The review process doesn’t necessarily mean starting from scratch; in many cases, it’s about strengthening what’s already in place – identifying improvements and making sure the partnership stays fit for purpose. It can also provide a timely opportunity to benchmark, renegotiate for optimum value or refresh arrangements in line with changing priorities.
Part of every benefits strategy
“Regular contract reviews are vital,” says Cheryl Clements, head of business development at Tusker. “They help employers understand management information, not least whether the benefits are working for employer and employee needs, as well as to identify trends.
“However, it mustn’t be a tick-box exercise,” she cautions. “It needs to work for everyone concerned, otherwise, really, what’s the point?”
Inefficiencies and overlooked risks
Long-standing contracts that aren’t reviewed can lead to overlapping services, hidden costs and declining engagement.
Robyn Hey, senior contracts manager at Wright Hassall, comments: “Review discussions can reveal anything from pricing discrepancies to outdated service packages and missed renewal dates. A review is also a good chance for you to determine whether your suppliers are delivering more or less than what they are contracted to deliver.”
Ian Hodson, director of people and culture at Housing 21, notes that significant changes within the business can lead to costs creeping up unnoticed. “If the agreement is based on headcount then often a merger or a TUPE can create a huge costing increase,” he explains.
In such instances, renegotiation can be used to establish a price cap or the use of headcount bands that are broad enough to allow for growth.
According to Heather Rogers, European sales director for employee recognition specialist OC Tanner, a review might reveal that return on investment is deceptively low and in need of improvement. “For instance, if you have fairly low uptake in the business you can look into paying a price per employee,” she says.
Signs it’s time to review
While reviews don’t need to wait for a specific event, certain patterns and warning signs can suggest it’s time to reassess.
“Employee benefits programmes can go stale, as can relationships with providers,” says Clements. While it’s important to watch – and adapt – to employee take-up, you should also monitor whether regular supplier meetings have dropped off. She says it is wise for reward and benefits professionals to ask themselves whether they are gaining new ideas or understanding from providers. Are your providers updating you about what the market is doing and how that impacts your organisation?
Of course, it makes sense to review any contract before it is renewed. However, Hodson recommends beginning the process well before the renewal date. “Don’t leave conversations too late,” he warns. “If you only have a few months left to run, the supplier will know you are probably not intending to, or would struggle to, change. Six months before renewal seems a timely point to commence conversations.”
Hey also recommends that employers have discussions with suppliers around their service offerings when the business is going through a significant change, such as a merger, or there have been changes in the law that might affect existing arrangements.
She adds: “In the case of disappointing performance by a supplier, you definitely want to have a discussion before the relationship sours or a formal dispute arises.”
Running an effective review
Effective reviews depend on preparation and clarity. Hey suggests that employers start by taking a good look at their own business needs and what the supplier is bringing to the table. “An internal assessment is a great way to ask the important questions – are your current suppliers meeting your needs, and is there anything you would want to change?” she explains.
Hodson agrees, emphasising the importance of establishing your “prioritised drivers” for the agreement. For example, is it the cost of the service that carries the greater weight, the integration, or the product functionality?
“Be clear on the costing model, the services that are being supplied, the relationship management approach and the movement of data,” Hodson advises. He also recommends establishing a clear framework for the review that can be used next time around.
Any review should take into account the views of employees. “Gather as much feedback as you can from across the business to get a full picture of how your suppliers are delivering and how employees are experiencing the services,” Hey suggests. “Don’t forget to ask people from different areas of the business involved – such as HR or finance – so that all aspects of the services can be assessed.”
Employee feedback is also important, says Kelly Jackson, director of governance, risk and compliance at Perkbox Vivup. She emphasises that employee experience is essential information for the providers themselves. “Suppliers need to have an understanding of what their clientele’s needs are to assess what changes are necessary to meet these demands,” she insists.
In terms of structuring the review, it could be as simple as starting with a list, according to Jackson. “Key things to look for include products, unused features, minimum term, cost, payment terms, liability and internal feedback related to the service provided and the products offered by the supplier,” she advises.
However, before you make any decisions, Hey suggests you test the market, weighing up key factors like pricing, service quality, and any added value.
“You may be drawn to fancy bells and whistles, but make sure you choose options that genuinely meet the needs of all your employees and fit well with the way your business operates,” she warns.
Questions to ask
Clements offers a range of key questions employers should put to their suppliers, including:
- How long have you been offering this service?
- How are you keeping up to date with technology, legislation or market changes?
- What advice and proactive support do you give to employers, and what does this look like in practice?
Meanwhile, Charlie O’Brien, head of people at Breathe HR, suggests:
- What key performance indicators do you use to demonstrate your value?
- Can you show us the impact on our specific objectives?
Gains from renegotiation or switching
A thorough review can lead to better pricing, improved services, or even smarter bundling of benefits.
“In some instances, adding or replacing products offered by the supplier can unlock cost-saving benefits in other areas,” advises Jackson.
According to Hodson, using a broker to review, particularly around insurance and health products, can reap significant savings.
“In a similar way, bundling services together with an existing provider can often mean less overheads than engaging multiple suppliers and saving on implementation or origination costs,” he adds.
Pitfalls to avoid
Make sure that any comparisons made in the review are meaningful, and that the contract terms are understood in full.
“Don’t compare apples to oranges,” warns Clements. “What do you get from the existing supplier that you might lose? What do you gain from a new supplier that will support your current challenges?”
Meanwhile, O’Brien recommends looking out for sneaky pricing escalations that might be baked into the small print. “Make sure you are clear on contract timelines, so you don’t get locked into lengthy contracts, and other critical deadlines, such as break clauses and contract notice periods,” she warns.
Similarly, Hey recommends going through the liability clauses with a fine-tooth comb to avoid accepting any risks that could have serious consequences. “It is just as important to check what’s missing from an agreement as what’s included,” she insists.
A measured approach
Perhaps the biggest pitfall to avoid, however, is changing suppliers unnecessarily.
“Realistically, I am never looking to change providers unless I really have to as embedding a new service has its own complications in respect of employee communications, implementation resources, technologies and of course re-establishing engagement,” says Hodson.
He also recommends allowing a reasonable amount of time for a partnership to form. “Sometimes, that is about the strengths of the individuals in the relationship, while sometimes it is about understanding each other’s operating models,” he explains.
“A period of around two years is an ideal time to understand if the relationship is working or if it needs to be evolved or reviewed.”
For employers looking to future-proof their benefits strategy and extract maximum value, it’s a conversation worth having.
