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May 2005

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;
• Paper-based systems are still the most commonly used method to administer benefits overall, but specialist web-based employee benefits software is becoming standard for flexible benefits administration;
• The tax changes around childcare vouchers are making many organisations consider their introduction;
• Four out of ten respondents are considering introducing a salary sacrifice driven benefit in 2005;
• Almost half of those respondents who have benefits in place believe their employees would/do value flexible benefits more than standard benefits;
• Five per cent is the most common average employer pension contribution measured as a percentage of payroll.

The survey 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 has 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 flexible benefits.

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 spend on benefits.

However, there was evidence that employers with flexible benefits schemes in place are getting better value from their spend. 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.

Despite the fact that it is less than a year away pensions simplification legislation does not appear to be having much of an impact on HR professionals as yet. L ess than one per cent (0.9 per cent) of respondents viewed dealing with pensions simplification legislation as their biggest HR challenge for the next year. The three biggest HR challenges identified by respondents were controlling costs, complying with employment law and implementing culture change.

Employee Rewards Watch 2005 also analysed the broader reward trends occurring in the UK including:

• The majority of respondents intend giving a pay rise in line with inflation this year;
• The majority of respondents intend paying employees a bonus this year with the two most common items on which bonus were to be paid being company performance and individual performance;
• A fifth of respondents don't know the average length of sickness absence in their business;
• The government's attempts to encourage more family friendly working practices seem to be working. The majority of respondents reported that they had received a request for flexible working since April 2003 and have accepted the majority of these requests;
• Despite this the majority of respondents still provide just the statutory legal minimum requirements for family friendly policies.

Michael Whitfield, managing director of thomsons online benefits, comments: “The results of Employee Rewards Watch 2005 demonstrate 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.”

“Our research also 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 HR teams 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.”

Ends

Notes to editors:

* Members of the public can obtain a free copy of the report by calling 020 7802 5855;

* Michael Whitfield is available for interview.

Thomsons online benefits was founded in 2000 to revolutionise the way that benefits are administered and communicated. They have won the following awards “Corporate Adviser of the Year” in the Money Marketing Financial Services Awards 2004 and 2005, “ Most Effective Use of an International Benefits Strategy" in the Employee Benefits Awards 2004, “Advanced Supply Chain Integration" National Innovation category and "E- business" for London region in the DTI Ecommerce Awards 2004. Their clients include Avon Cosmetics, MTV, Reed, Regus, Smith and Nephew. thomsons online benefits ltd is authorised and regulated by the Financial Services Authority. Further information can be found at www.thomsonsonlinebenefits.com

Press contact:

Caroline Shenton
thomsons online benefits
Telephone: 020 7802 5855
Email: cs@t-bx.com
www.thomsonsonlinebenefits.com