Case study
Flex scheme at KFC offers cars and mobile phones
In 2013, KFC launched a flexible benefits scheme for its salaried employees offering an extensive menu
of items – including travel insurance, breakdown cover, cars and mobile phones. Employees can pay for
benefits by flexing down one or more of their core benefits to free up funds or through salary sacrifice.
At a glance: Flexible benefits at KFC
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KFC has 850 restaurants in the UK, but only 25% are
owned and operated by the company itself – the rest
are managed independently by franchise partners.
KFC only has control over the pay and reward of the
10,000 employees working in its company restaurants
and head office. This group is further divided in terms
of how they are paid: the majority of restaurant staff
are paid weekly; assistant restaurant managers and
above receive an annual salary. And only employees in
this latter group are eligible for the company’s flexible
benefits scheme.
Flexible benefits introduced in 2013
KFC’s journey to flexible benefits started at the end of
2012, while the company was gearing up for pension
auto-enrolment. ‘Our auto-enrolment staging date was
1 April 2013, so we were reviewing our pension
strategy ahead of this,’ says Andrea Talreja, Reward
Manager at KFC, ‘and our previous reward manager
saw it as an opportunity to review the entire reward
offering. He felt it was the ideal time to improve the
package we gave to our employees.’
To help inform these changes, the reward team carried
out some extensive external benchmarking of KFC’s
pay and benefits to see how it compared with
competitors. At this time, the company offered a core
benefits package of a defined contribution pension,
private medical insurance (PMI), childcare vouchers,
life assurance and group income protection.
‘The review concluded that the package we offered did
not meet our aspirations and that introducing flexible
benefits would help fill the gap,’ says Talreja. ‘It was
something that would set us apart and that our
employees couldn’t get elsewhere.’
The company introduced the scheme, ‘Pick N Mix’, at
the start of 2013, with employees’ first selections going
live at the start of the benefits year on 1 April.
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Benefits can be funded by trading down
core items...
To ‘buy’ benefits from the flex menu, employees have
two choices. They can choose to flex down the level of
one or more of their core benefits and use the funds
freed up to purchase other items. For example, an
employee receiving life assurance worth 4 x salary may
opt to lower this to 2 x salary, and use the funds saved
to purchase non-core benefits, such as a gym
membership or dining card. Employees cannot take
any freed up funds as take-home pay, however.
Given this reliance on flexing down core items to free
up funds to spend elsewhere, the reward team
increased the value of these benefits ahead of the
launch of flex. ‘We wanted to make sure the value of
employees’ core packages would take them further,’
says Talreja. ‘So when we introduced Pick N Mix we
also upped the level of life assurance offered as
standard and added personal accident insurance and
critical illness cover as core benefits. This gives
employees more choice in terms of flexing down and
spending funds elsewhere.’
...or via salary sacrifice
Alternatively, employees can keep all of their core
benefits and choose to pay for additional benefits – or
to increase their core benefits – through salary
sacrifice. Employees are free to spend as much of their
salary on benefits as they wish, providing it does not
bring their pay down below the level of the minimum
wage.
When the flex scheme was launched, the reward
manager trained all of the company’s HR team in
salary sacrifice – and they then cascaded this training
to restaurant general managers and area coaches
(regional managers). ‘We made our managers experts
in salary sacrifice so that they would be able to answer
any questions their employees might have,’ says
Mercedes Fitzgerald, Reward Analyst at KFC.
Profile: KFC
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11
Flexible benefits 2014
SALARY SCRIFICE SAVINGS HELP FUND THE SCHEME
When employees pay for certain benefits through
salary sacrifice, both they and their employer make
savings on their national insurance contributions
(NICs). KFC uses 75% of the NICs savings it makes to
help fund the flexible benefits scheme – no decision
has yet been made on where the rest of the savings will
be invested. ‘We are still looking at the plan for this,’
says Talreja. ‘One possible option is to invest the
money into our training and development
programmes for employees.’
The flex menu
This table shows the full menu of benefits available
for employees to select in the 2014 scheme, together
with details on the core level of cover provided and
paid for by the company (where applicable) and the
minimum and maximum levels that employees can
select. It also gives the number of employees who
selected each benefit in both 2013 and 2014,
together with the percentage change between the
two years.
In addition to these items, employees can also
purchase a range of goods and services – such as high
street retail vouchers and reloadable cards, package
holidays and cinema tickets – through an online
discounted shopping portal. ‘We introduced this in
direct response to employee feedback,’ says Fitzgerald.
‘They asked for it and we thought it would fit well
alongside the flex scheme.’
Cars, mobile phones and dining
membership were added in year two
The ‘My car’, mobile phone and dining card options
were all added to the flex menu in the scheme’s second
year. ‘We sat down and reviewed the scheme in
December 2013 and asked ourselves “How can we
evolve in year two?”’ says Talreja. ‘We decided to add
three benefits that are all geared towards “Generation
Y”, who make up a lot of our restuarant and assistant
restaurant manager populations.’
The car and mobile phone options were seen as
particularly important additions as these are given as
core benefits to area coaches. ‘Our restaurant
managers were obviously keen to receive these items
as well, but it wouldn’t have been affordable to extend
them as core benefits across this level,’ says Talreja. ‘So
by adding them to the flex scheme we were able to
give restaurant managers and assistant managers
access to some very good deals without it actually
costing us anything.’
The new benefits have proved popular with employees
– in 2014, 71 selected the dining card, 17 signed up for
The benefits menu and selections in 2013 and 2014
Benefit
2013 selections
Finance and protection
2014 selections
% change
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Leisure and lifestyle
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KFC
a mobile phone and 55 ordered a car. ‘These figures
tell us that we were right to introduce these items,’ says
Fitzgerald.
Employees given a four-week window
to select benefits
In the scheme’s first year, employees were given a
three-week enrolment window to select their benefits.
This was extended to four weeks in 2014, in response
to employee requests for a longer period in which to
consider their choices. ‘As long as employees’ final
selections are submitted by mid-March, we are able to
process them ready for the start of the benefits year on
1 April,’ says Talreja. ‘So it is not a problem to start the
window earlier. We may even extend it again in 2015 if
people ask for even longer.’
The company is looking at making some of its benefit
selections available all year round, rather than just
during the annual window. ‘Employees are already
free to amend their pension and childcare voucher
selections every month,’ says Talreja. ‘And we have
extended this to the car scheme – people may need a
new car at any point, not just during a short window
at the start of the year, so we have designed the scheme
so that they can opt into the scheme whenever they
wish. We are looking to do something similar with
mobile phones too.’
‘It’s all about making the scheme as flexible as possible
for our employees,’ says Fitzgerald.
Employees make their selections using a
dedicated online portal
Employees must log in to a dedicated Pick N Mix
website, hosted and managed by Aon EB, to select their
benefits. At launch, all employees were issued with a
username and password for the site – new employees
are given their details during their induction.
The site shows the annual and monthly cost of the
core benefits that are funded by KFC. Employees can
choose to flex one or more of these items up or down
by clicking on it: this brings up a list of the available
cover options, together with details on how much it
will cost to increase coverage, or how much money
they will save by opting for a lower level. They can also
click on any of the other benefits to see a full list of
options, together with their annual and monthly costs.
Employees are free to select and deselect items as they
wish to see what impact any options paid for through
salary sacrifice will have on their take-home pay –
then, when they are happy with their selection, they
must submit their final choices.
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Scheme communications start after
Christmas each year
Communications for the scheme start in the New
Year, with a teaser campaign using posters in head
office and at restaurants. A week before the enrolment
window opens, all eligible employees are sent a letter
and booklet to their home address. This includes a
reminder of their username for the Pick N Mix
website as well as details of all of the benefits on offer.
Presentations are also held at head office, where
employees can hear about the scheme and ask any
questions they might have.
In 2013, the reward team invited a pensions and
benefits expert to come and spend four days at head
office – employees could then drop-in and ask any
questions they had about the scheme or any specific
benefits. ‘Our employees got a lot of value out of this,’
says Talreja. ‘One challenge for us is to see how we can
recreate that one-to-one experience for all our
restaurant and field-based staff.’
Benefit selections increased by 82%
in the second year
In the scheme’s first year, 219 employees logged on to
the Pick N Mix portal and selected at least one benefit.
This number almost doubled in 2014, with 380
employees making at least one selection. The number
of benefits selected also showed a significant increase
– up from 2,039 in 2013 to 2,929 in 2014, a rise of
82.2%.
‘The increase shows that our employees have become
more savvy now,’ says Talreja. ‘They understand the
scheme and they understand salary sacrifice. And the
new benefits we added this year have also helped
increase interest in the scheme.’
Understandably, the core benefits are generally the
most popular items, as employees must choose to
decrease their standard entitlements on these items to
free up funds to spend on other benefits. Outside of
these, the pension scheme had the most selections in
2014, followed by dental insurance, the dining card
and holiday trading.
The scheme has generated a positive
response from employees
The reward team has yet to carry out a full
evaluation of the flex scheme’s impact, but it has
received lots of positive feedback from employees.
‘People have told us how pleased they are with
being able to select their own benefits, so we know
it is a great fit and is well understood by our
employees,’ says Talreja.
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Flexible benefits 2014
The company did carry out the Great Place to Work
survey in November 2013, however, and it achieved
double-digit increases to its percentage scores in all of
the pay and benefit categories. ‘You’re never going to
get 100% ratings for pay and reward,’ says Talreja, ‘but
seeing such a huge increase was great.’
Future additions to the menu may include
driving lessons and Apple products
Planning for the 2015 scheme is now underway
and the reward team is currently considering
possible additions to the menu. ‘We might
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introduce driving lessons,’ says Fitzgerald.
‘Employees have asked us about them before and
with the addition of cars this year it makes a lot of
sense to bring them in now.’
‘We are also looking at whether we can offer staff a deal
on Apple products,’ says Talreja. ‘The iPhone is the most
popular mobile phone in the scheme, so we would like to
see if we can offer a wider selection of Apple products if
possible. We may also extend the holiday trading rules to
allow employees to buy or sell more than the current
limit of three days. But we still have a lot of planning to
do before we finalise our plans for next year.’
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