Feeling the benefit

How prevalent are flexible benefits offerings?

David Wreford: There is a wealth of interest in a number of
different facets of the employee benefits package. Flexible benefits really
kicked off in the early 1990s among companies that were interested in maximising
national insurance savings. Subsequently, the attraction and retention agenda
took over in the late 1990s and early 2000s. Businesses said that they needed to
establish some structures that would appeal more to different groups of
employees.

Historically, there has been a lot of change around cars, again driven by tax
issues. Debate has also grown on issues like how much time is spent at work and
away from work, and how the work/life balance can be accommodated in terms of
employment.

Is it a case of companies moving benefits around or are they becoming
more generous?

David Wreford: In terms of benefits packages, I think
companies are increasingly trying to control their costs. In the main when we
talk to companies, it is about trying to inject some sophistication around the
package that can help position something positive to employees, when the company
might be doing other things that are not so palatable. For instance, a move from
a defined benefit to a defined contribution pension arrangement might be wrapped
within a flex plan as a way of shielding a bitter pill.

Given the Treasury’s Budget u-turn on the home computing initiative,
is there a greater or lesser appetite within government for involving itself in
benefit arrangements?

David Wreford: I think it varies on a benefit-by-benefit
basis and I suspect there are several agendas all pushing different benefits in
different directions. So on cars, for instance, it is being nudged by greener,
more environmentally friendly issues.

I suspect the home computer initiative turnaround was largely driven by the
claim that the UK had already reached the objective of having a certain
proportion of households with home computers, I think it was 75% or so, and also
what was perceived to be apparent abuse. There was hardware being called
computers that might actually be an iPod. There was concern that the national
insurance advantages and tax advantages were being abused.

What is the impact of the pensions crisis on employee benefits? Are
fewer companies coming to you trying to create pension schemes for their
staff?

Chris Tavener: Defined benefit pensions are certainly seen
by a lot of companies as attractive. But we are not seeing many companies set up
brand new defined benefit pensions schemes. We have seen quite a few starting to
freeze their pension schemes for current employees and members of the pension
scheme, and ceasing to award them benefits for future service. They are now
offering either reduced benefits or defined contribution benefits instead.

Given that art and property cannot now be included with pension
investments, have we seen real change through A Day?

Chris Tavener: For the large majority of employees, A Day
has been quite a success. Pensions are now more flexible for a lot of people.
The most upheaval has been for higher earners. There has been a lot more thought
about the benefits they are going to receive and whether they should continue to
receive a pension or opt out of their pension scheme and receive alternative
benefits.

Are fewer employees taking out a company car and going for the cash
benefit instead?

David Wreford: There are a lot of different agendas. Some
things are clear: companies that have historically provided private fuel with
their company car are now saying it doesn’t make any sense. Lots of companies
are offering individuals the option of not having a car, or they are just taking
it away because it is taxed on the same basis as if it was a car with a list
price of £14,400 so the tax is very high. You would need to do something like
15,000-20,000 private miles before there is any value there.

What are the more unusual benefits companies are offering
staff?

David Wreford: You get all sorts of funnies within benefit
packages, including cinema vouchers, health screenings and bicycles.

This week’s experts:

David Wreford is a principal and UK & Ireland team
leader for the UK human capital product solutions business at Mercer Human
Resource Consulting.

Chris Tavener is a partner at Lane, Clark & Peacock.

Chaired by Damian Wild, group editor in chief of
Accountancy Age and Financial Director.