ecent research into Canadian employers’ attitudes towards flexible benefit plans (Hewitt Associates’ 2002
survey) identified that the two primary reasons for switching from a traditional plan to a flex program were to better meet employee needs and to more effectively contain future benefit cost increases. Balanced against these advantages were perceived administration and communication challenges.
The decision to “go flex” involves weighing the pros and cons. Superior Propane, a national marketer of propane and appliances with more than 1,800 employees, made the switch in 1997. Terry Gill, vice-president, human resources in Superior Propane’s Calgary corporate office, was asked about the company’s reasons for introducing flexible benefits and whether its goals have been attained.
What prompted Superior Propane to implement a flex program?
In 1996, our company underwent a “cultural transformation.” We were driven by a need to improve our financial results and so we changed our business strategy. That necessitated a corresponding change in our people practices so that the two were aligned.
Previously, Superior Propane had exhibited a paternalistic attitude towards its employees. Now, we wanted — and needed — to attract a more diverse group of employees to fit with our new performance-based culture. We realized that most employees wanted opportunity and choice — a “one-size-fits-all” plan wouldn’t work. In addition to flexible benefits, we also introduced a defined contribution pension plan.
Did flexible benefits succeed in attracting and motivating the staff Superior Propane needed?
Yes, the flex program is a big attraction when we are recruiting. Flex is not common in our industry, so Superior Propane is viewed as progressive when compared with our competitors.
How did existing employees feel about such a dramatic change in the benefits program?
Some of our long-service employees found the new program to be quite a shift from the traditional approach. Some of them perceived flex as being a take-away. We had anticipated this reaction, however, and were prepared with a communication strategy that included face-to-face meetings on an extensive road show. To be frank, though, buy-in from this group took longer than we expected. Communication was key.
Have your employees adapted to the flex plan now?
It’s not been a case of our employees adapting to the plan, but rather the plan adapting to better fit our employees. Our plan is continually refined — it’s an evolutionary process. If our employees suggest something, we respond. We see the chance to adapt the plan as an opportunity to better meet employees’ needs.
How have you changed the plan since its inception?
We recently enhanced the basic medical and dental plan as a result of feedback from our employees, and simplified the Health Spending Account. We’ve also tailored a prescription drug option to serve the needs of employees in Quebec based on the legislation in that province.
For the most part, if we improve some aspect of the plan to meet employee needs in one part of the country, we change it across the board where possible. This is part of our philosophy to ensure equity for employees.
How has introducing a flexible benefits plan affected Superior Propane’s bottom line?
It has been an integral part of our overall business strategy. A positive factor is that we have a better sense of what our costs are now and what they will be. The funding of our plan is quite unusual. It requires Superior Propane to make a contribution to the plan as a fixed percentage of pay. We review the amount every few years. This year, the employer contribution increased by 25 per cent to keep in line with competitive practice. For most employees, this resulted in a slight decrease in their contribution to benefits. However, as benefits costs continue to rise, employees will need to share in that increased cost. Employees will be able to manage their costs by evaluating the level of their benefit selections.
So you’ve managed costs by requiring employees to contribute?
There’s no doubt that’s true. However, our employees recognize benefit costs are increasing and appreciate the fact Superior Propane makes a contribution, along with their own, in order for them to obtain competitive group insurance coverage. We actually refer to the company contribution and the employees’ as our respective “investments” in the benefit plan.
The fact that employees contribute to the cost of their flex benefits has increased their appreciation of the program. It’s also in keeping with our business model. “Resource management” is a key part of our business strategy and our employee group is acutely aware of managing expenses.
What specific challenges have you experienced with your flex plan?
I think that the two primary obstacles were communication and administration.
I mentioned the specific communication problems we experienced. On a more general level, I think the best advice I could offer is to communicate not just the “what” and “how,” but also the “why” of the plan. You must connect the rationale for the change to flexible benefits to your business philosophy. And you have to be clear about the advantages for employees.
Communication doesn’t stop being a challenge once the first enrolment is complete. It’s ongoing. But it’s also an opportunity to re-emphasize to employees how your approach to benefits is aligned with your business strategy.
Administration of a flex plan can also pose a problem. The key is to have effective back-office processes and a strong three-way partnership with your insurer and your administrator. Administration has to be a seamless process.
Going flex has been great for Superior Propane. We have a more engaged workforce and we are also able to manage our costs.
Cathy O’Bright is an actuary and benefits consultant in Hewitt Associates’ Calgary office. She may be contacted at (403) 232-1188, firstname.lastname@example.org.