Informe sobre los sistemas de retribución flexible realizado a partir de encuestas a lectores de la publicación Employee Benefits y de los usuarios de www.employeebenefits.co.uk (en inglés)

1. MARCH 2011
Sponsored by
FLEXIBLE BENEFITS
RESEARCH l 2011

2. SPONSOR’S
COMMENT
Adapting to a world of change
Recently, I have often had the feeling that legislative changes from the new rules on pensions
everything is on the move, changing, taxation, auto-enrolment and the national
transitioning around us – and the benefits employment savings trust (Nest) from 2012, removal
world is no exception. New legislation and of the annuity purchase requirements at age 75, and
changes in taxation have been key drivers, changes in childcare taxation, among others. These
however, there have also been the business are leading to interventions such as the provision of
drivers of managing costs, controlling risk cash alternatives to pensions and the greater use of
and delivering results in a challenging salary sacrifice arrangements.
economic environment. Flexible benefits can facilitate these changes in a
It would be stating the obvious to say that many number of ways. At the simpler end of the scale,
employers have been looking at ways to reduce the flexible benefits can help soften the impact of other
benefits offered under their defined benefit (DB) harder changes. It is also an excellent mechanism
pension plans, and, in many cases, closing these plans to enable employees to make their choices about
Jacqueline Otten, to future accrual and moving to defined contribution future benefits provision, be it pensions, private
director of flexible (DC) pension provision. But other restructuring of medical insurance or income protection, at the
benefits has also been taking place, including same time facilitating the introduction of salary
benefits consulting pruning private medical insurance (PMI) provision, sacrifice benefits.
at Towers Watson, reducing the term of income protection benefits and Flexible benefits can also be part of a proactive
moving from dependants’ pensions to lump-sum solution to reduce costs and manage risk. For
says flex can play
death benefits. example, it can be designed to help share with
an important role in These changes have not always been made simply employees the rising costs of benefits or to manage
the changing to cut costs. Some employers have even improved benefits to a lower level or different structure over
defined contribution rates with the aim of making the time. In this way, employees become more actively
benefits landscape defined contribution option a more realistic engaged in the structure and cost of the benefits they
alternative to defined benefit pension provision, but choose to meet their needs. This moves benefits away
with a lower level of risk and cost volatility. Drivers from traditional paternalism to a new consumer
such as the desire to reduce risk exposure longer term approach. The employee thus becomes the consumer
have led to other benefit changes, for example of benefits within the cost and risk controls defined
moving to lump-sum death-in-service benefits. by the employer.
There has also been a move to simplify benefits There is a compelling business case for using flex
and the associated administration, to cut to support benefits change. Not only does it provide
management costs. In particular, harmonising benefits an effective tool for the employer to manage change,
terms across an organisation and removing legacy potentially reducing costs, but it also delivers value to
differences where many exist can reduce the employee through greater tax and national
administration costs significantly. insurance efficiency and access to employer-
And, of course, there has been the tax and negotiated terms for a wide range of benefits I
To find out more, visit: www.towerswatson.com

3. employee benefits/towers watson flexible benefits research 2011 M A R C H 2 011 03
Contents
Research Editor’s comment
Key findings 5 Will flexible benefits schemes as we know them still
Expert summary: Survey highlights and exist in years to come? This question is currently the
details about our respondents
subject of much debate as product and provider
evolution in the benefits market means the boundaries
Attitudes 6
Cost conscious: Age of austerity sees high between different types of scheme are becoming
value placed on flexible benefits increasingly blurred.
For example, there are no longer such distinct lines as
Structure 10
before between the definitions of flexible and voluntary benefits schemes. Also,
Ring the changes: Employees are flexing up
or down, and reshuffling their perks pack the launch of corporate wrap platforms has led to speculation about what this
will mean for flexible benefits schemes going forward.
Benefits on offer 13 Only 35% of respondents to this year’s survey think flexible benefits will remain
Stepping stone: More employers offer
voluntary benefits as a precursor to flex
in their current form for the foreseeable future. A further 38% see flex plans
becoming integrated into wider reward platforms, and 14% predict that schemes
Tax-efficient benefits 17 will be integrated into corporate wrap products. Some 13%, meanwhile, believe
Give us a break: Government tax changes
flexible benefits plans will be replaced by voluntary and tax-efficient schemes. It
make flex an attractive option
will be interesting to see how this pans out over the next couple of years as the
Impact of legislation 19 market continues to evolve.
New rules: The effects of high-earner tax
As always, we have carried out a prize draw among our respondents. This time,
changes and the 2012 pension reforms
Catherine Campkin, HR and reward manager at Estee Lauder Companies, is the
Administration 20 lucky winner of £100-worth of Marks and Spencer vouchers.
Efficient delivery: Outsourced flex admin is
growing, and success needs measuring Debbie Lovewell, Deputy Editor
Alternatives to flex 23
Other offerings: Voluntary benefits and
total reward statements are popular Editor Debi O’Donovan, deputy editor Debbie Lovewell, data analyst Michael Marshall, senior reporter
Nicola Sullivan, reporters Tynan Barton, Jennifer Paterson, art director Deborah George, sub-editor Bob
Wells, group production manager Wendy Goodbun, commercial director Suzanne Saunders, business
development director Hamish Scott, senior sales executive Peter York, group publisher Phil Hayne,
publishing assistant Lucy Jones, cover photography John Millar
Employee Benefits St Giles House, 50 Poland Street, London W1F 7AX.
Tel 020 7970 4000, Subscriptions 020 7292 3719
Email employee-benefits@centaur.co.uk
Website www.employeebenefits.co.uk
Employee Benefits accepts no responsibility for loss or damage to material submitted for
publication. Copyright Centaur Media plc. All rights reserved. No part may be reproduced
in any form without written permission of the publisher. Employee Benefits is published
by Centaur Media plc, the UK’s premier independent business publisher. For information
about the range of products produced by Centaur, visit www.centaur.co.uk. The site
contains details of vacancies at Centaur. You can subscribe online to Employee Benefits
Sponsored by at http://sales.centaur.co.uk.12-month subscription: UK £67; Europe & USA £83; Rest of
world £105. ISSN 1366-8722

4. Because we carry out regular research to keep up to date
on the latest trends and developments in the employee
benefit market, the dental plans we arrange suit a variety
of dental needs and budgets. The plans are designed using
our in-depth knowledge of dentistry and with a range of
products to choose from that cover regular dental costs,
you can offer your employees a dental plan arranged by
Denplan with confidence.
When you think dental, think Denplan, the UK’s leading
dental payment plan specialist.
So, offer your employees a dental benefit we believe
is good for them, good for you and good for overall
wellbeing.
0800 169 3279
Terms & conditions apply
www.denplan.co.uk/companies
*Denplan commissioned YouGov to conduct independent research with 1,486
employees during March 2010. The term “employee” refers to individuals
currently in employment.
years at the
heart of dental care
CAM407 02-11
Terms and conditions apply.
Denplan Limited, Denplan Court, Victoria Road, Winchester, SO23 7RG, UK. Tel: +44 (0) 1962 828000. Fax: +44 (0) 1962 840846. Email: denplan@denplan.co.uk
Registered in England No. 1981238. Registered address 5 Old Broad Street, London EC2N 1AD, UK. Lines are open 8.30am to 5.30pm Monday to Thursday
and 8.30am to 4.30pm Friday. We may record and/or monitor calls. Mobile phone charges may apply.

5. employee benefits/towers watson flexible benefits research 2011 SECTION I 05
Key findings
The survey, carried out in January 2011, is based on 379 responses from Employee
Benefits’ readers and users of www.employeebenefits.co.uk
I How many employees I The type of flexible benefits
are in respondents’ scheme offered
KEY FINDINGS
organisations
A formalised plan that is communicated to staff
as a whole and run for a set period of time 33% 38% see flexible benefits schemes
being integrated into wider
reward platforms in the future
14% Employers do not offer flexible benefits, but do offer
15%
tax-efficient benefits through salary sacrifice 25%
12%
18%
Tax-efficient benefits through salary sacrifice
(promoted as part of a cohesive flex package) 12%
36% will consider introducing
salary sacrifice around pensions
within flexible benefits as a result of the
Employers do not offer flexible benefits, but are incoming 2012 pension reforms
currently considering doing so 12%
12%
29%
Employers do not offer flexible benefits, but a
plan is currently being designed 7% 67% will not use flex to mitigate the
high-earner’s tax changes
Introducing flex has never been considered 7%
Less than 100 I I 1,001-5,000
The idea of offering flex has been rejected 5% 64% find flex schemes to be effective
in making the most of tax and
national insurance breaks
100-500 I I 5,001-10,000 Sample: All respondents
501-1,000 I I More than10,000
I The industries that private sector
90% of respondents offer benefits
with tax and/or NI breaks via flex
46% have not changed tax-efficient
Sample: All respondents
respondents operate in
benefits within flex in the wake
I Which sector Financial services 31% of government changes to such perks
respondents operate in Professional services 18%
4%
Manufacturing
Technology/telecommunications
10%
7%
97% offer childcare vouchers through
flexible benefits
14%
Retail
Building and construction
6%
3%
67% say the cost of implementation is
the biggest barrier to offering flex
Healthcare 3%
23%
60%
Leisure
Media
3%
3%
71% of employers offering a flexible
benefits scheme measure
the success of their scheme
Service (excluding public sector) 3%
Pharmaceuticals
Transportation
2%
2%
31% of employers do not know
how much it costs to run their
flexible benefits scheme
Utilities 2%
Privately owned I
Public sector I
I Publicly quoted
I Voluntary sector
Logistics
Other
1%
6% 55% allow employees to trade
down cover on specific benefits
within flexible benefits
Sample: All respondents Sample: All respondents
For more benefits research, visit: www.employeebenefits/research

6. 06 S E C T I O N I I employee benefits/towers watson flexible benefits research 2011
Attitudes
As the recession is replaced by the age of austerity, many employers are looking to
flex as a cost-efficient way to keep employees motivated, says Jennifer Paterson
I The main advantages of running a flexible benefits plan Once again, the most commonly
cited advantage of running a flex
Enables employees to tailor their benefits package to suit their needs/lifestyles 84% scheme is that it enables staff to tai-
Recognises the diverse needs and values of the workforce 79% lor benefits to suit their needs and
lifestyles. This year 84% believe this
Promotes employee understanding/appreciation of benefits 70%
to be the case, compared with 80%
Makes the most of tax and/or national insurance breaks 63% in 2010.
Reinforces the concept of total reward 58% The other top reasons have
Helps improve retention 55% changed little over the years. For
example, recognising the diverse
Helps organisations to differentiate themselves as an employer of choice 54%
needs and values of the workforce
Helps improve recruitment 52%
has consistently ranked near the
Promotes employee understanding of the cash value of benefits 50% top. In 1998, 84% felt this to be the
Helps improve motivation 49% case, broadly in line with this year’s
Helps improve engagement 47% figure of 79%.
Flex is also more likely to be seen
Helps organisations to remain competitive 47%
to help retention and recruitment.
Reinforces corporate culture/objectives 37%
In 2009, when the economy was on
Sample: All respondents (381) the slide, flexible benefits schemes
were seen as beneficial for reten-
tion (58%) and recruitment (55%)
I The barriers to implementing a flexible benefits plan purposes. The figures slipped to
50% and 47%, respectively, in
Cost of implementation 67%
2010, but crept up again this year.
Cost of administration 56% For the past two years, the cost
Complexity of administration 53% of implementing a flex scheme has
Getting approval for the business case 48% been perceived as the main barrier
to offering it. The cost and com-
Cost of flexible benefits platforms 46%
plexity of administration have also
Updating existing technology 37%
stayed near the top of the list. In
Potential removal of tax breaks by HMRC/HM Treasury 30% 2008, 54% cited these reasons,
Impact on internal HR and processes 23% while in 2011, cost and complexity
Not enough benefits that can be flexed 22% scored 56% and 53%, respectively.
Another common barrier is get-
Internal staffing resourcing constraints 19%
ting approval for the business case.
Confusing/difficult for staff to make informed decisions 18%
This year, 48% say this is the major
Amending staff contracts 18% barrier to implementing flex – a sim-
National insurance and tax issues 18% ilar level to the past three years. Per-
Lack of employee interest 18%
haps these group are not able to
prove the savings available from tax
Integrating with current benefits (eg different contract periods) 18%
and/or national insurance savings.
Sample: All respondents (379)

7. employee benefits/towers watson flexible benefits research 2011 SECTION II 07
I How the economic climate has affected flexible benefits plans in the past 12 months
Employers reviewed providers to obtain a better deal 45%
There was more pressure for employers to introduce tax-efficient benefits 37%
Employers communicated benefits more to obtain value from the scheme 33%
It has not had any impact 22%
Employers reviewed consultants to obtain a better deal 14%
It was easier for employers to justify the cost of the scheme 12%
More staff took cash rather than spending the money on benefits 11%
It was harder for employers to justify the cost of the scheme 9%
More staff flexed down employee pension contribution levels and took cash instead 7%
More staff flexed down employer pension contribution levels and took cash instead 6%
Other 2%
Sample: All respondents that offer flexible benefits plans (137)
I How the economic climate will affect flexible benefits plans in the coming 12 months
Employers will review providers to obtain a better deal 40%
There will be more pressure for employers to introduce tax-efficient benefits 39%
Employers will have to communicate benefits more to obtain value from the scheme 33%
It will not have any impact 21%
More staff will take cash rather than spending the money on benefits 13%
It will be harder for employers to justify the cost of the scheme 11%
Employers will review consultants to obtain a better deal 6%
It will be easier for employers to justify the cost of the scheme 5%
More staff will flex down employee pension contribution levels and take cash instead 4%
More staff will flex down employer pension contribution levels and take cash instead 3%
Sample: All respondents that offer flexible benefits plans (136)
Last year, 34% of respondents said they intended to review providers in the case. This year, 37% said this actually occurred, while 39% predict
the coming 12 months to obtain a better deal. Twelve months on, 45% they will experience this in the next 12 months. Such measures can help
of respondents said they actually did so. A further 40% intend to do so employers to justify the cost of their flexible benefits scheme. These may
in the coming year. have contributed to the greater-than-expected proportion of respondents
Employers are also continuing to come under pressure to introduce that found it easier to justify the cost of their scheme in the last year –
tax-efficient benefits. In 2010, 41% said they anticipated this would be 12% did so up from the 5% expecting this to be the case.

8. 08 S E C T I O N I I employee benefits/towers watson flexible benefits research 2011
The percentage of respondents I What flexible benefits plans have been effective in achieving
which feel that flexible ben-
efits schemes have helped Making the most of tax and national insurance breaks 64%
to reduce or contain the cost Promoting employee understanding and appreciation of benefits 56%
of reward has returned to
Recognising diverse needs and values of the workforce 52%
2009’s level of 38%, down
from 55% in 2010. Improving staff engagement 50%
However, overall, what Promoting employee understanding of the cash value of benefits 50%
respondents believe flex has Harmonising benefits/assisting with integration of benefits 44%
been effective in achieving in
Improving recruitment 41%
their organisation has changed
Helping the organisation remain competitive 41%
little in recent years. Plans are
most commonly perceived as Reinforcing the concept of total reward 39%
being effecting at promoting Reducing or containing the cost of reward 38%
employee understanding or Improving retention 35%
appreciation of benefits; recog-
Becoming an employer of choice 35%
nising workers’ diverse needs;
Improving staff motivation 34%
and promoting understanding
of the cash value of benefits. Reinforcing company culture 28%
Improving company image 28%
Reducing or removing status symbols/hierarchy 12%
None of the above 4%
Sample: All respondents that offer flexible benefits plans (135)
I How respondents view the future of flexible benefits plans As the reward and benefits market
expands, the standing of flexible benefits
is uncertain. Will flex be around for years to
13% come or will it go the way of the dinosaurs?
I They will become integrated into wider reward platforms One-third (38%) of respondents see flex
I They will broadly remain as they are for the integrating into wider reward platforms,
14% 38% foreseeable future while 35% see it remaining intact in its
I They will become integrated into corporate wrap products current form for the foreseeable future.
Smaller percentages of respondents predict
I They will be replaced by voluntary and tax-efficient
schemes’ integration into corporate wrap
benefits schemes
products or replacement by voluntary and
35%
Sample: All respondents that offer flexible benefits plans (136) tax-efficient benefits plans.
For more benefits research, visit: www.employeebenefits/research

9. 60
Online interface with flexible benefits schemes
For more information Tel: 0845 365 2996 E: kucorporatesales@kidsunlimited.co.uk
www.kuvouchers.co.uk
kidsunlimited Summerfields Village Centre, Dean Row Road Wilmslow Cheshire SK9 2TA

10. 10 S E C T I O N I I I employee benefits/towers watson flexible benefits research 2011
Structure
The trend for employees to be able to trade their benefits up or down continues,
and many staff are active in making changes to their package, says Nicola Sullivan
I Do plans allow unused flex I How respondents structure their flexible benefits plans
balance to be taken as cash?
Employees do not get a flex pot to spend, but can trade up or down from
I Yes their current package 30%
I No 55% Employees can opt to take tax-efficient benefits through salary sacrifice 30%
Employees are given a flex pot in addition to the core benefits offered 16%
Employees are given a flex pot equal to the value of the core benefits package 10%
45% Employees receive flexible pay, which includes the value of benefits, that
they can spend subject to purchasing certain minimum benefits 7%
Employees are given a flex pot of a percentage of salary and/or cash amount 6%
Other 2%
Sample: All respondents that offer a flexible benefits plan Sample: All respondents that offer a flexible benefits plan (153)
(153 respondents)
How flexible benefits schemes are structured This has since evolved and the most com- is just as popular as allowing employees to
has remained fairly consistent in recent years, mon way of offering flex now is to enable staff trade benefits up and down, with 30% of
although the definition of flex has changed to trade existing benefits up and down, as respondents structuring plans in this way.
quite a lot since it first arrived in the UK in the offered by 30% of employers. This figure has Such arrangements are attractive because
1980s. When flex first emerged, it was run as remained fairly static year on year, but is a slight of the savings employers can make on national
a formal scheme for a set contract period, rise on the quarter of employers that structured insurance (NI) contributions.
through which employees could opt in and out their flex scheme in this way in 2009. Some employers are beginning to offer flex-
of a selection of employer-paid benefits, select This year, enabling staff to take tax-efficient ible benefits plans internationally. This year,
employee-paid benefits, or take the cash. benefits through salary sacrifice arrangements 11% offer a plan outside of the UK.
I Proportion of employers that specify staff must I Proportion of employers that allow staff to flex
take a minimum level of benefits cover in flex down cover on some benefits and take cash
On life assurance 52% On holiday 51%
On group income protection 36% They cannot take cash 37%
No minimum cover specified 29% On life assurance 29%
On annual leave above On private medical insurance 19%
statutory minimum 28%
On income protection 18%
On pension contributions 21%
On employer pension contributions 12%
On private medical insurance 19%
On critical illness insurance 5%
On critical illness cover 7%
On other benefits 5%
On other benefits 1%
Employer considering offering 3%
Sample: All respondents that offer a flexible benefits plan (139) Sample: All respondents that offer a flexible benefits plan (139)

11. employee benefits/towers watson flexible benefits research 2011 SECTION III 11
I Proportion of staff who made I Who respondents offer their Flexible benefits schemes tend to be offered
changes to package through flexible benefits plan to to the entire workforce, although 28% of
flex during the last enrolment respondents structure their scheme differ-
ently for different groups of staff.
1 1 Employees in flexible benefits schemes
1 are fairly active when it comes to making
7% 12% 5%
changes to their benefits. This year, 14% of
9% employers said 61% to 70% of employees
9%
made active changes to their flexible bene-
9% fits package during the scheme’s last enrol-
28%
ment period.
12%
65%
14%
9%
8%
9%
28% structure their flex
scheme differently for
Less than 10% I I 51-60% I The whole workforce receives access to the
different groups of staff
10-20% I I 61-70% whole scheme
21-30% I I 71-80% I The whole workforce, but the scheme is
structured differently for different groups of staff
31-40% I I 81-90%
I Head office employees only
41-50% I I 91-100%
I Management employees
I None
I Other
Sample: All respondents that offer a flexible benefits plan (139) Sample: All respondents that offer a flexible benefits plan (153)
Although employers are keen to offer choice tions, which is perhaps surprising as we draw nomic downturn, which put a strain on
through flex, some want to ensure staff are closer to the 2012 reforms, which will bring in resources and caused workforces to shrink due
covered by particular benefits by specifying a minimum contributions for employers and to redundancies and recruitment freezes.
core minimum level of cover on some benefits employees, as well as make auto-enrolment However, in some cases employers offer
within flex. For the past two years, group risk compulsory. We therefore expect this to staff greater flexibility by enabling them to
benefits have been the perks for which employ- change significantly over the next few years trade down cover on certain benefits in return
ers have been most likely to stipulate a mini- with the proportion ultimately rising to 100% for cash. This can be particularly useful for
mum requirement. Such benefits are useful for to comply with the new pensions legislation. employers wanting to cater for younger staff,
employees in times of crisis, so it is hardly sur- This year, employers are also more likely to those with fewer family commitments or those
prising employers feel obliged to ensure staff insist that employees take annual leave above who are also covered under their partner’s
have a minimum level of cover. the statutory minimum. This may be because employee benefits schemes. The most popular
A smaller proportion (21%) of employers of their desire to tackle workplace stress. This benefit employees can trade down on is holi-
apply the same principle to pension contribu- has doubtless been exacerbated by the eco- day, followed by life assurance.
For more benefits research, visit: www.employeebenefits/research

13. employee benefits/towers watson flexible benefits research 2011 SECTION IV 13
Benefits on offer
Voluntary benefits are increasing as the main precursor to flex, while childcare
vouchers and bikes for work continue their rise in popularity, says Jennifer Paterson
I The benefits, or communications, employers offered as a precursor to flexible benefits
Voluntary benefits 44%
Standalone tax-efficient benefits via salary sacrifice 35%
Total reward statements 31%
None of the above 24%
Sample: All respondents that offer flexible benefits plans (153)
Making the transition to flexible benefits workforce for that change. fits through salary sacrifice and total reward
requires a change in how staff think about In last year’s research, 30% of respondents statements are also common means of prepar-
their perks. The manner in which benefits are offered voluntary benefits as a precursor to ing employees for a flexible benefits scheme,
offered or communicated before flex is intro- flex. This year, that number has grown to because they introduce choice and help staff
duced will have a huge impact in preparing the 44%. Offering standalone tax-efficient bene- understand the value of the package.
I How many benefits appear Getting the balance right when offering a flex-
on an employer’s total list of ible benefits scheme can be quite complicated.
flexible choices Employers will want to provide an ample Most employers offer 11
amount of choice, while also keeping the plan to 15 benefits in their flex
well structured so employees do not become scheme, illustrating more
overwhelmed by options.
7% 10%
Back in 2008, the most common number of
emphasis on choice
13% benefits offered was between five and 10, with
38% providing this amount. This year, most
respondents (39%) offer between 11 and 15
31% benefits in their flex scheme, illustrating an
increased emphasis on choice. However, 31%
still offer between five and ten benefits.
The proportion of employers which offer
39%
more than 20 benefits has always ranked the
lowest, and 2011 is no exception, with only
7% including that many perks in their flex
scheme. Meanwhile, the percentage of respon-
Less than five I I 16 – 20 dents offering a small selection of fewer than
5 – 10 I I More than 20 five benefits has stayed relatively static in the
past few years – 12% in 2008, 11% in 2009,
11 – 15 I
7% in 2010 and 10% in 2011.
Sample: All respondents that offer flexible benefits plans (135)

14. 14 S E C T I O N I V employee benefits/towers watson flexible benefits research 2011
I Benefits employers offer through flexible benefits schemes
Childcare vouchers 97% Optical care/vouchers 28%
Holiday buy and sell 91% Car allowance 22%
Dental insurance 87% Financial advice/counselling/education 21%
Bicycles/bike loans 83% Legal advice/counselling 20%
Life insurance for employees only 83% Company cars 19%
Private medical insurance for employees only 83% Wine 19%
Private medical insurance for partners of staff 82% Motor breakdown cover 17%
Critical illness insurance for employees only 75% Training and development 17%
Health screening for employees only 75% Share incentive plan (Sip) 15%
Travel insurance 66% Bonus 15%
Health cash plan 65% Discounts in onsite staff restaurants 14%
Critical illness insurance for partners of staff 64% Car parking 11%
Leisure/retail vouchers/discounts 62% Sharesave/SAYE plan 11%
Group income protection 62% Subscriptions (publications) 10%
Health screening for partners 61% Cinema tickets 9%
Group personal pension (GPP) scheme 56% Group self-invested personal pension (Sipp) scheme 8%
Life insurance for partners of staff 52% Home computers 8%
Give-as-you-earn/Payroll giving 48% Home insurance 7%
Personal accident insurance for employees only 48% Staff accounts (learning, wellbeing) 7%
Additional voluntary contributions to pension scheme 45% Mobile phone – discounted handsets 7%
Gym membership 45% Hybrid DB/DC pension scheme 6%
Personal accident insurance for partners of staff 37% Concierge service 5%
Season-ticket loan for employees only 31% Motor insurance 5%
Defined benefit pension scheme 30% Identity theft protection 3%
Stakeholder pension 29% Pet insurance 3%
Trust-based defined contribution pension scheme 28% Private fuel 3%
Carbon credits/offsetting 28% Season-ticket loan for partners of staff 2%
Sample: All respondents that offer flexible benefits plans
Benefits offered through flex have changed little over the years. Dental income tax and national insurance relief will be restricted to the lower
insurance and critical illness insurance have been popular since 2002 and income tax rate. Employees already in a scheme will be unaffected.
are still near the top, but childcare vouchers and bikes for work have Bikes for work have become common in flex schemes, but HM Rev-
been the big climbers, both typically offered through salary sacrifice. enue and Customs has said the benefit must be available to all staff to
In 2002, 24% of employers offered childcare vouchers through flex. qualify and redefined the term “fair market value” to clarify the terms
In 2007 the figure was 38%, and the following year it shot up to 93%. at the end of the hire period. In 2007, bike schemes were offered by
In 2011, these vouchers are nudging towards 100%. From 6 April, the 20% of employers, rising to 63% in 2009 and 83% in 2010 and 2011.
For more benefits research, visit: www.employeebenefits/research

15. Boost the force in
your workforce
Research shows improved productivity when an
organisation focuses on the overall health of their people.
In fact, employee well-being is essential to continued
business growth.
LA fitness Works can help you and your team to
better health by providing tailored programmes
both in the gym and online with detailed management
reporting, dedicated support and integrated payroll
structures. We’re experienced in the integration of
flexible benefits schemes and can create bespoke
employee communication to help motivate your
team to make positive lifestyle changes.
Call us on 0844 770 7722 to discuss your businesses
health needs or visit lafitness.co.uk/company-membership
Reason no design costs, no build costs,
5 just an annual license fee

16. Some employee benefits advisers
offer noble sentiments.
We offer practical help.
For further information, please contact us today:
020 7710 5571
bruce.eaton@enrichbenefits.com
www.enrichbenefits.com
Benefit solutions designed with you.

17. employee benefits/towers watson flexible benefits research 2011 SECTION V 17
Tax-efficient benefits
With government tax changes on the way, more and more employers are keen to
cash in on tax and NI breaks through flexible benefits, says Jennifer Paterson
I How government tax changes I Effect of speculation about Offering perks with tax- and national insurance
have altered benefits that are withdrawal of tax breaks (NI) breaks has become a popular way to redi-
offered through flex rect cash back into a flexible benefits scheme.
2
6% Popular options include childcare vouchers,
3
1 bikes for work and pensions.
9% 2 12%
But some of these benefits have come
17% under fire in the past couple of years, with the
46% 58%
14% government issuing changes to tax relief or
clarification on how flex and salary sacrifice
25% schemes must operate in order to qualify for
the tax efficiencies. For example, from 6 April
I Speculation has made employers cautious about
this year, the government will restrict the level
I No alteration I Employers have introducing affected benefits to flexible benefits
of tax relief for higher-rate taxpayers who
I Employers are likely removed perks in I Speculation has caused employers to consider receive childcare vouchers.
to consider question from flex withdrawing flexible benefits Such actions can lead to concern among
alterations I Employers have
I Speculation has caused employers to withdraw employers. For example, HM Revenue and Cus-
I Employer have reintroduced a
affected benefits from flexible benefits toms’ clarification around tax-efficient benefits
altered the terms of benefit(s) they
I Speculation has encouraged employers to has caused 45% of respondents to be cautious
how they offer tax- had previously
introduce flexible benefits about introducing impacted benefits to flex,
efficient benefits removed from flex
while 13% have withdrawn these perks.
I Other I Speculation has caused employers to introduce
Offering tax-efficient benefits via flexible
affected benefits to flexible benefits
Sample: All those that offer tax/NI-efficient benefits within a benefits, however, can produce significant sav-
flexible benefits plan (122) I Employer does not act on speculation
ings. Some 90% of employers currently offer
Sample: All respondents (373) benefits with tax and/or NI breaks via flex.
I Tax-efficient benefits offered through flexible I How respondents use the savings gained from
benefits schemes offering tax-efficient benefits through flex
Childcare vouchers 97% To fund the flexible benefits scheme 47%
Bikes for work 80% To save money for the business 33%
Pensions 80% Share the savings with employees 29%
Group income protection 37% To fund benefits outside the flex scheme 8%
Car 14% To fund additional pension contributions 7%
Car parking 6% To fund other initiatives within the business 7%
Mobile phones 3% To fund other HR initiatives 4%
Discounts at onsite restaurants 3% Do not use them 2%
Health screenings 2% Sample: All those that offer tax/NI-efficient benefits within a flexible benefits plan (122)
Other 4%
Sample: All those that offer tax/NI-efficient benefits within a flexible benefits plan (122)

18. You see employee benefits...they see 1000s
of products to choose from at Sainsbury’s
MAEB0411
corporate health club memberships
through flex and salary sacrifice
Enhance your employee wellness with
the GYM FLEX network.
• Memberships available at over
2,500 UK health clubs
• SINGLE and JOINT memberships available
• Discounts available for NEW and EXISTING members
www.gymflex.co.uk • 0845 300 6474 • info@gymflex.co.uk

19. employee benefits flexible benefits research 2010
benefits/towers watson flexible benefits research 2011 S E C T II O N VI I
SECT ON I 19
Impact of legislation
Forthcoming pension reforms and changes to high earners pensions tax relief have
affected attitudes to flex, but some employers are still unsure, says Jennifer Paterson
I How the 2012 pensions reforms have affected the way employers A significant number of employers still do not
view pensions in relation to flexible benefits know how the 2012 pension reforms have
affected the way they view pensions in relation
to flex. In 2010, 32% of respondents said they
Will consider introducing salary sacrifice around pensions within flexible benefits 36%
were not sure how the changes, which include
Do not know how it has affected their view 31%
auto-enrolment, had affected their view, and this
Will use flexible benefits to ease the pensions changes 24%
year’s figure is only slightly lower at 31%. In 2009
Will avoid offering pensions through flexible benefits 12%
it was 45%.
Will be deterred from flex in case the option for contributions by salary sacrifice is withdrawn 7%
This year’s research shows 36% of employers
Will remove pensions from flexible benefits altogether 5%
are considering introducing salary sacrifice around
Employers that offer salary sacrifice around pensions within flex will consider removing it 4%
pensions and flex, while 24% will look at using
Sample: All respondents (373) flex to ease the impact of the pension changes.
I Are respondents considering using flexible benefits to mitigate high earners’ tax changes?
They are not 67%
To offer a corporate individual savings account (Isa) 15%
To offer defined contribution (DC) pension
benefits as an alternative to defined benefits (DB) 11%
To offer benefits as an alternative to pension contributions 10%
To offer a cash-back alternative 8%
To offer alternative defined DB pension arrangements 4%
Other 2%
Sample: All respondents that offer flexible benefits plans (136)
With the introduction of the 50% tax rate for high earners. However, two-thirds (67%) of individual savings accounts (Isas) are the most
employees earning more than £150,000 a year employers say that they would not consider commonly considered option. This is followed
last year and the reduction of the annual using a flexible benefits scheme to mitigate the by options such as offering benefits as an alter-
allowance for tax-free pensions to £50,000 tax changes for high earners. native to pension contributions, a cash-back
coming into effect this April, employers should Among those that will consider using flexi- alternative, or alternative defined benefit (DB)
be looking at alternative options to reward ble benefits plans for this purpose, corporate pension arrangements.
For more benefits research, visit: www.employeebenefits/research

20. 20 S E C T I O N V I I employee benefits/towers watson flexible benefits research 2011
Administration
More employers are outsourcing the administration of flex, and measuring the
success of their scheme is becoming a greater priority, says Nicola Sullivan
Although the proportion of respondents that employers managed their plan in this way. By partly administer their scheme in-house and
manage their flex plan fully in-house has con- last year this figure had fallen to 39%, before partly outsource it. It is also becoming more
tinued to fall, it is still the most popular way to dropping even further this year to 25%. common for employers to outsource the tech-
administer a scheme. Six years ago, 51% of Just under a quarter (23%) of employers nology aspect of their flex, with 23% doing so,
compared with 13% in 2010 and 14% in
I Proportion of employers that use a third party for any aspect of 2009. This could be due to more providers and
their flexible benefits scheme consultants offering online flexible benefits
technology platforms, as well as many employ-
They use a flexible benefits provider 46%
ers turning to the experts to handle adminis-
They use a technology systems provider 36% tration while the employer looks at strategy.
They use a consultancy firm 17% Where respondents use a consultancy, the
They do not use a third party 16% most common reason is for help with provider
selection (61%). This is followed by help with
They use an independent financial adviser 10%
scheme design and administration (both 52%),
They use an accountancy firm for tax advice 3%
scheme communication (48%), legal aspects
Sample: All respondents that offer a flexible benefits scheme (134) (35%) and tax approval (30%).
I The cost of running a scheme per I What the annual costs of flexible benefits cover
employee per year (excluding
the cost of internal resources) Technology 87%
Administration 75%
Helpline 59%
13% Communication 53%
4%
31% Design of scheme 47%
Tax approval 21%
13%
Other 6%
Sample: All respondents that offer a flexible benefits scheme (134)
12% Given the economic climate, it is surprising which is slightly less than last year’s 13%.
16%
31% of respondents claim to have no idea Meanwhile, 13% spend £21 to £25 and a
12%
how much it costs to offer flexible benefits, similar number spend £30 or over, compared
although this figure is lower than last year, with 14% that spent this amount last year.
when 41% of organisations admitted they Most employers said the cost of flex cov-
Do not know I I £21-£25 did not know the annual costs of flex. ered technology (87%), administration
£10 or less I I £26-£29 Where employers have recorded what (75%), a helpline and design of the scheme.
£11-£15 I I £30 or over their scheme costs, 16% spend £10 or less Many invest heavily in technology to reduce
per head, compared with 14% in 2010, and admin and ensure the scheme is user-
£16-£20 I
12% spend £11 to £15. The proportion of friendly. Communication factors in highly,
Sample: All respondents that offer a flexible benefits scheme (134) those spending £16 to £20 is also 12%, indicating a desire to maximise take-up.

21. employee benefits/towers watson flexible benefits research 2011 SECTION VII 21
I Proportion of employers that I How employers measure the success of their flex plan
measure the success of their
flexible benefits scheme Employee take-up rates 88%
Employee satisfaction with the scheme 65%
Level of NI savings for the employer 52%
Level of tax and NI savings for employees 37%
29% Employee understanding of the value of benefits 37%
Impact on employee engagement 33%
Impact on retention 18%
Impact on business objectives 15%
71% Impact on other HR objectives 14%
Impact on recruitment 13%
Sample: All respondents that offer a flexible benefits scheme and measure its success (94)
Do no I I Do
I How employers capture this information
Sample: All respondents that offer a flexible benefits scheme (133)
Data provided by flexible benefits provider 73%
Employee surveys 68%
The number of employers that measure the
Other HR/business data 33%
success of their flex scheme has risen steadily
over the years. This year, 71% did so, up from Leaver exit interviews 23%
64% in 2009 and 53% in 2005. Tighter cost Employee focus groups 22%
margins have increased employers’ interest in Other 1%
the return on investment from benefits. Most
look at take-up rates as a measure of success, Sample: All respondents that offer a flexible benefits scheme and measure its success (94)
while 65% focus on employee satisfaction.
Many employers use the national insurance
I Why employers do not measure the success of their flexible
(NI) savings from offering tax-efficient benefits
benefits scheme
via salary sacrifice arrangements within flex to
fund either the scheme itself or other initiatives. Lack of resources 41%
The level of NI savings is used as a measure of
Lack of time 33%
success by more than half (52%) of respon-
They intend to start within the next year 33%
dents. NI and tax savings for the employee are
measured by 37% of respondents. Do not know 23%
The most common way for employers to No available budget 5%
capture information on the success of their Waiting for the economy to improve 3%
scheme is by obtaining data from their flex
Other 3%
provider. This is followed by staff surveys.
When it comes to those that do not meas- Sample: All respondents that offer a flexible benefits scheme and do not measure its success (39)
ure their plan’s success, 41% cite a lack of
resources as the reason. This has risen from
31% in 2009 and 33% in 2010.
For more benefits research, visit: www.employeebenefits/research

22. ʻʻ
A best in class
exhibition
bringing together
leading-edge
companies and
professionals into
one place - if you're
serious about pay
and benefits then
this is the place to be.
CRAIG TRUTER
REWARD MANAGER
CENTRICA PLC
ʻʻ
Definitely worth a day out of the office
giving you the ideal mix of education,
new ideas and networking opportunities.
JUDY LUCKINS
SECTION MANAGER BENEFITS AND PAYROLL
HONDA UK MANUFACTURING LTD
97%* of visitors to Employee
Benefits Live 2010 felt that the
exhibition was a good use of
27-28 SEPTEMBER 2011
BUSINESS DESIGN CENTRE time away from the office.
Book your stand for this year’s show now…
For information about exhibiting call Juliette on 020 7943 8066
or go to www.employeebenefitslive.co.uk
EXHIBITION ›› CONFERENCE ›› NETWORK ›› DEVELOP ›› LEARN ›› RESEARCH
*Employee Benefits Live Post-show Survey 2010 – 561 respondents.