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Finding Solid Benefit Providers

Finding Solid Benefit Providers

Employee Benefits

December 16, 2009

The search for key benefit providers must not be based on cost alone, and expert advice may be needed to locate the best candidates, says Jenny Keefe

One of the great things about the employee benefits market is its diversity. But for employers looking to buy new perks, that can be a drawback. Even if they have an idea which benefit they want to buy, they are often uncertain about which provider to choose. The problem is, it can seem like there are too many providers, too many schemes, and too many options. It is just baffling.

If employers want the best provider to meet their needs, they should not just go for the cheapest. In these tough economic times, there is a trend to think about cost above anything else, including a provider’s track record and suitability. Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), says: “One of the mistakes employers are making is focusing on cost to the exclusion of everything else, and not thinking through the long-term costs of such an approach on employees.”

Financial stability

This means organizations need another yardstick against which to grade providers – financial stability. These are heady times for the benefits world, particularly after the prime minister unveiled plans to gradually withdraw tax and national insurance relief on childcare vouchers. Steve Herbert, head of benefits strategy at consultancy Origen, says: "Many providers are effectively one-product suppliers, which leaves them very exposed to government policy changes. If a provider only offers childcare vouchers, its financial stability is suddenly much more questionable.

“It is likely that whichever political party comes to power next year, the state of the UK economy will ensure many benefits tax breaks are reviewed again, and more changes to benefits may follow. Given this, childcare vouchers may not be an isolated case. Diversification of product range will make a provider more financially robust, which is important for employers to consider.”

Despite most budgets being slashed, many employers are still seeking to buy new perks. According to the Employee Benefits Research 2009, published in May, 17% of employers were planning to launch schemes.

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