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Contact: Renay Logan
Tel: +44 20 7178 3553

UK
London, 22 October 2009

One in four employers now offers employees choice in the benefits they receive, with a third of the remainder also considering doing so, according to a survey of more than 1,700 organisations in 47 countries, conducted by Mercer.  The most important reason for providing choice is to “respond to diverse workforce needs and values”, but a further factor is also the ability to manage costs. Nearly a third of organisations offering choice programmes* said the strategy had helped them to reduce benefit costs.

According to the survey, 27 percent of employers provide at least some choice in the benefits they offer, while 14 percent have comprehensive flexible benefits programmes. Comprehensive or “full flex” programmes are defined as having core benefits and optional benefits, with credits and a spending account.

The survey results indicate that these numbers will grow.  Of the employers who currently offer a standard package of benefits to all employees, 37 percent say they are either planning to add choice or are considering it.  Beth Umland, Mercer’s head of health & benefits research, commented: “In the current economic environment, many employers can’t afford generous pay increases, so they are relying more on their benefit programmes to keep employees happy.” 

In connection with this, she noted that nearly two-thirds (62 percent) of all respondents said that a very important priority for their health and benefits programmes for the next few years would be “to increase employees’ understanding and appreciation of benefits.”

Regionally, choice in benefits is more common in North America** and Europe than in Asia-Pacific or Latin America.  But there is also considerable variation within regions, most notably in Europe.  Employers in the Netherlands, Spain and the UK are the most likely to provide choice (53 percent, 44 percent and 42 percent, respectively) while employers in Italy and Russia are the least likely (13 percent and 16 percent, respectively).

“Many factors affect the decision to implement a choice programme, starting with the level of state benefits and local regulation and policies affecting taxation of benefits,” said Ms Umland.  “In addition, employee expectations vary widely by country and by industry. For example, in the UK, Canada and Singapore, there is an expectation that desirable employers in certain industry sectors will offer flexible benefit schemes. In many developing countries, such as China and Eastern Europe, workforce competition is driving the need for innovative ways of offering benefits.” 

Success of programmes offering choice

The majority of respondents agreed that their choice programmes had met their original objectives (82 percent).  In addition, most employers said that the employee response to their programme had been positive (83 percent).

Although the most common reason given for not offering choice is the perceived cost (given by 60 percent of respondents without choice programmes), the majority of employers offering choice have found that they are either cost neutral (42 percent) or save money (30 percent). Ms Umland commented: “Employers can shift the effects of inflation and other cost increases to their employees by placing a maximum limit on their contributions to the benefits package through a flexible benefits scheme.”

She added, “We were interested to see that more than 8 out of 10 employers with choice programmes said these had met their original objectives, from both a business and an employee satisfaction perspective.  Given this, we can expect the trend towards offering choice and full flex programmes to continue – especially as advances in technology make them easier and less costly to administer.”

One in four global employers that offer choice or full flex programmes said they are seriously considering implementing a global employee choice strategy. Currently, few multinational employers manage their employee choice programmes globally (2 percent) or even regionally (9 percent).

Current benefit choices offered
The types of benefits offered through flex programmes can vary widely by region and country.  Across all survey respondents:  

Insured benefits most likely to be offered are medical (71 percent for employees; 48 percent for dependents), life insurance (57 percent), dental (52 percent), accident (47 percent) and vision care (35 percent).

The range of allowances includes those for mobile phones/telecommunications (29 percent), cars (29 percent), gym memberships (28 percent), childcare (24 percent), food (18 percent), public transportation (15 percent) and housing (13 percent).

Other benefits commonly offered include retirement/employee savings plans including voluntary pension (46 percent), health screenings (28 percent) and holiday buy/sell options (24 percent).

Administration of flex programmes
Nearly half of those employers with comprehensive flex programmes handle them exclusively or primarily in-house (49 percent). More than a quarter (28 percent) outsource the entire process, with just the key decisions remaining in-house. Another 23 percent use a co-source approach with a mixture of in-house and outsourced resources, with claims payment and administration and the help desk/call centre most often outsourced.

The majority of respondents’ employees enrol via an online enrolment system (68 percent) while 47 percent use printed materials and 7 percent use a telephone voice-response system. Some of these employers use a combination of methods.

Mercer has developed an interactive tool that allows companies to compare choices offered to employees in different geographies and by different sized companies, among other survey findings. 

Notes for editors
*For the purposes of this survey, “employee choice” was defined as an arrangement whereby employees may exchange some or all benefits for others or for increased cover, or are given a set budget to “purchase” supplemental benefits.  Comprehensive or “full flex” programmes were defined as having core benefits, optional benefits, credits and a spending account.

**North America is represented only by Canada.  The US was not included in the survey as a separate, annual survey is conducted in the US on healthcare and other related benefits.  

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Contact: Renay Logan
Mercer Press Office
Tel: +44 20 7178 3553