Flexible packages - Be flexible but firm.

Setting up a scheme that lets staff choose from a selection of perks requires serious thought and planning. Adrian Glew answers 10 questions HRDs frequently ask before taking the plunge.

How do you decide if a flexible benefits policy is right for your company and employees?

This is one of the most important questions and should not be rushed. There's a list of things to consider before making any changes to the employee benefits package.

First of all, you need a clear understanding of your organisation's key objectives. Then you have to gain support from the key sponsors within the business, especially the finance director; devise a strong business case for implementing change and demonstrate the financial advantages; understand the current benefits situation in terms of size and complexity and detail any current issues that exist; have a clear understanding of the current scheme's strengths and weaknesses; set down the existing processes involved in delivering the benefits scheme; get feedback from employees of their current understanding of the existing package in terms of value and relevance to them and any changes they would like to see in the future; and finally, budget for actual and hidden costs of change.

Other areas that you should also consider are timescale, communication and administration. What is realistic in terms of launch date, how will the changes be communicated and how will choices made by the workforce be administered?

Are there other steps you should consider before introducing a full flexible benefits programme?

The flexible option is all too often wrongly seen as the only solution when changing a current standard benefits package. What is being considered might seem obvious and relatively straightforward to someone dealing with benefits on a daily basis but the introduction of a fully flexible programme can overload employees.

As a first step you may want to consider surveys. These can help you gain an insight into how the employees feel about the current scheme and how they rate it in terms of value. This could be followed by a paper or online total rewards statement. The next stage could be a range of well-chosen voluntary benefits and possibly the offer of salary sacrifice arrangements for the likes of voluntary group income protection, childcare, bikes, or even pensions (though not all are suitable for this) and mobile phones. There is merit to this approach as the employee sees the path more easily and the employer has a way of keeping the programme alive, but at the same time preventing employee overload.

How do you choose a flexible benefits partner?

Very carefully. Whoever you select will play a key role in either the success or failure of the scheme, so tread carefully. The choice is huge, with some companies providing an entire end-to-end service while others offer specific help with only elements of the programme. You need to think about how involved you want to be, and the resources you can put into it in terms of manpower and money.

Check out at least three providers and visit their offices. Ask for references. They should provide you with a demo site to play with and be available to visit you when required. Scrutinise also the small print; sometimes a low fee hides a charging structure for ongoing maintenance and upgrades or a call-centre facility.

Most importantly, ask to meet and get to know the team that will be working with you. If you like them and they like you there is a good chance it will work.

How much HR, payroll and IT time and resource is taken up when implementing a fully flexible programme?

It depends on the groundwork you do. Feasibility studies will help you decide if a flexible arrangement is right for the business or not. If this is done early on then you will have a good foundation to work on. It will have identified your budget, the internal and possibly the external team you need, a natural leader (very important) to smooth the wheels during difficult times, the right benefits to add to the mix and of course the desired timescale for the launch.

The launch date sets your timescale. Anything less than six months and you really are rushing things; anything more than 18 months and your team will desert you. The timescale and resource is also driven to a degree by how good your data is. Poor data in several different locations will take longer to understand and clean. You need buy-in from your IT people at an early stage and security is often the main point of concern for this department.

With so many benefits out there to choose from, how do you know what and how many to include?

Consult your workforce first as this will give you a feel for what is and is not popular. It is also worth employing an expert to look at the make-up of your workforce and also the type of business and area you operate in. They should be able to make recommendations based on comparable workforces. The number of benefits is critical and should fall between five and 10 key options. When choosing the main ones be careful to select those based on your demographics and performance and not just on which is the cheapest.

What happens outside the flex selection period?

Further benefits can be considered that sit outside the period during which employees are expected to make their selections. Staff will deal directly with the providers for these. This ensures interest throughout the entire year rather than just during the selection period.

If you are going to work with benefit specialists, encourage them to run mid-term seminars. These can be specific to the benefit offering or branch out into areas such as tax and pensions.

What are the best ways to communicate the scheme to help get the message across and improve take-up?

Whichever software package you choose should be able to show the value of what's on offer. They should calculate total reward, manage flexible and voluntary benefits and administer salary sacrifice. They should also calculate the tax position of each employee, produce bespoke reports, run surveys and be able to offer a foolproof paper trail analysis showing the process of all employee selections. In addition to online methods a well-targeted communication campaign often makes use of posters, emails, roadshows and one-to-one meetings. When all these are used the programme comes alive and take-up levels improve dramatically.

How are terms and conditions dealt with in a flexible programme?

The obvious area where change will be needed is when salary sacrifice is involved. The employee needs to fully understand what they are giving up and the term they are giving it up for.

You also need to be aware of the minimum wage regulations and install proper controls within your software package to ensure that no one can choose a benefit that means they could go below this minimum wage marker.

In short, each benefit should be thoroughly checked to ensure they fully comply. Companies that regularly acquire other businesses should be cautious when considering benefit selection. And finally, check the small print of your existing core benefits, especially for health-related perks as pre-existing conditions are sometimes not covered by the incoming flexible benefits package.

How labour-intensive is a fully flexible scheme once it is set up and the glitches have been ironed out?

Understandably, some employers are nervous about the additional administration burden, and rightly so. To give you an idea of the amount of work involved, ask your flexible benefits partnering company for at least two references within its portfolio that offer the same type of programme you are looking to implement. Read the contract between you and your provider carefully so you understand what is their responsibility and what is yours.

There will be some additional work at the set-up stage as your departments will be responsible for collating employee and benefit data. You will also have to ensure the partner is regularly fed information on all your starters and leavers and life changes. To help with ongoing enquiries try to find a partner that will offer you a call-centre facility.

A flexible scheme will create some additional work but this should be seen in the context of what the entire programme is bringing to the business.

What is the average pot of money needed for each employee to make a flexible benefits programme work?

It depends ... if you have very deep pockets you may want to choose your benefits and calculate the cost of them and then give that value back to your employees in the form of a very large pot. At the other end of the spectrum, some companies offer no money and ask their employees to buy the benefits out of their own salaries. This is really a voluntary benefits programme disguised as a flexible benefits scheme.

These are extremes but they do have their place. If we are to look at a more usual case you would want to have a fund of around 6% of an average £20,000 salary. But it really depends on the benefits that you choose as these will have a big bearing on the size of the pot required.

- Adrian Glew is director of Personal Management Solutions.