When people communicate, it is not just about the words that they use that helps others to understand their meaning. More than half (55%) of what an individual means to say in a conversation is conveyed by their facial expressions and gestures, according to research carried out by Albert Mehrabian, emeritus professor at the University of California Los Angeles (UCLA), in 1971.
This can pose a problem for benefits professionals. In the digital age, employers find out about reward and benefits through a variety of sources including text books, emails, websites and telephone conversations, and not simply through face-to-face meetings with providers and consultants.
In turn, employers must also ensure they then communicate the finer points of the benefits they offer clearly to staff. But it may come as no surprise that, in the ever-evolving field of employee benefits, complex details can easily be misunderstood or lost when terminology and jargon are thrown around. This can result in some benefits professionals potentially using certain terms to describe an idea when they actually mean something completely different.
Flexible benefits
Dorian Hannington, head of client implementation at benefits provider You at Work, explains: "As an industry, we don't have standard definitions of what things could be."
This lack of standard definitions for products and services is evident in a variety of cases and can lead to confusion about what is meant by certain terms.
One area in which this commonly occurs is around flexible benefits plans. One of the most common definitions of flex is a scheme through which staff can trade benefits options. They may be able to do this using a pot of money provided by their employer or be told the overall value of their compensation package in a total reward statement, the value of which they can use to purchase perks.
Even within this definition, however, the idea of flex can be open to ambiguity. An organisation that offers a raft of voluntary benefits, allowing employees to choose as many or as few of them as they want, for example, might claim that since they offer a benefits package that can be tailored to suit employees' needs, this is, in fact, a flexible benefits scheme.
It is unclear, however, if the discrepancies around flex definitions have arisen because some employers have misunderstood the message that has come from their benefits provider. It seems there is a degree of disagreement in the industry, for example, around whether or not an employer has to provide a flex allowance for staff in order to operate a true flexible benefits scheme.
You at Work's Hannington argues: "I don't believe there has to be a flex allowance in order to have flex."
Often going alongside the variations around flex, are discrepancies regarding the interpretation of salary sacrifice arrangements and how these operate. This term is commonly used to refer to tax-efficient options, such as cycle-to-work schemes, childcare vouchers, or pension contributions, which employees purchase from their gross pay, thereby enjoying tax and national insurance contribution (NIC) exemptions. The employer will also save up to 12.8% NICs.
Some of these definitions, however, may become confused with other benefits arrangements, such as salary deduction which is when an employee purchases perks from their net pay. In these instances, employers must be very clear about what they mean by each definition and ensure they convey this to staff.
Hannington argues that because salary sacrifice arrangements go through a company payroll system, they do not fit within the definition of voluntary benefits. He explains that "old school" voluntary benefits are discounted arrangements, such as shopping vouchers and government-backed initiatives like cycle-to-work schemes, do not fit in with this definition.
Another misconception regards healthcare benefits such as private medical insurance (PMI), says You at Work's Hannington. "I [once] had a hideous conversation with a client [which was] going to drop PMI because they thought a cash plan was the same thing," he adds.
PMI and healthcare cash plans can be similar. The latter is a form of insurance scheme whereby if staff need dentistry, eye care or such like, they can claim a cash payout to cover this. PMI, meanwhile, enables staff to obtain and fund private medical treatment.
But while examples of some of the most significant misunderstandings around benefits are relatively easy to gather, it is much more difficult to identify why disagreements have arisen over the precise meaning of certain terms and to find a solution so that, for simplicity's sake, everyone can end up singing from the same hymn sheet.
Technical hurdles
There are some areas in the benefits industry, which can be difficult to understand so employers often depend on consultants, advisers and providers to give them honest and thorough information about more technical issues. Hannington explains that, while fellow benefits providers do not deliberately set out to mislead their clients, there are instances when some are not technically competent enough to talk through more complex issues, particularly if these are outside the realm of their personal experience. This can be a major factor in creating confusion among employers.
In a perfect world, the ideal solution to this problem would be for all providers and consultants operating in the benefits arena to agree on a set of universal terminology for benefits options and strategies, but this is both improbable and impractical.
One way to work around the issue would be to have a higher level of transparency throughout the industry. Regardless of the terminology used to describe schemes and platforms, providers, consultants and employers should know exactly what is being communicated if clear explanations are given. Hannington says: "It doesn't do our industry any favours when, in the desire to sign up a client, [some providers] are not being frank with [customers] about what they are buying, what they are not buying and how involved they will have to be [in managing a scheme]."
At the same time, employers must maintain a focus on what they want their benefits scheme to do, and what they want to get out of it. They should worry less about the terminology used to describe a benefits scheme but instead choose a structure that will best suit their business.
Author: David Woods
Publisher: Employee Benefits
Date: 3 March 2008