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Most employers consider that the introduction of compulsory employer pension contributions is likely, according to new research carried out by award winning employee benefits consultancy, thomsons online benefits.
The finding was one of a number of insights revealed in Employee Rewards Watch 2005, a study of 430 UK firms. Other key findings shedding light on the changing employee benefit landscape included:
- The number of companies with a flexible benefits scheme in place has doubled over the last year, with web-based software now being the most common method of administering such schemes;
- Almost one in ten employers are considering changing their pension scheme structure / provider in the next 12 months and two out of ten respondents who have a flexible benefits scheme in place had changed their pension scheme structure / provider when implementing flex;
- The two most common reasons given for changing pension scheme / provider were the running costs of the scheme and the burden of administration that it produced;
- Communicating effectively is the greatest challenge in implementing flexible benefits;
- Although it is less than a year away, pensions simplification was deemed by less than one per cent of respondents as their biggest HR challenge for the next year;
- Four out of ten respondents are considering introducing a salary sacrifice driven benefit in 2005 to leverage tax and national insurance savings with 27 per cent considering the home computer initiative and 26.8 per cent childcare vouchers;
- Five per cent is the most common average employer pension contribution measured as a percentage of payroll.
When asked whether they thought the introduction of compulsory employer pension contributions was likely, 47.4 per cent of respondents said yes, and 29.8 per cent answered probably. Less than ten per cent of respondents thought this was not an inevitable outcome. However, the majority of respondents felt that the responsibility to encourage employees to save for their pension was shared between the government, their employer and the individual. Around a third of respondents (32.8 per cent) felt that it was the individual's sole responsibility.
Employee Rewards Watch 2005 revealed that the majority of UK employers (60.7 per cent) continue to offer their employees standard benefits schemes (where employees are provided with a fixed menu of benefits by their employer). The number of employers with a flexible benefits scheme in place had doubled to ten per cent over the last year. Taken together with the number of employers currently in the process of implementing flexible benefits (2.6 per cent) and those currently considering implementing flexible benefits (12.3 per cent) this indicates that just under a quarter of UK employers (24.9 per cent) have or are actively considering implementing flex.
Standard benefits schemes still seem largely undervalued by employees and poorly communicated by employers. Just 2.3 per cent of employers with a standard benefits scheme believed that it was highly valued by employees. This points towards the fact that the majority of employers are not leveraging proper value from their expenditure on benefits.
However, there was evidence that employers with flexible benefits schemes in place are getting better value for money. The majority felt that their employees valued flexible benefits more than a standard offering and four out of ten reported that it had assisted their recruitment and improved their employee retention rates. Nevertheless there are signs that even employers with flexible benefits could do more on this point. For example many respondents had no formal evaluation processes in place to measure the success of their flex implementation, with the majority relying on measuring their success using general feedback.
Other interesting trends revealed in Employee Rewards Watch 2005 include:
- The two most common types of pension schemes currently open to employees are a stakeholder pension (with an employer contribution) followed by a group personal pension;
- 2004 was the year that has so far seen the highest number of flexible benefits schemes implemented;
- Eight out of ten respondents plan to review their benefits during 2005;
- Almost half of respondents who currently do not offer any benefits (other than holiday entitlement) believe that the most likely improvement they would see from introducing benefits would be improved recruitment and retention rates. The three benefits that these respondents consider would be the most popular are additional holiday entitlement, pension and private medical insurance.
Michael Whitfield, managing director of thomsons online benefits, comments: "The results of Employee Rewards Watch 2005 indicates that most employers do not see the huge changes looming under pensions simplification legislation as a challenge. I believe this is mainly due to the fact that most UK companies do not know how it is going to affect both them and their employees. We expect a stampede for knowledge to occur in the first quarter of 2006 before the change in April, when in reality, employers should be preparing now."
"Our research also demonstrates that the spread of flexible benefits in the UK is finally living up to the hype. This is largely due to the fact that the cost of web based technology has reduced and its ability to mass produce benefit administration makes flex an affordable option even for SMEs."
"When speaking to employers we are also seeing a shift away from paternalism and towards a culture where employees are encouraged to take responsibility for their own decisions so that they choose their package and working patterns according to their own lifestyle. There is also an increasing trend towards the introduction of more lifestyle orientated benefits such as flexible working, childcare vouchers and the home computer initiative particularly as more employers realise the potential savings they can reap under salary sacrifice arrangements."
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