With an increasingly heterogeneous workforce across Europe and the Middle East (EMEA), employers are no longer able to meet employee needs solely through traditional approaches. One proven solution to this challenge is employee choice in benefits, an employeedirected approach to benefits whereby employers allow employees to select their benefits from a menu of options. Employees design their own personalized benefits package to suit their individual needs.
Employee choice in benefits is already well-established in markets across the world because of its potential to increase employee engagement and improve brand recognition as an employer of choice while also controlling benefits costs by saving employers from investing in benefits that employees don’t want.
Mercer Marsh Benefits recently released results from its EMEA Employee Choice in Benefits Survey 2014, which examines the role that employee choice plays in organizations’ health and group benefits programs across the region, analyzing responses from 636 employers across 17 countries in Western Europe, Eastern Europe, and the Middle East. The survey updates and expands on the findings of a survey conducted in 2011 of employers in Western Europe only. The results are intended to help employers benchmark their benefits program against other organizations as well as understand the benefits and challenges of implementing employee choice.
Survey results indicate that employers in EMEA are implementing choice in order to better compete in the war for talent. Among the top reasons respondents gave for implementing employee benefits choice are to remain competitive in the marketplace, to retain employees, and to improve employee engagement. (See Figure 1.) Choice programs seem to be delivering on employers’ goals: Almost three-quarters say that choice is helping them meet organizational objectives — an 8% increase from the figure reported in 2011. Financial drivers appear to be less important: “Reduce/control company contribution to cost of benefits” was cited as a reason for implementing choice by only 11% of respondents.
Employees seem to appreciate the ability to choose the benefits of most value to themselves and their families. About three-quarters of respondents say that their employees have responded positively to benefits choice, and almost all respondents that offer comprehensive programs have been happy with the level of employee participation. Interestingly, Eastern European respondents report a 90% satisfaction rate from their employees — the highest among the three regions surveyed.
Of course, some challenges remain. Whether or not they have implemented a choice program, respondents worry most about the cost, administrative complexity, local tax legislation, and resources available to implement and manage choice. Yet the survey results show that outsourcing and co-sourcing arrangements, which can significantly lessen the organization’s administrative and resource burden, are on the increase; more than 70% of employers offering comprehensive benefits programs receive this outside help.
Meanwhile, although cost is cited as the most significant challenge employers face in implementing and running an employee choice program, 43% of those with a comprehensive choice program report that it has lowered their overall benefits cost, whereas another 23% report that it has been cost neutral. (See Figure 2.) This disconnect between the perceived and the actual impact of benefits choice should prompt organizations to undertake a cost-benefit analysis of their current benefits programs to make sure they are not missing out on potential savings.
More than half of the surveyed employers are now providing some form of choice in the benefits they offer to their employees. About a quarter offer choice in employer-paid benefits, whereas another quarter offer voluntary benefits (fully paid by the employee) but no other type of choice. The larger the organization, the more likely it is to provide some degree of employer choice: 73% of those with 5,000 or more employees provide choice, compared with 37% of those with 250 employees or fewer.
Given differences in cultural and historical factors and the role of the state, the actual take-up and the way benefits are provided vary greatly across countries, with choice most prevalent in Spain, the UK, and Poland. Employers in the Middle East, where employee choice is still in its infancy, having been just introduced to the market, are the least likely to offer employees choice, whereas those in Western Europe are the most likely.
The current economic climate has had little impact on organizations’ benefits choice programs, with two-thirds saying it has not affected the design of their employee choice plans and 13% saying it has prompted them to add a greater degree of choice. Choice is likely to become even more prevalent as economies across Europe pick up and companies look for cost-effective means of improving employee engagement for enhanced attraction and retention.
The transition to benefits choice is a move in the direction of a total rewards approach, shifting the focus from the cash component of remuneration packages, which can exacerbate transient behaviors, to a more balanced offering in which an employee’s focus is not only on remuneration but also on the value of the benefits that his or her company provides. Embedded in this process is the effective communication to employees of the total value of their remuneration package through a total rewards statement. This in itself can be a powerful retention tool and is the foundation from which the choice in benefits approach can evolve. Offering employees a choice does not mean companies have to spend more.
The menu of choices offered to employees should be carefully designed to ensure that it meets their needs. Employers often conduct surveys and/or focus groups to ensure they get this right. Popular choices in EMEA have included offering employees the opportunity to buy or sell annual leave, enhance their medical insurance (or include extended family members), or get help in buying a car.
Learn more about the EMEA Employee Choice in Benefits Survey 2014.
|Kevin Kinsella (Dublin)
Principal, Employee Health & Benefits
+353 1 411 8180
|Damon Robinson (Woking, UK)
Employee Health & Benefits
+44 1483 777215
|Isil Cayirli (Istanbul)
Principal, Regional Marketing