Global People Strategy

The Flexible Benefits System (FBS) started in the US during the 1980s, is having a resurgence of popularity in many parts of the globe. When combined with compensation, the flexible benefits are more commonly known as “total rewards.” But there are many countries where flex alone is critical to employer strategies for workforce attraction and retention, as well as cost control.

Early, a Flexible Benefits System represented the first endeavor many HR leaders experienced with the concept of marketing their benefit plans. It was an effort to bring disparate benefits together in a unique package. Unlike a traditional plan in which “one size fits all employees,” FBS was seen as a way to appeal to unique needs within the employee population. Employees, hopefully, would find value in the packaging of the total benefit offering, gain better understanding of the cost and begin to make meaningful decisions about how much they wanted to spend. It was a significant shift away from the paternal role in which employers made all decisions.

The end result is a process whereby employees are more actively engaged in making decisions, and they begin to appreciate the financial value of the total package.

What drove employers to consider a Flexible Benefits System? We see striking parallels between the early FBS adopters and what today’s HR community faces. Maintaining the status quo is extremely difficult in a world where attraction and retention are constantly evolving. Key considerations in early flex programs and current programs are very similar:

These are some typical benefits with tax advantages if employee selects them across a Flexible Benefits System (it can vary by country).

Retirement Plan
Health Insurance
Life Insurance
House renting
Car renting
Meal Vouchers
School Vouchers
Training

This is a important advantage, because permit the employees enjoy the benefits and reduce his tax to pay (the two things at once)

The Designing a program is often the relatively easy part of the process, the success of a FBS often lies in how well it is communicated and implemented.

A well-designed program integrates four perspectives to support the overall need for a successful change management implementation.

– Employer perspective. Analysis of workforce characteristics, variances across operating companies/divisions and emerging trends.

– Employee perspective. Research about employee preferences by demographic group, business, and critical areas of hiring and retention. Identification of the most critical rewards that will enhance perceived value and impact on both recruitment and retention.

– External perspective. Research about relevant competitor practices and expected direction. Understanding of regulatory and administration requirements.

– Cost perspective. Assessment of costs related to all current and prospective programs and the potential for adverse selection.

One other important lesson learned from early the compensation flexible plans are the risk of offering too much choice. Not all employees value it. It can be overwhelming. Some employees will not trust it and therefore will not trust their employer. What are the risks?

– Paralysis. People who have too much choice or don’t feel capable of making the “best” choice will avoid making a decision or they will assume they didn’t make the best decision.

– Poor choice. People can make bad choices that don’t seem at all rational to an independent viewer. But sometimes employees make the easiest choice or one that is familiar and comfortable rather than one that is more difficult to make.

– Regret. Even when someone makes a decision, they might have regret or buyer’s remorse about the choices that could have been made. The result of being overwhelmed with possibilities is that they are less satisfied because they doubt that they made the best decision.

Borja Burguillos

Global People Strategy

The employees willing to pay for Voluntary Benefits

Flexible Benefits System: increasing the Total Compensation

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