2009-10-15
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Hewitt publishes results of 14th Flexible Benefits Survey
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LONDON, UK – Childcare vouchers, dental insurance and bicycle schemes have topped a list of the UK's most popular employee benefits, reveals new research published today by Hewitt Associates, a global human resources consulting and outsourcing company.
Hewitt's comprehensive Flexible Benefits Survey, now in its 14th year, incorporates data gathered from 120 organisations with a significant presence in the UK, representing 740,000 employees. The survey reveals the current practices of companies in relation to flexible benefit plans, where employees can select from a range of benefits based on their own individual requirements.
Top Three Benefits
Childcare vouchers, a means of tax-efficient childcare, are now the most popular benefit excluding pensions as they are offered by 98% of flexible benefit schemes. Dental insurance is the second most popular benefit (offered by 92% of companies with flexible benefit schemes). Bicycle to work schemes, are the third most popular benefit and are offered by 91% of flexible benefit schemes with their popularity doubling in the last year alone.
While childcare vouchers are the most popular benefit, current proposals from the Government propose scrapping tax relief on childcare vouchers by 2015.
Martha How, head of reward consulting at Hewitt Associates, said:
"Childcare vouchers top the list of flexible benefits, but their current tax-free status is under threat. Reducing, or altogether scrapping, tax relief on these will have a major knock-on effect, particularly for employees that rely on the tax benefits they have through childcare vouchers to secure a means of returning to work while caring for the family. After 2015 a 40% tax rate couple taking childcare vouchers will be £2392 per year worse off and a basic rate tax paying couple will be £1808 worse off."
Hewitt's research also reveals a notable shift towards health-related benefits. Permanent health insurance is now offered by 67% of flexible benefit schemes, compared to 23% in 2007/08. Health screenings are now offered by 75% of companies, compared to 56% in 2007/08.
One in 10 Schemes Risking Financial Penalties
Industry best practice dictates that all flexible benefit schemes gain formal HMRC approval. Despite this, 10% of organisations in the Hewitt survey have not yet secured endorsement approval.
Martha How said:
"We were very surprised to see that one in 10 schemes have still not gained formal approval – this is much higher than expected. By operating a flexible benefits scheme without HMRC agreement on benefits tax treatment, companies are risking a potentially lengthy and painful investigation which could result in penalties, including back payment of taxes. We urge these companies to seek immediate approval. Companies which already have approval need to keep a close eye on changes to legalisation to ensure their schemes remain compliant."
Continued Growth in Flexible Benefits
Flexible benefits have continued to grow in popularity in recent years. Hewitt's survey reveals 43% of UK companies have implemented or are in the process of implementing flex plans for their employees, compared to just 17% in 2003. Hewitt calculates there are currently in the region of 600 flexible benefit schemes in the UK and believes this is set to grow further.
Martha How said:
"Flexible benefits have traditionally been the domain of large multinational companies but we are now seeing small and medium companies taking a greater interest – not least due to the potential financial benefits such as national insurance savings. This is driving an increase in popularity and flexible benefits are now reaching critical mass in the UK. We expect this trend to continue over the next five years."
Emerging Trends
While Hewitt's survey is mainly an indicator of current practice, it also reveals emerging trends in the market as leading employers are seeking ways in which to maintain and increase employee engagement in a cost-effective manner.
Martha How said:
"As the flexible benefits market has matured, employers can no longer rely on the novelty of the basic structure alone to deliver best-in-class employee benefits. The most forward-thinking employers are working with the industry to take flexible benefits to the next level, and there is a real thirst for fresh, new ideas."
Based on the survey and its ongoing dialogue with clients, Hewitt expects to see greater interest in pan-European flexible benefit schemes and 'green' benefits such as season ticket loans, bus tickets and low carbon emission cars.
Notes to Editors
For additional data from Hewitt's 14th Flexible Benefits Survey please see the accompanying fact sheet.
Terminology
Flexible benefits plan—a benefit structure which offers employees the choice of how they receive the value of their total reward package, as cash and a combination of benefits. Plans generally include statutory minimum days' holiday and 'core benefits', such as basic life cover, which employees cannot opt out of.
Salary sacrifice plan—where an employee exchanges the right to receive cash in return for an alternative benefit. Salary sacrifice plans can be standalone, covering a single benefit such as contributions to the employee's pension, or can offer a range of benefits such as holiday buy and sell.
About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.
Other Contacts
Anna Mitchell, Capital MS&L, 020 7307 5346 or anna.mitchell@capitalmsl.com
Supriya Mathur, Capital MS&L, 020 7307 5347 or supriya.mathur@capitalmsl.com
