THE BUSINESS CASE FOR FLEXIBLE BENEFITS

The main business drivers for flexible benefits are to:

§  meet the increasingly varied needs of today's diverse workforce;

§  increase the perceived value of the package by targeting expenditure into areas selected by employees;

§  aid recruitment and retention (flexible benefits will normally be preferred by employees to fixed benefits of equivalent value);

§  reinforce culture change - for example, flexible benefits can reduce status divisions between grades or be used to encourage greater personal responsibility among employees;

§  position the employer as flexible and forward-looking in its approach to managing people;

§  tie in with a range of other people initiatives designed to make HR processes more flexible, for example: performance-related salary increments; broadbanding, job families, flexible working hours;

§  provide leverage to the employer's purchasing power to benefit employees and thus secure their loyalty;

§  highlight the aggregate value of the package;

§  respond to employee demand;

§  take advantage of tax/NI advantages for certain benefits (see below).

In the specific situation of a major merger - or for businesses that are, by their nature, acquisitive - flexible benefits can be a relatively inexpensive way of harmonizing terms and conditions.

Flexible benefits can also be used to control costs by providing employees with a fund to spend rather than promising a particular level of benefits (see below). Hence, if the cost of a particular benefit increases, the employee can choose whether to spend the extra on the benefit. Many US employers have used this approach to contain health-care costs.