All-you-can-buy

Instead of traditional one-size-fits-all employee coverage, a bespoke flexible benefits scheme offers staff a plan that best meets their individual health and financial needs. HRM Asia explores how organisations can achieve recruitment and retention goals by customising their reimbursement policies.

It’s a question many employers find themselves asking these days: What is a great total rewards programme that comprehensively covers employees’ every need and want?

That’s because most employees agree one of the key elements of a well-rounded rewards programme is an attractive benefits scheme.

In fact, a Hays survey conducted last year revealed that 40% of Singaporean employees named their benefits package as the top reason for staying on with a company. 

Across Asia-Pacific, the Willis Towers Watson’s Global Benefit Attitudes Survey 2015/16 showed nearly three in ten employees preferred superior retirement and health benefits, over the chance of higher salaries and bonuses.

The same study also revealed that three in five workers in Asia-Pacific would like to see some alternative to salaries and bonuses within their total remuneration.

Cafeteria line

One particular type of scheme that has been receiving more attention in recent years has been flexible benefits.

These are also commonly referred to as “cafeteria benefits”, because they function like a lunch stall,  where staff are given meal credits that can be used to purchase their desired items without having to fork out their own cash.

In the case of benefits, staff can purchase anything they want from a set list of provisions already paid for by the company, as long as it does not exceed the given credit limit.

Any additional top-ups are then paid for by the individual, depending on the terms and conditions.

To put it simply, staff can put as much “food” as they like on their “plates”, provided nothing spills over, or they have sufficient credit.

One key advantage of such plans is that they allow employees to cherry-pick only the products relevant to their individual needs, unlike regular group corporate plans where there might be a number of generic benefits that an employee might never utilise.

In some cases, employees can also cash out unused credits at the end of the year.

As Mercer’s Regional Industries and Products Leader Godolieve van Dooren explains to HRM Asia, companies can also incorporate “fun” items in the packages, such as movie and restaurant vouchers, annual zoo passes, and gym memberships.

Some plans even allow employees to book holidays or purchase personal items as a benefit. Staff then submit claims for these expenses on a dedicated company insurance portal.

“I always tell my clients that they need to keep it fun because otherwise employees think it’s just the usual, boring stuff,” says van Dooren, adding that the best bespoke plans have a good mix of both medical and lifestyle provisions.

She says that it is also important for companies to consider the interests and backgrounds of all staff before deciding on a policy. For example, in a company with more millennials on the workforce, the most ideal benefits are those that cater to work-life balance needs.

On the other hand, wellness and health features might be preferred in an organisation where the workforce is older.

The Tripartite Alliance for Fair and Progressive Employment Practices, a non-profit organisation that promotes the adoption of fair, responsible and progressive employment practices in Singapore, has long been an advocate of implementing effective work-life strategies like flexible benefits.

“These types of schemes are very popular because staff do not have to take benefits they don’t really want and can opt for benefits they do want,” the alliance’s website notes.

“You can offer a wider range of benefits under flexible benefits schemes than your employees would get from a core package in order to accommodate the diverse needs of your staff.”

Bang for the buck

Organisations that provide voluntary insurance programmes understand the importance of good employee experience, says van Dooren.

She says being able to customise each and every benefit right down to the finest details not only boosts the employee value proposition, but also the individual value proposition, leading staff to becoming more engaged.

It is also probably no coincidence that organisations like Siemens Singapore, Singapore’s Housing and Development Board (HDB), Singapore Power Group and PSB Academy have reported much healthier turnover rates since adopting flexible benefits programmes.

At Siemens, staff are given “flex dollars” to upgrade their insurance coverage, or buy health supplements and equipment, among other things. The company said that about 60% of employees have used their credits to upgrade hospitalisation and medical coverage for their dependents.

At Singapore Power Group, employees receive S$750 of benefit dollars each year. They can use these credits to pay for their children’s education, fitness packages, or even their personal holidays.

HDB introduced flexible benefits back in 2005. Under its scheme, staff may claim reimbursement of up to S$400 each year in five categories: lifestyle, health and fitness, family, learning, and union membership. This scheme has seen almost full utilisation rate every year since its implementation. 

Today, some 80% of HDB staff have worked at the statutory board for over 10 years.

Employers also achieve more bang for their buck with these schemes, say Cecilia Yeoh, Vice President of HR, PSB Academy.

“The same amount of funds channelled for this benefit yields much more advantages compared to the previous scheme,” says Yeoh.

The education institution’s flexible benefits, which were implemented in 2015, take into account the marital status and seniority of employees.

For example, staff who are married with children are allocated a greater portion of flexible benefits dollars compared to staff who are single.

Consequently, attrition rates have stayed low.

“Through multiple discussions with our various stakeholders and fine-tuning the scheme, we have received favourable feedback and employees have expressed satisfaction with this implementation,” Yeoh adds.

Daniel Lim, Assistant Vice President of Marketing and Corporate Communications, is one employee who has enjoyed the academy’s bouquet of benefits. He recently spent some of his credits on dance classes.

“Not only am I allowed to use this fund for alternative forms of medical treatment, I can also use the dollars for my personal development and enrichment, and participate in activities for my personal wellbeing that I would not have considered otherwise,” says Lim.

Making the switch

But despite the multitude of advantages identified, adoption rates of these schemes throughout the rest of Asia-Pacific, apart from Singapore, remain slow.

Mercer research data shows only 5% of larger organisations in China, Malaysia and South Korea offer such plans.

In Indonesia, only 6% of companies with a headcount of 250 and above provide bespoke plans.

Even in a finance hub like Hong Kong, only 14% of larger companies have such benefits, compared to 49% in Singapore.

Van Dooren says one deterrent could be the initial set-up costs and scale involved.

To implement such schemes, employers have to invest fairly heavily in automation tools, hire consultants, and spend time and effort enquiring with various insurers.

The costs involved also mean smaller outfits do not have the capability to adopt such practices.

“They are not major expenses, but when you add them up all together, it can become a significant amount, and that’s something the management needs to buy into,” she says.

In the case of Hong Kong, attractive tax rates could be another reason why such schemes do not offer enough incentives for companies to make the switch, says van Dooren.

In Europe, where the income tax rate is between 30% and 40%, exchanging a higher salary for more benefits means employees don’t have to pay as much taxes, while still getting to take holidays and purchase personal luxury items.

But in Hong Kong, where the income tax rate averages a much lower 15%, there is no significant advantage to give up cash for benefits.

Another potential hurdle to the switch lies in how employers themselves view benefits. It seems not many employers are promoting their benefits to their staff, which will make any changes to more flexible schemes ineffective.

Research data from Thomson Online Benefits suggests that benefits cost businesses up to 25% of their total people spend, yet only 7% of employers actively communicate these benefits to employees on a monthly basis.

The research also found that benefits add 42% to the value perception of an employee’s package, yet only 9% of employees were aware of the schemes available to them.

PSB Academy’s Yeoh believes things will change only when basic administrative teething issues are addressed. 

One way to solve this is “to improve the integration between different insurance providers so as to simplify the process and encourage more businesses to make the switch”, says Yeoh.

Health and Benefits on show

Flexible benefits schemes will be one of the key discussion points at HRM Asia’s Employee Health and Wellness Congress in May. The two-day event will give delegates a comprehensive guide to the business advantages of taking a pro-active approach to employee health, while also looking at the broad range of schemes and programmes on offer in the Asia-Pacific region. Speakers will include Alexander Yap, Global Rewards Director for UTAC, Stephanie Tan, HR Business Partner with Fitbit, and Patricia Goh, Senior HR Business Leader covering Total Rewards with MasterCard. This exclusive learning event will take place in Singapore on May 24 and 25. See www.hrmcongress.com.sg for more details

 

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