Flexible benefits (or flexi-benefits) are fast gaining traction among employees and employers alike as a critical component of compensation packages, finds the latest report by TeamLease Services.
So much so that though flexi-benefits such as health/wellness plans, maternity/paternity benefits, performance bonus and stock options form 10-15 per cent of salary, they carry a perception value of 42 per cent of compensation packages for employees.
"While they form a smaller portion of the overall package, features like tax exemption and higher take-home component increases perception value of such flexi-benefits," said Sonal Arora, vice president of TeamLease Services.
Covering the changing dynamics of the job industry in terms of rewards and compensation structures, the TeamLease Compensation & Total Rewards Trends Report finds that if low, medium and high cash benefits were valued during 1990s, 2000s, and 2010s, the future belongs to flexible benefits.
"While the cost to the business in providing flexible benefits
is 25 per cent of the total human resource
(HR) budget, which in turn is around 10-15 per cent of the employees' total salary package. However, the perceived value of these benefits is nearly 42 per cent of the compensation package and hence new-age companies are innovating in every way to bring in the employee delight. Professional development and educational benefits are the most preferred benefits for employees
followed by pay raise, healthcare plan and performance bonus amongst others," the report stated.
According to the report, both employees and employers seem to be moving towards total rewards wherein the share of variable pay and flexi benefits
are significant. In fact, the variable pay for senior management has risen to 25-30 per cent from 18-20 per cent, while that for middle and junior management has moved from 10-12 per cent to 18-20 per cent, and 5-8 per cent earlier to 10-12 per cent currently, respectively.
However, Arora stated that while flexi benefits
have become a popular medium to please and retain employees, organisations need to be honest with their intent, put earnest effort and prioritise on aligning rewards with business objectives, communicate effectively and personalisation.
The report's analysis of flexible benefits
across different sectors found that traditional sectors like manufacturing, healthcare & pharma, BPO/ITeS offer a wide range of options in the compensation and benefits mix, to cater to a broad-based workforce.
"While the new economy businesses like BFSI, e-commerce, IT, telecommunication
have rationalised the benefits mix by stripping it of elements that employees perceive as irrelevant. Also, sectors like retail, media & entertainment, travel & tourism that are seen to be fun places to work at have a lean compensation & benefits structures," the report stated.
Another finding that the report showcased is how the reward value retention is perceived differently by employees and the employers at different stages of the employee cycle. While attracting the employee to a new job, the employer thinks of career advancement opportunity as the most important criteria for an employee the base pay/salary is what attracts him/her to the new job.
Covering employees across age, qualification, profession and cities, the report elaborated that 63 per cent of candidate preferred no dress code for in office, 42 per cent candidates prefer relaxed and open plan offices as their desired workplace environment.
Further, for indispensable elements of total rewards 87 per cent candidates' preferred personalised healthcare and insurance plan, 67 per cent opted for career advancement opportunities and a close 62 per cent chose flexible working hours, vacation
Evolution of Payout Structure
1990s Low Cash Benefits
2000s Medium Cash Benefits
2010s High Cash Valued Benefits
Future Flexible Benefits
Benefits most important for employee
Professional development or educational benefits 43%
Pay Raise 26%
Healthcare Plan 12%
Performance Bonus 12%
Vacation Time 5%
Maternity, Paternity & Adoption Leave 2%
Value proposition of flexi-benefits
Cost to business: up to 25% of total HR budget
Actual worth: about 10-15% of salary
Perceived value: nearly 42% of compensation package