in place so good marks on the “hassle” index LOW “Hassle”
cost
Benefits Connection from Asperity
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What does “Integration” in VB look like? By Ross Musgrove, Head of Client Services at Asperity In this article, we take a look at how an integrated VB scheme dovetails with both other benefits and the wider HR strategy within a financial services organisation, ‘FinanceForYou’. With thousands of staff and hundreds of retail outlets, FinanceForYou was a challenging environment for HR and the reward specialists in particular, with a huge range of jobs and geography. Something fresh was required to get the interest of the staff and in so doing, draw their attention to the total value of their employment package. That something was discounts on goods and services. A previous discounts scheme with insufficient choice and lowend offers had limped into the distance although it wasn’t quite dead. The reason it wasn’t quite dead was that it was used as a vehicle for FFY’s financial products for its own staff, clearly a valuable employee benefit but one which was not being communicated well, and where it was known and accessed by staff, was tarnished by the lacklustre surroundings of the failing discounts product. So a new platform was needed that combined FFY’s own products with a much wider employee discounts proposition, re-invigorating the total reward message.
Communications in organisations frequently fails, not least because lots of people talk endlessly about communicating but don’t actually do it.
Integration with FFY’s internal comms channels Communications in organisations frequently fails, not least because lots of people talk endlessly about communicating but don’t actually do it. FFY had well-established internal communications– intranet, staff magazines, newsletters and team briefs – and OffersForYou fed into these regularly with competitions, top offers and, importantly, chiming with internal initiatives like Green Week and the Finance Provider of the Year Awards theme. A visual rolling 12 month programme meant high visibility for the rewards specialists and easy explanations to IC departments and employee reps. But like many organisations, FFY’s grapevine was the most efficient comms tool and word of mouth from satisfied users was instrumental in raising engagement.
Joined Up Branding One Stop Shop for all VB For FFY, it was make or break – if the integrated VB scheme didn’t work, it would be dropped. The decision was taken to use FFY’s recently launched consumer branding on the comms for the new scheme and the brand the staff scheme OffersForYou, giving the scheme the clear backing of the organization, not just something that sat in a dusty corner of the benefits cupboard. It was a bold decision but the parameters were clear – 40% engagement inside 18 months or the plug would be pulled. That dealt with the integration of the employer’s brand with VB and the internal products with the external offers. Phase 1.
With the discounts and branding working well, the next step was to bring FFY’s childcare vouchers scheme into the OfferForYou portfolio – making for a single login, website and cross-awareness. Highly valued in financial terms by users, feedback suggested that the current scheme was cumbersome which deterred employees from signing up. It was also poorly understood by employees on the lower end of the earnings scale and FFY had a significant number of staff earning under £18k who could benefit but were not. To enhance the sustainability agenda, Cycle to Work was launched as an integrated product and OffersForYou was established within its first year as the home of VB. A fully integrated campaign meant that cycle to work crosspromoted the discounts service and both enhanced the overall brand. Innovative integrated communications set the watercoolers talking - they didn’t all like the particular theme FFY had chosen but they did all talked about it. Next Bus passes, season ticket loans and some innovative discounts developments are on the way. 13 months in, 57% of employees regularly use OffersForYou and the target now is 65% at the end of year 2. This case study is real but the name of the organisation has been changed.
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Salary Sacrifice
Can be complicated but worth it By Tom Lavery, Head of Sales at Asperity “If all private companies were to set up salary sacrifice arrangements for their workforce, it is estimated that those companies and their employees could save an estimated £1bn a year in tax” ¹. Interesting sums there, but a vital part of the savings equation is missing – setting up the scheme is not enough, employers and employees have to understand and use salary sacrifice or it really isn’t worth having a scheme. If you want more than just a tick-box exercise for salary sacrifice, choose your provider and portfolio carefully. It’s fine to cover the green or sustainability agenda at the same time but better still to get a meaningful benefit as well. The perception of complexity for those just entering the salary sacrifice arena can seem daunting, and this lingering perception inhibits many employers from actively promoting schemes, fearful of generating paperwork and questions they don’t want and feel ill-equipped to deal with. The recent flurry of uncertainty around the provision of childcare vouchers during maternity leave, with its attendant cost for employers, has not helped. And there is still a lingering resistance post-HCI debacle. The end result of any salary sacrifice scheme is the same: the ‘product’ doesn’t differ. The schemes are regulated and the tax savings for an individual will be the same whichever organisation provides the vehicle. Where savings for employers can be maximized is by getting good take-up – the more people who elect to take childcare vouchers, cycles for work or annual bus passes, the more the employer saves. So don’t be frightened. Get good advice so you know you and your employees are compliant, get a motivated provider to ensure everyone knows about and can access the schemes, take away as much jargon as possible and grab a bit (or a bit more) of that £1bn.
¹ - Anthony Arter Head of Pensions, Eversheds in www.legal.com
Benefits Connection from Asperity
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Smoke & Mirrors
“When is a discount not a saving?” By Glenn Elliott, MD of Asperity Are your employees “normal” consumers? We live in a fast moving world with brands and retailers pushing hard to get a share of our money. That’s one reason why marketers and companies have to try so hard to make their product or offer seem better than the next one. After all, once you’ve got the punter through the (online or offline) door, even if the reality of the product hits them before they buy, at least you’ve started a dialogue and might even benefit from buyer’s inertia along the “I’ve got this far, can’t be bothered to keep looking” variety. But one person’s cutting edge marketing is another person’s complaint to the Advertising Standards Authority, what one person would see as spin or presenting the product in the best possible light, someone else would see as being detached from the truth – so where does the line get drawn?
If your benefits provider is actually being paid by retailers, shops and brands, who do you think they will really be serving?
Some of the more extreme examples of companies getting carried away with their own hype end up in marketing folklore. There’s the energy company that made an unwelcome appearance on a TV consumer programme after complaints about their fixed price annual electricity deal; they had redefined a “year” in the small print to be 10 months long. With “enthusiastic” marketers abundant in the retail space it’s no surprise that these practices can spill into the employee discounts arena.
‘Too good to be true’
off!
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And that’s where employers need to be careful because employee communication is not retail consumer marketing and it’s important to take reasonable steps to make sure staff aren’t misled up or down the garden path. If a discounts service is put in place by their employer, employees will have the expectation of enjoying a real benefit. Deal or no deal Over its time in employee discounts, Asperity has come across all sorts of great deals that weren’t really great deals after all. We’ve seen the “60% off XYZ gym offer” that was comparing the price of a full peak membership with a Saturday and Sunday only membership – a great headline but not a discount per se. It was actually comparing these two completely different products (peak and off-peak) and there was no ‘offer’ at all. Then there was the “£500 off all used cars for employees” offer that was actually identical to the same car retailer’s normal consumer offer, except the special employee site used the words “employee-only” on screen. On a slightly lesser scale, but still capable of becoming an issue, are the “Up to 40% off” headlines. When faced with a claim like this, isn’t it reasonable for an employee to think that most products will be close to 40% off? Or is it enough that one or two are at 40% off and the rest are at a more modest 10% or 20%? We think that it’s better to promote an offer as “10% - 40% off normal prices” and keep the employee’s trust on our side rather than over-egg the marketing and end up with an employee that feels cheated at the very first fence. The problem with this sort of marketing is it undermines the genuine value available in employee discount programmes and it can make employees feel a whole scheme is a con. A few high profile, much talked about but incorrectly promoted offers can easily discredit a scheme and if you think this issue is related to just some shoddy back street retailer offers you’d be wrong – many of the worst offenders are the largest brands and biggest retailers. What your employee see needs to be what they get But it would be wrong to lay the whole blame at the retailers’ doors; the promoters of a portfolio of offers have something to answer for as well. If you were assessing two VB providers and the first offered a headline rate of 30% off a well known discount holiday operator and the second 6% off the same operator, at first glance the 30% discount trashes the meagre 6%. In fact the 6% was the winner because the second provider had negotiated 6%
Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
off the normal consumer pricing for employees, whereas the first competitor had negotiated 5% off, but then decided to combine an existing 25% off that this particular holiday shop offered all of its consumers with their negotiated 5% to make a total of 30%. This is risky territory and most employees would think this was misleading once the standard 25% off came to light. Employees have a right to be able to look at their employer’s benefit scheme and see clearly and unambiguously what the employee deal is. They don’t expect to be pushed towards marketing from external companies and they don’t come to work to be sold to by aggressive marketers. There is a line between consistent, competent, clear and ‘come on in’ employee communication and allowing providers and retailers to run rampant. Employers put their trust in reputable providers to know where that line is. The scheme provider has to ensure that neither they nor overly enthusiastic retailers take advantage of the unique relationship that benefits providers have with employees, and don’t misuse employer branded internal communications. “Free” discount schemes are becoming as quaint as smoking in an aircraft Employers as clients have had a role to play in the development of some of this situation themselves as the benefits market has evolved. For some years, it was the norm for many companies to expect benefits providers to keep costs to employers low (or in some cases none existent) by those providers taking commission and payments from retailers to be listed in a programme. It now seems nearly as quaint as smoking on an aircraft. Although this practice is fading, it is still around and employers who go down that route need to be very clear of the drawbacks and any duty they owe to employees. They need to be happy with the answer to the question: if your benefits provider is actually being paid by retailers, shops and brands, who do you think they will really be serving? It might be better not to have a scheme than to encourage over-zealous marketing, pushing offers that aren’t really offers and discounts that can be easily beaten elsewhere to your workforce in your name. The only way to deliver true value to employers is for providers to know clearly who the client is. It needs to be the employer, with the employee as the consumer. At Asperity we are clear that we are employer funded – we have no distractions or conflicts of priorities; offers get promoted to employees who use our schemes because it’s a good deal, not because we got paid to list it or are earning commission. By focusing on employees, we get to show them only deals which they like and they use and therefore we get to deliver the high levels of employee engagement that employers want and pay us for. Funnily enough it actually works for the suppliers too – by creating an employee focused benefits space, unencumbered by mixed messages and conflicting priorities, we’ve developed a programme with unparalleled levels of employee usage and spend. So the suppliers benefit in the end – well the good ones anyway.
There is a line between clear, ‘come on in’ employee communications and allowing providers and retailers to run rampant
Benefits Connection from Asperity
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Adding value to their bottom line: Helping your employees’ take-home pay go further By Rizwan Kanval, Head of Supplier Relations
Prices of everyday shopping are going up. Pay, if it is going up at all, is not generally going up by anything like as much. The savvy employer needs to find ways to help employees stretch their current disposable income. There is broad agreement among commentators as to the extent and impact of price rises in basic foods, with most putting the rise for an average family at between £700 and £800 a year. One national newspaper reported: “Food prices are accelerating at their fastest rate since records began, fuelling a rise in the average family’s shopping bill of £750 a year. Experts say the rate of food price inflation was making life increasingly difficult for the millions of families already struggling to make ends meet under the weight of rising council tax bills, mortgage repayments and energy costs.”¹
A study by a price comparison website found that “a family that spent £100 a week on food shopping last year will now have to find an extra £780 a year to put the same items on the table”². Milk has risen by 17% in the past 12 months a large branded loaf has gone up to over £1.20³ and the soaring of petrol costs is welldocumented. If we take a look at the rise in price of some specific items, and bearing the headline figures in mind, it’s clear to see that may employees will welcome assistance in coping with food inflation. So that’s the problem. What can employee benefits offer by way of solutions? The short answer, for an average family, is savings that come somewhere close to offsetting a £750 increase. Starting with that average food bill of £100 a week, Asperity’s Reward Gateway offers vouchers for Sainsburys or Asda or
Illustration of rise of price at some basic foods ASDA
Orange Juice 1 litre
Sainsburys
Tesco
ASDA
12 free-range eggs
2.5 kgs Maris Piper
frozen peas 1kg
2007
73p
£1.62
£1.78
£1.19
2008
88p
£2.35
£2.18
£1.79
For a very small outlay per employee per year, employee discounts enable employers to offer their workforce the opportunity to make their salaries go significantly further
Somerfield at 5% extra free with no delivery charge on orders over £100. So, over 52 weeks, your average family would save £5 x 52 paying for the shopping this way. If they also spend £30 a week on petrol, that’s another £78 saving. Adding in some annual and routine purchases, like insurance, phone and broadband, it is not difficult to see how a family using a market-leading discounts scheme could recoup the rise in outgoings. So savings are already potentially over £700 without factoring in ordinary spending on online purchases like DVDs, travel, financial services, books, clothes or local discounts at coffee shops, dry cleaners, gym membership and so on. Cashback amounts, one of the ways to make online savings are always additional to the retailer’s best consumer offer and so the savings are genuine. Apart from having a scheme which delivers great value, employers need to get the ‘you can save hundreds of pounds a year with our scheme’ message across. If you’ve got it, flaunt it! Having fallen into the doldrums for a few years, in the last 18 months or so, discounts for employees have become sharply relevant and excellent value for employers. For a very small outlay per employee per year, the return on extending disposable income is significant.
¹ - Daily Telegraph - April 2008 ² - mysupermarket.co.uk ³ - Office of National Statistics - April 2008 4- Illustration based on 5% extra free at ASDA and Sainsbury’s; somerfield is 4% extra free.
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Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
Illustrative annual saving using Asperity’s reward Gateway Employee Discount Scheme Saving Groceries
How
Notes
£260
Extra free on vouchers or cards
Petrol
£78
Extra free on vouchers or cards
Car insurance
£45
Cashback
e-sure new policy
Mobile phone
£40
Cashback
carphone warehouse pay monthly any phone any tariff
Cinema
£66
Odeon tickets
2 people once a month
iPod
£44
Discount
Refurbished by Apple
Day out
£52
Discount
4 people to Alton Towers
Contact lenses
£32
Cashback
Monthly supply with 8% Cashback
Holidays
£60
Discount
£1000 holiday with Virgin Holidays
Appliance
£42.50
Vouchers
£500 appliance with 8.5% discount
Total Savings
£ 719.50
Savings shown are when compared to the best available consumer offer rather than the RRP. Savings against RRP are higher.
Benefits Connection from Asperity
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FAQs
What are the questions employers and potential employers ask about VB schemes? By Tom Lavery, Head of Sales at Asperity Employers who are thinking about putting in or changing a voluntary benefits portfolio will have a variety of reasons for doing so, and different expectations of what would define ‘success’ of a scheme in their organisation. There are, however, a number of questions which commonly come up and we look at some 3 of these here. Why would I bother with a VB offer? It is very rare, in my experience, for employers who have had one or more voluntary benefits to stop – they may change providers but only very infrequently do they withdraw completely. This re-inforces research which tells us that a discounts scheme is the most popular low-cost employee benefit, delivering real and perceived value considerably in excess of the cost to the employer. There are several sound reasons why employers are keen to retain or introduce a VB scheme – probably the top four are: 1. Savings to the employees make salaries go further and turn wage into an employment package 2. Benefits turn a wage into an employment package 3. A discounts website or brochure, customised and tailored to the employer, is a fantastic tool for re-inforcing the positive aspects of the employment contract. 4. Bringing together the whole range of benefits in one place makes for cross-promotion of different benefits and a seamless approach for HR.
Employees who use a high-end discounts scheme and, if applicable, also take advantage of tax-efficient benefits can add hundreds of pounds a year to their disposable income.
Geographically dispersed employee populations and those who don’t have internet and email access at work are more challenging to reach and engagement across these organisations will take longer to build. It’s important to be realistic about VB because employees use it in different ways and 100% or employees won’t be engaged 100% of the time! At the risk of sticking my neck out, I’d say that in manufacturing and retail environments where electronic communications often can’t be delivered, 25% - 35% engagement in year 1 is often a good target, rising to as high as 50% in year 2 and past that in year 3. When we are looking at office based environments where email and intranet communications can be added to the posters, flyers and other paper-based communications that we do, we often exceed 70% engagement in year 1. It is, of course, important to be able to measure not just engagement but other key stats as well. I believe total employee spend is the best measure of success. Many providers just track how many people have viewed an offer – but that doesn’t tell you if they liked the offer and took it up or just looked at it and thought it wasn’t worth their time. Employee spend is the ultimate measure because it means the employee took their money out of their pocket and actually spent it through the programme on the offer. So it’s the ultimate measure meaning that the employee found out about the benefits programme, managed to get registered, found an offer on the product they were looking for, found the offer attractive and easy to use and actually bought it. How much will it cost? Rate cards are commercially sensitive. There are employee discounts schemes that are free, but there’s no such thing as a free discount and employers need to be diligent in checking why the scheme is apparently free. Others offer a top of the range product, wholly employer funded with added value in branding, engagement, MI, comms and employee service. The best schemes are highly cost-effective and offer a valuable benefit for a whole year for probably less than the hourly rate of a mid-level supervisor.
What sort of engagement levels can I expect?
What about employees who don’t have the internet at work?
This will vary widely and a number of factors feed into the equation. Probably most important is the quality of the scheme – a poor VB scheme will inevitably lead to low engagement. Even a good scheme, however, will also suffer with lower than expected engagement if it is not properly and regularly communicated to employees.
It’s true that online shopping opens up a whole set of discounts and savings that aren’t available offline. Retailers worried about ‘code leakage’ are increasingly turning to other ways to attract employees and Asperity’s Reward Gateway has an extensive portfolio of Cashback deals which offer fantastic value. They are available online only at the moment, though watch this space!
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Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
We have done considerable research to find out the extent of internet use by employees in various workplaces, and in particular where employees do not use a pc as part of their working day. The results are extremely consistent and show over 80% of people in work have broadband access at home, with another small percent having dial up. This includes industries with lots of lower paid or part-time workers. So although your workforce might not be tapping away during the day, they will very likely shop online anyway – or someone in the family will.
don’t be put off. If you’d like a copy of our complete FAQ set dedicated just to Childcare Vouchers, give us a call and we’d be happy to wing one over.
There are 3 key mechanisms for reaching offline shoppers – shopping vouchers and cards with extra free which employees order by phone (or online) and just take into the store, a discounts card which employees can show to mostly local retailers or a good brochure. We’ve done some great work in these areas so really do have a solution for everyone.
Tom Lavery Head of Sales Asperity Employee Benefits t: 0207 229 0349 m: 07590 183 405 e: tom@asperity.co.uk
Of course, we gets lots of questions apart from those above and will address more of these in our next issue. In the meantime, I’d be very happy to talk to you about your particular questions on discounts, childcare vouchers or cycle to work.
How complicated is salary sacrifice like Childcare Vouchers and Cycle to Work? Yes, this one comes up all the time and it is true, these schemes are regulated, they involve HMRC and they can be tricky for employees to grasp. Payroll is involved and sensitive data. But
Benefits Connection from Asperity
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In a crunch you need all of your staff to be focused on creating value
rg|Concierge helps your staff get on with their job – whilst we help them by doing ours. rg|Concierge is the new business focused concierge service from Asperity Employee Benefits and Ten Lifestyle. Working 24/7, internationally and in multiple languages, we can take care of product sourcing, business problems, organisational tasks, event booking, complex travel arrangements and just about anything that’s legal and ethical. So if you want your people to focus on the real tasks in hand, let them offload their non-core work onto us. You’ll see an improvement in productivity and you’re team will thankyou for it as well. For more information call Tom Lavery at Asperity on 020 7229 0349.