Article: Flexible Benefits: Aon Hewitt approach

Benefits & Rewards

Flexible Benefits: Aon Hewitt approach

There is belief that benefits and rewards are simple add-ons to a salary package but actually it turns out to be enormous.
Flexible Benefits: Aon Hewitt approach

 Flexible benefit is an important attribute of every organization leading to economic security, employee retention and the overall growth of both employee as well as the employer. AON Hewitt Retirement and Investments gave a detailed understanding of Flexible benefits in their webinar.

Did you know the impact benefits and rewards can have on business and workforce? According to a recent SHRM study, 53% of employees rated flexible benefits as very important for their job satisfaction. 89% of organizations review their benefit packages in accordance to change in supply and demand of talent and changing employee priorities. Within the last 12 months, 60% of the organizations indicated that the amount of benefits offered remained the same, 33% reported an increase and 7% reported a decrease.  

There is belief that benefits and rewards are simple add-ons to a salary package but actually it turns out to be enormous. 

Take a glance at the following facts on flexible benefits:

  • Benefits cost a business 25% of their total people spend
  • Benefits packages are worth 10 – 15% of an employee's total pay
  • Benefits add 42% to the value perception of an employee's package

Looking at the above importance of rewards and benefits, Aon Hewitt Retirement and Investments organized a webinar on Flexible Benefits- Introduction, Feasibility and the Way Forward. 

So what exactly are Flexible Benefits?

Philip Hutchinson, Principal, Mercer HRC defined this term in a very classic way in the November 2006 issue of Employee Benefits Magazine: “Flexible Benefit is a scheme is the one that trades one element of the reward package for another.” It is a great way to engage your staff by allowing them to choose from a wide array of benefits tailoring to their needs. Flexible benefits can be categorized into: 

  • Tax-efficient benefits
  • Insurance benefits
  • Health care benefits
  • Travel benefits 
  • Risk benefits
  • Pensions
  • Leave benefits 
  • Family benefits
  • Other benefits

How do employees and employers benefit from Flexible Benefits?

In an employee survey by AON, it was found that a very high percentage of employees have indicated their preference towards flexibility in benefits rather than one size fits all approach. The Thomson Online Benefits says that, over the last ten years Flexible Benefits has become to one of the most promising way to reward employees. 58% of multinational companies are now offering some flexibility over benefits and 24% are at the inception of incorporating this into their organization. To kill the curiosity, below are some of the ways how flexible benefits can be beneficial:

Cost saving - This means to take out a small amount from the employees’ salary before tax-income helping them to save money at tax-time thus increasing their total take-home income. There are various ways through which cost can be reduced one such is the National Insurance Contributions (NIC) savings made through salary savings, salary sacrifice by buying additional holidays and reduced benefit premiums. 

Value of money and choice - With flexibility in benefits, employees can decide how much money they wish to allocate for the current year and also for future.

Tax-free benefits - These benefits can be exceptionally helpful for employees helping them not to shed any additional lump-sum tax amount.

Harmonization of benefits - As mentioned above, flexible benefits is a key to support harmonization of benefits. One of the main areas of concern for employers is to manage the expectations of employees whose benefits have been reduced. Implementing flexible benefits allows the significant advantage that employers are able to offer the same benefits options to all employees. 

Reduced attrition rate and enhancing employee retention - According to a latest research it was found that, Samsung has witnessed a reduction of 3.5% in attrition rate by starting flexible benefits programme. Samsung were able to involve their employees in the process and ensure they were being offered what they really expected. The proportion of companies who communicate their benefits package to potential employees during recruitment has risen from 58% to 70% in the past year.

How to determine the feasibility of flexible benefits?

Flexible benefits may always not be the right solution, so a feasibility study should be undertaken to find out the right choice. The 3 important tools in designing a feasibility study are:

  1. Construct a substantial business case
  2. Ensure the organization is ready to accept the concept
  3. Decide a best way to communicate to the employees

Flexible benefits: Flex credits

Employers provide flex credits to employees which they can use to purchase benefit schemes of their choice. Some of the potential flex credit sources in India are: 

  • Conversion of part of the salary to flex credit
  • Sacrifice 3 to 5 days of the entitled annual leaves 
  • Reducing hospitalization insurance cover
  • Health and Wellness, Company cab or any other benefits not being utilized can be converted to flex credits
  • Rewards and recognition budgets turned into flex credits

So what is AON Hewitt’s approach towards flexible benefits?

AON has a TBS (Total Benefits Solution), as an important strategy for flex implementation.



For more benefits of TBS, kindly visit here

Like said by Nick Russel, Associate Director at Consultancy and Research Group The Work Foundation ,“When benefits are flexible it makes the employees feel that their employer is thinking from the employee point of view, rather than what is easy to provide, thus building trust”. 

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Topics: Benefits & Rewards, Compensation & Benefits

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