Voluntary employee benefits have, until recently, been the term used for deals and discounts across various products and services to their employees. The employer either arranges these individually or through a specialist provider that offers pre-selected ranges of products and services. Typically, these will include discounts with holiday companies, entertainment and retail discounts.
Whilst the employer communicates these to their employees, normally the employee deals direct and uses a code to obtain the discount.
Are they worth it?
The success of these arrangements is often determined by how well they are communicated and, probably more importantly, how good the deals and discounts are. With employees being able to use the Internet to access discount online retailers, the deals on offer through the employer can sometimes seem pretty mediocre. The larger the employee base, the better the deals often are but for the SME and smaller corporate market there is some question about their value. Take up rates will measure how well the employees perceive the offering - often these can be very low.
However, there are some excellent offerings that do provide options for smaller organisations as they pool their buying power and provide some good deals.
The other problem is that some of the providers have insurance products that they seek to sell in to the employee base with the discounts and deals being a smoke screen to make their offering appear more attractive. As an employer, ask yourself if you are comfortable for your employees to be sold insurance or financial products that are of questionable value? By allowing a scheme to be promoted to them will your employees consider that you are endorsing it? These are sold on the basis as being a free added value service to employers - well, you have been warned!
Voluntary benefits and salary sacrifice
More recently, the term voluntary benefits has also started to be used for employee-funded benefits where salary sacrifice is used to capture tax savings. For example, childcare vouchers that are chosen by employees are purchased by the employer and an equivalent salary reduction is made so that the process is cost neutral for the employer. Other benefits that are operated in this way include home computing, mobile phones and bikes to work. All of these can be operated as salary sacrifice arrangement and provide the employer and employee with tax savings.
By operating salary sacrifice, an added level of complexity is introduced and this also increases employer administration. Each benefit needs to be formally administered with salary contract changes and relevant adjustments and compensations made through payroll whilst the plan operates. One or two benefits might be within your capabilities but if the complete range is to be offered then you might wish to consider using an administration service to operate the entire offering on a combined basis.
Voluntary benefits and flex
The salary sacrifice arrangements described above can be confused with flexible benefits. Our definition separates the two plans because one, the voluntary, has no employer funding whereas a flexible benefit plan does.
So, if salary sacrifice arrangement is offered to employees with employer funding then it becomes a flexible benefit plan. It is a range of benefits that an employee can choose from and which will be employer funded. If the employee wants to spend more that the employer is offering, then they can forgo salary to purchase more benefits.
The discounts and deals offering can be offered alongside which the employees access directly and the only care that needs to be taken here is to not confuse employees with too much information. It might be sensible to consider a phased roll out, with the deals and discounts being delivered after the flexible benefit has been launched.
Summary
Voluntary benefits have their place but it is important to be realistic about their value. Look carefully for good discounts and deals and be careful about companies selling free "worksite" marketing plans.
Also consider the impact of introducing several salary sacrifice arrangements and consider your overall benefit strategy as at some point you may consider combined the disparate parts into one cohesive offering. Good communication, as ever, is vital to make the most out of what you are offering.
