A guide to flexible benefits

Employees using flexible benefits tech platform
Lumina

Contents

What are flexible benefits?

Flexible benefits give employees flexibility to choose from a range of benefits, exchanging employer-allocated points or salary for the benefits that are most valuable to them.

An employer might work with an employee benefits provider – or, indeed, several employee benefits suppliers – to curate a selection of perks and benefits, which may be as varied as carbon neutral fuel cards, gym memberships or additional annual leave. Employers can make these choices easily accessible to employees through an employee benefits platform.

The main difference here from old-school, one-size-fits-all benefits systems is that employers no longer need to presume what is best for their people.

It’s an opportunity to give your employees autonomy. They can look at a package, tailor it to their needs, and do so without paying for benefits that they were never going to use anyway.

With flexible benefits, your employees have the freedom to pick and choose from a range of benefits based on what works for them. They choose the bells. They choose the whistles.

How can flexible benefits work for your organisation?

1. Listen to your people.

See what your employees want, so you can come up with a solution that works for everyone in your company, including underrepresented groups.

We’ve often noticed that companies copy the benefits of other successful organisations. But their people are not your people. It doesn’t matter how prestigious the competition is, you want benefits that reflect your own people’s values and what they care about.

A paid day off on their birthday might be really appealing to one employee, but not to another who has never been especially bothered about celebrations and would rather have you plant trees. The point is to let their opinions shape the selection, so they can choose perks and benefits that will be relevant to their lifestyle.

2. Align flexible benefits with employee values

It’s important that your employee benefits are relevant to your people’s values as well as their needs.

The advantage of flexible benefits is that it gives your people choice but this is only going to be effective if they care about the benefits on offer. Choice has to go hand in hand with changing employee values, particularly around sustainability, social responsibility and wellbeing.

If employees are offended by the perks on offer it’s even worse than apathy. You wouldn’t take a vegan on a date then ask them if they’d prefer hot dogs or steak.

3. Consider how company values fit with your employee benefits

If environmental responsibility is important to you, own it. Auto-enrol all employees into an ethical pension plan as part of your core benefits. Some things can be set in stone. But not everything has to be. If well-being is important to you, you can still give everyone a free gym pass. But maybe acknowledge that some employees could already have gym memberships, and some may not want to go.

4. Define what good will look like before roll-out of a benefits scheme

Flexible benefits can be modulated to what employees do and do not want. If you find the take-up on some benefits is low and others high, you can choose to invest resources in one area more than another, or combine certain benefits into a package. A malleable system is good but the shift can take time to perfect.

5. Book demos to compare flexible benefits platforms

Whichever platform you choose, it should be intuitive so every employee can easily see what’s on offer, and you should be able to tailor what’s on offer to your employees’ needs and values.

The Lumina platform is straightforward and easy to use, and our tiered pricing system means there’s an option for everyone. Get in touch to see what Lumina can do.

6. Keep listening to your people after launching a new benefits scheme

Over time, ask employees what they like, and what they’d change. And to stay relevant to your changing workforce, ask new staff what they’d like to see when you onboard them. This helps you to keep on top of current trends and shows your workforce that their voice continues to matter.

An effective flexible benefits scheme starts with listening and it continues with more listening. You don’t know which benefits your staff are going to use the most. We don’t either. But if one of the benefits you select to offer to employees is used by everyone, and another isn’t touched at all, then it gives you the chance to make changes based on the needs of your workplace at a flexible rate.

The Lumina platform can measure uptake here so you can see which benefits are most effective.

What are the advantages of flexible benefits?

1. Flexible benefits help attract talent

68% of UK workers said a great perks package was key when deciding whether a company would be a good place to work, according to our own research of thousands of employees. One Medical’s research backs this up: 69% of employees would consider changing jobs for a better employee benefits package.

2. Flexible benefits promote employee retention

The cost of living crisis means companies are being hit hard. Talent is expensive and newer generations are more likely to leave a company if there’s a better position elsewhere. Given the £3,000 and 27.5 days it takes to hire a new worker in the UK, this can be costly to a company and added work for HR. It takes months to train a new employee, and losing the good talent that you already have is a fast way to be stripped of a competitive edge.

If employees are struggling in the cost of living crisis, upping their salaries is the most obvious way to solve this. But the cost of living crisis is affecting companies too. When your purse strings are tight, you need other options.

The right benefit system is a way to navigate this while saving money. If the thing that attracts your employees to other companies is ‘more pay’ but they’re using that pay to cover the cost of a gym membership, or counselling, or company transport options, then check to see what a flexible benefits system can do.

If you allow your employees to tailor a flexible benefits scheme to their needs, you can abandon the unnecessary costs of traditional packages and instead let your employees focus on the things that will keep them in the company. Pay competitiveness becomes less of a dominant factor when your benefits package is one that they actually want to use.

3. Flexible benefits lead to happier and more productive employees

Offering incentives for employees based on their feedback shows that you value what they have to say. It reminds your staff that you care about them enough to give them the things they want while acknowledging that they’re individuals.

When your people feel noticed, they’re more likely to feel they belong, and this can’t help but affect every other area of your organisation. For instance, Glassdoor associates a higher employer score with higher customer satisfaction.

4. Flexible benefits can appeal to a multigenerational workforce

For the first time in history, five generations of people are in the workforce at once. Millennials are the largest group, but Gen Z are catching up. 5 years from now and Gen Alpha will be joining, too. There’s no way you can expect these generations to share the same values or priorities. The youngest and oldest members of your office will have massively differing views on when to pick up the telephone – let alone the big-picture stuff.

Gen Z and Millennials are wanting different things from their employers now. They’re more eco-conscious, and more value driven – our own research showed that environmentally friendly perks would influence 96% of younger workers’ choice of employer. Let’s put it this way: these workers are loyal to their values, not their employer.

Meanwhile, older generations often have different priorities than younger generations and to differing degrees. And beyond that, each employee is an individual. Flexible benefits are a way to account for individual differences too. Stanley from The Office does not want the same things as Dwight.

Baby Boomers and The Silent Generation have been more than happy to stay with the same business for 30 years and retire with a card and a company watch. For new workers, it’s the age of The Great Resignation. Major companies are folding, and small companies are struggling to get their footing. If your talent is important to you, you need to create a benefits system that they want.

How to choose a flexible benefits platform

A flexible benefits platform should be intuitive for employees to use, and easy for HR teams to monitor, reducing admin for everyone involved. Most platforms will achieve this, so the difference often lies in the partners the provider works with and includes on the platform.

Make sure that your provider understands the role of value-driven benefits. It’s one thing to be flexible, but flexible benefits aren’t the final destination. They’re just a halfway house on the road to what businesses need most: value-based benefits.

When it comes to benefits, new recruits in today’s job market are looking at their lives more holistically than ever before. The value system of the company is as important as the way that the company treats them. So when you’re choosing your benefits platform, you’re going to want to choose a provider that understands this employee-values dynamic.

We think you should choose us. Obviously, we’re going to say that. Our platform is easy to integrate, it’s simple to use, and our pricing system means that there’s an affordable option, no matter what your budget.

None of this is really about the tech. Flexible benefits platforms just happen to be the easiest way to offer your people choice. But it’s the choice that matters, along with the values behind the selection.

What do employees value in a flexible benefits platform?

Our research into thousands of UK employees showed that:

  • Nearly three quarters of of those aged 18-24 would actively research a potential employer’s values and ethics before accepting a job.
  • 3-in-5 of workers who don’t feel their employers share their values are thinking about leaving in the next 12 months.

Employee benefits need to make a statement your people can get behind

Flexible benefit systems are pretty limited if they don’t align with the values of your people. Gen Z and millennials want to be part of a company that cares for them, but also a company that has a mission and a set of principles they won’t compromise on.

Our own research showed that 34% of HR leaders say their benefits package doesn’t reflect their own lifestyle and values.

If over a third of HR leaders – the people curating employee benefits – think their selection isn’t relevant to them, how much more out of touch will those benefits be with other departments and generations?

By all means, if the reason you want your employees to get out of bed in the morning is a pat on the back and a paycheck, go ahead. Just don’t expect them to stick around for too long.

When it comes to benefits, ask yourself what the company stands for. What do your benefits systems say about your company’s values?

Because once you’re no longer dealing with the mandatory, legal-minimum, core benefit packages – the rest of the package is about who you are as a company. When your employees see any new benefits you bring in, you have to be aware that they are going to make a value judgement based on those benefits.

Employee benefits need to support lifestyle and wellbeing

If your company wants to support employees to raise families at the same time as advancing their career, it may be intuitive to offer childcare support. But if you ask your employees, it may be that some of them do need help with childcare, while the main need is for mental health support in raising kids post-pandemic. MetLife found that the employees’ use of wellness programmes more than trebled between 2015 and 2019. And needless to say: a lot has happened since 2019.

During the dot-com boom of the mid-90s, tech firms used innovative office perks as a PR tactic. A sauna at HP. A swimming pool and barber at Google. You could start the working day with a climbing wall, and finish by taking the slide.

But now your new employees are unhappy, they are not going to stay with you for 30 years, wait till retirement, then turn to each other and say ‘well, at least we had bean bags.’ And that’s not just because your teams are likely remote or hybrid – only 2 of 10 employees work from the office on a fixed basis.

Much like the quirky perks revolution of the 90s, there’s a new change happening right now. Gen Z and Millennials take up the largest proportion of the workforce. And what they want are real, flexible benefits tailored to their changing needs and lifestyle.

Employee benefits need to make a positive impact on the planet

When thinking about the value systems that drive your company, don’t gloss over green benefits. This may not be a surprise, but Gen Z and Millennials care about the planet. They aren’t the only ones. We care. A lot. It’s why our company has partnered with Furthr as part of an effort to plant 100,000 trees per year in Madagascar. Caring for people without caring for the planet is like making sure the bed’s made while the house is on fire.

Younger employees tend to have similar points of view. The workforce in general doesn’t want to work for a company that cares about the environment because it has to. They want to work for a company that cares about the environment because it actually cares.

Our research found that two-thirds of workers believe employers should try to be sustainable in everything they do. And when you look at the demographics, the younger the employee, the more important this tends to be.

This is great for companies who want to provide benefits that align with those goals. Carbon offsetting, electric cars and green energy tariffs are all environmentally friendly options to add, and a flexible benefits platform can be a great way to make them available.

If one employee spends half their life composting, and another cycles everywhere, where are they more likely to work? At a company that only includes a car-pool scheme for all employees or one that includes opt-in green budgets to let them choose?

But building a good reputation isn’t the reason to do this. It’s really important that we do. Younger workers aren’t interested in working for a company that only pays lip service to environmental concerns. It’s about doing the right thing. Companies that prioritise the environment will not only attract and retain top talent but also contribute to a kinder, healthier world.

This is why one of the biggest things we advocate for in a flexible benefits scheme is the pension plan. Ethical pensions can cut an unnecessary 19 tonnes of CO2 per employee, per year. Employees don’t want someone grudgingly dragging their heels when it comes to addressing the climate crisis. They want an employee leading the charge. This is a way to be at the vanguard.

What are the financial implications of a flexible benefits scheme?

There are financial considerations when moving to a new benefits scheme, both with tax and setting one up. And we’re not going to patronise you about it. You already know what a P11D form is. But there is a slight theme to how flexible benefits work in relation to tax.

The financial contribution that an employee makes to their benefits comes through a deduction in their before-tax income. This lowers their taxable income while effectively raising their take-home pay. So far so simple.

The only difference between a rigid and a flexible plan is that the employee gets to choose from a range of benefits, and some of those benefits may have specific tax caveats. For example, if you offer hybrid-remote working, you may want to know that employers can claim £6 per week in WFH expenses tax-free. Employers can reimburse broadband costs tax-free, too.

In other circumstances, tax needs to be figured out more specifically. Company cars are taxed based on both how often the employee has access to it and the CO2 emissions of the car. For some benefits, salary is completely unaffected, and in others, employees might opt into a salary sacrifice scheme. This sounds fine (and it is) but remember to make sure you aren’t dropping below minimum wage after deductions!

And of course, there’s the other side of it: how much we charge you. Fortunately, this is a lot more manageable than tax and The Beatles won’t be writing a song about us any time soon. If you want to see a rough breakdown of how much this could cost, we have an online calculator here.

Everybody should have access to a benefits system that offers environmentally friendly, and ethical benefits to all. That’s why we offer a three-tiered system. Whether you’re looking for an introduction, or something more comprehensive, we’ve got you covered. Book a demo.

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