In the olden days, employee benefits used to be fairly straightforward, and fairly immutable. Everyone joining a company would have the same package – the same collection of discounts, the same gym membership, and so on.
Flexible benefits tech is changing all of that… and the benefits game is becoming about extending more options for employees, making it easier for people to redeem the perks of their choice, and giving benefits managers and employers more to bargain with in the recruitment market.
And now a new development is about to change flexible benefits tech. The power to make benefits spendable will determine how successful benefits tech will be in the days to come.
If you play a role in designing benefits software, our research paper throws some light on the tricky position benefits managers find themselves in and how embedded finance gives you a new category of features to innovate out of the pickle.
What is flexible employee benefits tech?
On the surface, defining flexible employee benefits tech is pretty simple. It’s an app or a platform that allows employers and HR teams to offer fully flexible benefits to employees.
Rather than a fixed menu of benefits – like two monthly free cinema tickets, free on-site EV charging and a selection of restaurant discounts – employees have a wider buffet to choose from thanks to flexible benefits cards. These are company-funded spend cards, issued through a benefits platform and controlled by the employer to set allowances as tightly or freely as they like.
The flaw in flexible benefits technology (until now)
While the idea of flexible benefits has been around for a while, the practicalities of execution have kept it in its infancy.
Benefits managers are still reporting a low adoption rate for benefits. Employees forget what benefits they have, and they often aren’t impressed with the choice on offer.
Critically, when faced with the admin of filling out forms and applying for reimbursement, many employees will simply not bother.
This is now changing – benefits are becoming spendable.
Benefits platforms are beginning to put cards in the hands of employees, which means perks and allowances are no longer represented as discounts, vouchers, or points. Employees can now spend simple personal budgets on what most interests them, within company-defined perimeters, and according to themes such as fitness, wellness, and career development.
Compared to discount codes or logging receipts, this is no admin at all. Cards are a form factor that employees understand, offering an experience that’s as slick as Apple Pay (since they can actually be used through Apple Pay).
And, although the employer can (and should) place spend-controls on those cards, the employee is still left with way more options and power to purchase what’s meaningful to them.
Let’s look at how the most classic employee benefit, a discount on gym membership, will change
Under a flexible benefits program with spendable benefits, a gym membership might be replaced with a fitness and wellbeing allowance.
If an employee wanted to spend their fitness allowance on a gym membership, they can – and they can now choose any gym that they prefer, regardless of whether their employer or the benefits platform has a prior relationship with the gym company. And if spin classes aren’t their thing, they can take the equivalent value and spend it on a fitness activity that does interest them.
With a flexible benefits scheme, these active employees can tailor what their benefits should mean to them:
- Maybe they want to take up padel tennis and need to buy a bat.
- Maybe they’ve been eyeing up some Nordic Walking poles.
- Maybe their old karate gi is looking a little threadbare and it’s time for a replacement.
Since the shops that sell this equipment will all be classified as allowed under a fitness benefit theme, the employees can go ahead and spend their personal budgets in totally personalised ways. And as a result, they’ll think their employer is more considerate of their personal needs. The employer didn’t have to predefine or customise anything: they just had to give employees the power of choice.
Why does flexible benefits tech need this added flexibility?
For employees
If you spend even five minutes in the employee benefits world today, there’s one phrase you’ll hear repeated again and again: employers are competing on perks and benefits more than they are on salary.
The reason that’s become a cliché is because it’s true. Research by Perkbox found that a staggering 87% of Gen Z employees in particular said that it was important to have benefits tailored to them as an individual, while almost a fifth would take a lower-paying job if it meant having a greater variety of benefits more suited to their lifestyle.
For employers and HR managers
As we’ve already touched on, flexible benefits tech can have a significant impact on employee wellbeing, engagement and retention – often more so than salary.
The greatest challenge benefits managers face is to get employees to actually use their benefits. One report by Nous found that 48% of UK HR directors say they are seeing poor uptake because “employees don’t seem interested.”
It’s no surprise then that when we surveyed 250 benefits managers in organisations with 50+ employees this year, benefits managers said they were looking to offer
- More choice
- Greater variety
- More relevant benefits
All are vital to benefits uptake. And all are neatly solved by spendable benefits.
For the benefits platforms themselves
In terms of ready market demand, it shouldn’t be hard to join the dots and see why offering spendable benefits is such a potent opportunity for HR tech and employee rewards platforms.
Competition is fierce among benefits tech platforms, but adding more partner merchants to your rewards marketplace can often only provide marginal gains.
Competing on spendable benefits is a different game entirely, however.
If you have the ability to issue branded payment cards that employees can use as effortlessly as their regular debit card on benefits they choose, then you’re making flexible benefits tech that truly allows benefits managers to realise their ambitions.
What makes it work? An embeddable solution
Until recently, the idea of spendable benefits as part of the flexible benefits tech landscape would have been unthinkable. Protecting the system from misuse simply wasn’t feasible.
Let’s go back to our fitness and wellbeing example for a minute. If an employee has a spend card for their fitness allowance but is able to spend it anywhere, what’s to stop them from buying a stash of used video games on ebay and telling their employer they were buying a second-hand golf putter?
The solution is a card that they can’t spend anywhere and everywhere – at least not in the absolute sense. That means spending controls, and that’s where embedded finance is bringing spendable benefits within reach at last.
Embedded finance’s role in making benefits spendable
Embedded finance options like Weavr’s employee benefits solution give platforms the power to offer cards with spend controls. The platform and the employer can lock cards to specific categories of spend and set spend limits so that the entire budget can’t be used on a single transaction or in a single day, for example.
Crucially for the HR tech and rewards platforms, embedded finance means they can offer these spend controls without having to build a complete fintech business from the ground up, and without taking on the compliance burden of running regulated financial services. In embedded finance programmes at Weavr, we take care of the KYB checks, anti-fraud monitoring, Strong Customer Authentication, and a whole list of other things non-fintech businesses might never realise they needed.
With embedded finance, the path is open for flexible benefits tech to leap forward and offer not just more benefits, but the power for employees to tailor their benefits experience and for employers to keep the spending aligned with their vision.
To learn more about how embedded finance can help complete the spendable benefits equation, take a look at our latest research on flexible benefits cards and the rise of spendable benefits.
