Traditionally, organisations have always offered their employees a limited choice when it comes to compensation. However, recent research carried out with employees of a large organisation in New Zealand showed that giving employees the option to choose benefits that suit them may indeed be more cost effective than having a one size fits all. Indeed, the study revealed that conventional fixed benefits packages are inefficient and are often less valued by the employees than their actual cost to the business. Until a few years ago, the complexity and cost of administration were the major barriers to introducing flexible benefits. Today, however, better ways of working, new technology and the availability of outsourced services are making the idea of flexible benefits more real.
Giving employees the opportunity to choose the benefits they want and prefer enable them to select those benefits that they value the most while forgoing those benefits that are deemed to be of less importance. This would help increase employee satisfaction and job satisfaction, which would in turn help the organisation in attracting and retaining the best talent. Moreover, having flexible benefit plans provide the advantage of giving employees a whole true idea of the full worth of benefits that they are receiving while employers do not provide benefits that are not valued. As such, employees are given a sense of control and involvement by having a choice. What is more is that employers are seen to be more responsive to the needs of an increasingly demanding, diverse and ageing workforce. Another advantage that stems from providing flexible benefits is the alignment of the total reward strategy to the HR and business strategies. Romina Pace, HR Manager in a leading hotel in Malta commented: “There are several advantages of having a flexible benefits programme in an organisation. By allowing employees to choose those benefits that meet their needs, employers can enhance their employees’ satisfaction and motivation. In my view, it is crucial that employers have a good understanding of the type of benefits their employees favour and value before deciding on the benefits to offer to their employees.”
In addition to the above, providing flexible benefits nowadays is becoming of crucial importance because research shows that employees at different stages in their lives and careers often have a desire for different benefits. For instance, individuals without a partner are more likely to value financial and flexible lifestyle benefits, whereas those living with a partner are more likely to opt for training and development benefits.
Besides, research has shown that the needs and desires of employees for different benefits options are heavily influenced by their personal demographic characteristics. For instance, older workers may prefer to have assistance in skill development, schedule changes and take time off over cash compensation, whereas employees in the lower echelons of the job hierarchy would give more prominence to education and training opportunities.
The research study also revealed that work values would also affect preferences for benefits. For example, the comfort and security work value, which refers to the value placed on certain job characteristics such as job security and comfortable working conditions, increases the likelihood that the person would prefer family friendly and financial benefits. On the other hand, status and independence work values reflects the importance of job features such as the opportunity to advance to high responsibility, take risks and to work individually. The research study showed that employees with these kinds of work values are more likely to value training and development benefits as they are deemed to be beneficial to their career progression.
Asked about the kind of benefits their organisation provides, Pace said: “We provide a variety of flexible benefits that are tailor-made to the individual’s needs and preferences. However, albeit the fact that we are open to the idea of offering flexible benefits, we do have at times to make restrictions and limitations depending on the case of the individual involved.”
To conclude, one can argue that even if an organisation does not have a formal flexible benefits plan, it would still be valuable to differ employees’ benefits so as to match the needs and wishes of different individuals. A case in point is where employee benefits could be offered as a bargaining tool or as an incentive during wage negotiations. In this case, it would be of a huge benefit to understand those personal factors which influence employee preferences for the different types of benefits.
If HR professionals and employers want to create unique value for their employees then they need to have a good level of understanding of their employee’s personal demographic characteristics, personality and work values. This would enable them to design personal benefits schemes based on their knowledge of employees’ needs and preferences that would ultimately lead to a strategic competitive advantage in the labour market.
Ms Camilleri is a researcher at the Foundation for Human Resources Development