Demographics affect benefits options

“Employers need to think more about the needs of generation Y in making benefits provisions for their employees,” says Tony Morgan, a principal with Mercer. “Considering their lifestyle needs, more should be done to support them in meeting the financial burdens they face.”

In response to the emerging differences between age groups, changes with respect to benefits options and the method of communication need to be made.

Mercer found that 47% of employees in their 20s are inclined to participate in flexible benefits schemes, while close to 70% of their older colleagues (between ages 30 and 50) have a tendency to participate. The difference in participation rates can be attributed to the emphasis the flex schemes place on risk-based and lifestyle benefits —benefits that appeal to employees with dependents.

The difference in age is particularly clear in the areas of partner life, critical illness and personal accident insurances, as the take-up rate for these types of benefits tends to increase with age. The research found that the take-up for partner life insurance is a mere 5% for employees in their 20s and 15% for employees in their 30s. Critical illness has a 13% take-up for those in their 20s, compared with 22% of those in their 30s. Finally, personal accident insurance was included in 12% of the plans for employees in their 20s and 17% of the plans for those in their 30s.

“As products within flex schemes develop, it will be important for employers to communicate and market their schemes in a much more sophisticated way, based on individual employee needs—in effect, using true segmentation,” says Morgan. “However, this can be achieved only through continuing two-way communication, and employers should use this as an opportunity to reinforce their overall employee value proposition.”

While the differences according to gender are less pronounced, there was a discernible difference in the number of men and women who buy and sell holiday time. Mercer found that 19% of women and 11% of men purchase extra days of holidays, while 9% of men and only 3% of women sold their holiday time.

In spite of the differences, the popularity of flex schemes remains high across the general employee population, with up to 80% of employees making annual changes to their benefits choices in some organizations.

“Flex can deliver high value to employees since they generally appreciate the choices offered to help them meet their particular lifestyle needs,” says Morgan. “With advancements in technology and set-up costs now much more affordable, more employers are taking an interest in flex as a means of generating additional value for employees while managing their benefits costs more effectively. This is particularly important in today’s challenging times when companies are balancing the need to prune costs with the drive to maintain employee engagement and motivation.”

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