Pensions - Articles - European countries embrace flexible benefits

European countries embrace flexible benefits in an era of increased competition, cost control and a changing workforce

• Remaining competitive, retaining talent and responding to a diverse workforce are key motivations for employers to provide a benefits choice programme
• Cost control and administrative struggles remain biggest challenge to companies
• Flexible benefits look set to increase across Europe and within multinational companies

 A Europe-wide survey conducted by Mercer on employee choice in benefits has found that there is an increasing demand for employers to provide their workers with more choice and control over the benefits they receive as a consequence of the ‘war for talent’, cost constraints and a diversifying workforce. About a third (32%) of respondents said they already offered some form of choice in employer-paid benefits, with an additional 30% providing employees with the opportunity to purchase one or more voluntary benefits. And of those not offering choice currently, approximately two-thirds is seriously considering doing so. However, the survey results also show that employee choice programmes and benefits offered vary significantly by country.
 Findings from Mercer’s 2011 European Survey on Employee Choice inBenefits reflect the responses of 516 employers across 11 European countries in which employee choice* is either common or there is an interest in introducing more choice.
 The results show that employer-paid benefit choice is most common among respondents from the UK (48%), followed by Sweden (44%), the Nordic countries (39%), Denmark (38%), the Netherlands (37%), Spain (35%) and Germany (28%). It is less common in France (13%), where legal and tax issues pose significant challenges, and in Italy (5%), where employee choice is in its infancy.
 Nevertheless, the survey results suggest that these numbers will grow. Of all respondents who do not currently provide choice, 69% say they are looking to introduce some form of choice in the future whether in the form of voluntary benefits, choice beyond voluntary benefits, or a fully comprehensive flexible benefits (flex) programme. Some of the strongest interest is seen in countries where employee choice has been relatively rare. Approximately two-thirds of the respondents from Italy, for example, are considering implementing some form of choice programme.
 Reducing cost and complexity
 When asked about the challenges of implementing an employee choice programme, respondents across all countries were most likely to cite “complexity of administration” (39%) and “cost” (39%) as “very significant” challenges. However, far fewer employers are concerned about these issues today than in 2009, when Mercer’s survey found that 52% were concerned about administration and 49% about cost.
 Kim Honess, Mercer’s UK Head of Flexible Benefits, commented on this encouraging trend: “As the flexible benefits market has grown, one of the major attractions has been the ability of employee choice programmes to generate savings for the organisation while controlling the annual spend on benefits. There are a range of flexible benefits which attract no tax or national income contribution liabilities.”
 Social insurance model countries, that is, those with government-sponsored non-profit insurance funds with premiums paid by, or on behalf of employees, are more likely to see legal or tax issues as a “very significant” challenge, such as in the Netherlands (41%).
 Furthermore, survey findings show that administration challenges are increasingly being eased by the use of outsourcing. More than a third (36%) of companies with a comprehensive flexible benefits program now outsource all aspects of administration, which is a substantial increase from the 2009 survey (22%).
 Significantly, the results showed that the current economic climate has not affected companies’ desire to continue developing their employee choice programmes, with some even choosing to accelerate the process, illustrating the value that is placed on such schemes.
 Standing out as an ‘employer of choice’
 The most important reasons for implementing employee choice programmes were, “remaining competitive in the marketplace” (cited by 58% of respondents), “retaining current employees” and “improving employee engagement” (each cited by 54% of respondents), and “responding to diverse workforce needs and values” (45%).
 Ms Honess commented: “Employee benefits are one of the most important means to help companies stand out as an ‘employer of choice’. In today’s highly competitive marketplace, where a diverse workforce expects a range of options, traditional, ‘fixed’ benefits can seem outmoded. Therefore, a competitive and diverse benefits package, which gives people the ability to adapt benefits to suit their lifestyle, is important when recruiting and retaining company talent. This seems to be key motivation for employers across Europe.”
 Responding to diverse workforce values and needs
 “Employers are increasingly aware of the need to respond to a diverse workforce. Age, culture, and family are all factors which can affect workers’ benefits needs. By taking time to understand and target the different demographics of a company, employers can get more value from their benefits and make sure their employees are engaged with the benefits they receive”, said Ms Honess.
 The survey has shown that employers across Europe are tailoring their benefits to suit the different needs and values of their workforce. Whilst core employer-paid benefits vary across countries, the most common are insurances, pension savings plan, employee training, cars and meal vouchers.
 Global scope of flexible benefits
 While only a handful of multinational respondents have a global employee choice strategy in place, nearly a third of those that do not say they are seriously considering implementing one. The number of multinational respondents that believe their organisation is not yet ready for a global strategy has fallen from 35% to 20%.
 “Harmonising and standardising flexible benefits internationally can be a challenge when dealing with differences in customs, tax laws and other legislative factors”, says Ms Honess. “However, once established, a global strategy can aid employee engagement and benefits alignment, and, in an era where the global workforce is so fluid, an international flexible benefits scheme can bolster multinationals in the global war for talent.”
 Respondents cited that, through a global benefits strategy, they hope to achieve benefits and governance alignment, easier administration, reduced cost, and the reinforcement of their global brand.
 Flex programmes set to spread
 Ms Honess concludes that: “Employees are largely satisfied with their employee choice offerings. More than two-thirds (75%) of respondents described the employee response to choice schemes as being largely positive, and the majority agree that their employee choice programme has met their original objectives (62%). These findings confirm the value placed on employee benefit choice by employees and employers alike, and signal that employee choice -- flex programmes in particular -- looks set to spread within European countries and across them.”

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