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Flexible benefit programs on the rise

By Tim Hadlow
| www.cos-mag.com

What are the employee benefits of the not-too-distant future? How areemployers customizing their benefit plans to meet employee needs, aswell as to achieve corporate objectives? Are there benefit trends thatall organizations should be aware of?

Hewitt Associates’

Flexible Benefits in Canada 2009

elicited feedback on these questions and received responses from 211 organizations across the country, some with flex and others with traditional benefit plans. When commentary from last year’s Hewitt survey on flexible benefits in the UK is added, employers are provided with insight on up-and-coming options for strategic employee benefit programs.

Regardless of location, the prevalence of flexible benefit programs is on the rise. In the case of the Canadian survey, 60per cent of employers offer a benefits plan with a flexible component, up from 41 per cent in 2005 when Hewitt last conducted this survey. In addition, the perceived advantages of flex as a means to control costs and engage employees prevail on both sides of the Atlantic. Canadian employers also identified meeting diverse employee needs among their top three incentives to implement flexible benefit programs.

However, if flex plans attract and retain employees and interest in these plans is increasing, then employers have to continue to “refresh” their benefit plans to differentiate them from their competitors and better meet employee needs. Fortunately, the “flexibility” of flex plans means that adding or adapting benefits in such programs can be done more quickly and easily than is the case with traditional programs.

There are some notable commonalities to new trends in flexible benefit options, regardless of whether the employer is in Canada or the UK. In addition to dental care, medical, vision, and life insurance, interest in certain benefit options crosses borders:

  • Pensions and other retirement savings plans. Fourteen per cent of Canadian employers have already introduced the new Tax-Free Savings Account as an option. Another 32 per cent expect to introduce the TFSA as a benefit in the next three years.

  • Wellness programs, health screening and other preventative/proactive health-care measures. In Canada, wellness accounts, critical illness insurance and health club memberships are all on the rise.

  • Vacation buying and other arrangements to achieve greater work-life balance. A demand for greater work-life balance from Canadian workers of all ages has resulted in increased incidence of vacation buying (included in 28 per cent of plans) and sabbaticals (40 per cent of employers either provide such leaves or expect to do so in the next three years). Note, however, that vacation selling is also offered by 18 per cent of employers.

The emergence of other benefits can be regionally unique. For instance, in the UK, childcare vouchers, a means of tax-efficient childcare, are now the most popular benefit, offered by 98 per cent of flex plans. (The government is proposing to scrap favourable tax treatment for childcare vouchers by 2015, however.)

A continuing emphasis on corporate social responsibility may have influenced the increase in flex plans that support charitable giving in the UK (and in Canada). While employee take-up is low, 53 per cent of UK plans now make this option available, compared to 16 per cent less than two years ago.

One area that is receiving increased attention in the UK that may eventually make its way to Canada is “green” initiatives. Many employees in the UK have the opportunity to purchase bicycles for bike-to-work commuter programs, obtain a discount on public transportation, and receive a price cut on low-emission cars.

In Canada, as in the UK, critical illness insurance is becoming an increasingly common option. Twenty-six percent of Canadian employers currently provide this coverage and another 28 per cent expect to add it by 2012.

Thirty-nine per cent of Canadian employers are also interested in providing financial or tax counseling or already do so. However, it remains to be seen whether this benefit will really become a fixture in flex plans. In the UK, less than 10 per cent of employers offer a wealth management option, and some have recently removed financial planning from their flexible benefit line-up. Many employees go to independent financial advisors for this kind of service or banks, where advice may be offered free of charge. For employers, the concern is the level of regulation of financial advice and the risk of being held accountable for the potential consequences of that advice. Similar conditions and concerns apply in Canada.

It’s important to note that the advantages of flex plans don’t necessarily increase with additional flexibility. More important to the success of a flexible benefit plan is including options that employees want – preferably determined with their input – as well as effective communication and flawless delivery. Once a plan meets these three prerequisites, employers can focus on innovation.


Tim Hadlow is a senior benefits consultant in Hewitt’s Toronto office. Contact him at  tim.hadlow@hewitt.com

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