Flex benefits control costs, meet diverse needs, attract & retain employees

Organizations that offer employees benefit plan options may have an advantage when it comes to weathering economic highs and lows, according to a recent survey by Hewitt Associates, a global human resources consulting and outsourcing company. The majority say that flexible benefits plans have enabled them to contain benefit cost increases and, as Canada moves from recession to recovery, these employers are well-positioned to attract and retain the employees they need to regain and grow their business.

Of the 211 organizations from across Canada that responded to Hewitt's Flexible Benefits in Canada 2009 survey, 60 per cent offer a benefits plan with a flexible component, up from 41 per cent in 2005 when Hewitt last conducted this survey.

"Flexible benefit programs allow each employee to determine how to direct the organization's benefits 'spend' in order to best meet his or her own particular needs," says Jason Kolysher, a senior benefits consultant with Hewitt in Calgary. A traditional benefits plan offers a common set of benefits, though employees may have the option to upgrade coverage at their own expense.

"Even traditional plans may include a flexible element-a personal Health Spending Account where, in most provinces, employees can receive tax free reimbursement of health care expenses," says Kolysher. "However, these arrangements don't really offer enough flexibility to meet the needs of today's employees. If we exclude this design from the definition of 'flex', 47 per cent of the 2009 respondents offer true flexible benefit plans." A further 30 per cent are currently implementing a true flexible benefits plan or intend to do so in the future, many within the next two years.

Of those employers with "flex" plans, three-quarters say these programs are meeting or exceeding their expectations in terms of the top three advantages they identified: meeting diverse employee needs, containing rising benefit costs, and improving employee recruitment and retention.   

Adding More Options
In a flexible benefits program, employees receive flex "credits" or "dollars" as part of their compensation that they can spend on a range of benefit options. Plans include medical and dental benefits and employees can choose their level of coverage depending on their personal circumstances. For instance, workers with children who need orthodontia may opt to spend their credits on a higher level of dental coverage.

Hewitt's survey results indicate that organizations are adding new options to their line-up of benefits. "Many new offers focus on employee health and well-being," says Tim Hadlow, a senior benefits consultant in Hewitt's Toronto office. "For example, wellness accounts, critical illness insurance and health club memberships are on the rise. In addition, after the recent economic downturn, 30 per cent of employers are making financial/tax counselling available-up from 18 per cent four years ago-and 14 per cent have introduced the new tax-free savings account as an option."

Stretching the Limits of Flexibility
"Not only has there been an increase in the prevalence of flexible benefit programs over the last four years, Canadian employers of all sizes are pushing the boundaries of flexibility," states Kolysher. "If flexible benefits offer advantages for employees and employers alike, perhaps workers should be provided with similar discretion when it comes to other aspects of their total rewards package."

Flexible benefit programs are now going beyond health care to include options with respect to how pension, vacation and variable pay are delivered. "The next evolution of flexibility will see employees determining how much of their total rewards package they receive as cash rather than other benefits," says Hadlow. "Eventually, we may see employees defining their entire employment relationship including compensation, hours and work environment."

Copies of Hewitt Associates’ Flexible Benefits in Canada 2009 survey report are available from Hewitt by calling (416) 225-5001, or by e-mail to [email protected].

For more information about Hewitt, please visit www.hewitt.com/canada.