Flexible Work: Barrier to Benefits?

The Australian finance industry has been one of the leaders in the development of flexible work policies, with over 73 per cent of finance companies having a written flexible work policy (WGEA, 2016b). Flexible work arrangements (FWAs) are frequently positioned as a solution to the tensions between an individual’s dual work and non-work roles, and a tool for organisations to attract and retain a greater diversity of talented workers. While FWAs are now offered for reasons beyond caring responsibilities, FWAs were historically focused on family-friendly initiatives as a means of facilitating greater participation of women in the workforce (ABS, 2013b). Women, for a variety of reasons, remain the primary users of FWAs (ABS, 2011). Under the Fair Work Act 2009 (Cth) all Australian employees with caring responsibilities are entitled to request FWAs. Rather than an entitlement, however, FWAs are frequently positioned as an employee benefit offered by progressive employers. This study explores the association between FWA use and access to other employee benefits to determine if employees who use FWAs understand and can access the other employee benefits available to them.

Employee benefits, sometimes called fringe benefits, are defined as the non-wage components of remuneration (ABS, 2013a; Bureau of Labor Statistics, 2015). They are a significant component of compensation or ‘total reward’, representing an estimated 10–20 per cent of total compensation costs in Australia, the US and the UK (Shields and North-Samardzic, 2016; Dulebohn, et al., 2009; Tremblay, Sire and Pelchat, 1998). As is the case in financial planning, the Australian context for benefits is quite different to other developed economies. Mandatory superannuation and good public health care mean that retirement plans and health insurance are not commonly part of the suite of benefits provided by Australian organisations. Rather, benefits may include special paid leave, health and wellbeing programs, career development such as training, and employee discounts. Employee benefits also differ between and within Australian industries, depending upon company and industry choice of ‘best fit’ or what may provide employers with a competitive advantage in attracting and retaining staff (Dulebohn, et al., 2009). Common benefits in the Australian financial services industry include salary sacrificing, share equity plans, and discounts on proprietary financial products.

Benefits are distinct from employee entitlements. Benefits are framed as non-essential extras designed to attract, retain and reward staff (Shields and North-Samardzic, 2016), while entitlements are considered essential working conditions. The Fair Work Ombudsman defines employee entitlements as “rules about what employees get at work”—that is, working conditions protected by law or by formal agreements, such as the hours employees work, sick leave or the frequency and duration of breaks (Fair Work Ombudsman, n.d.). The Australian Fair Work Act 2009 provides all workers with caring responsibilities the entitlement to request FWAs; however, Australian organisations maintain the ability to refuse FWA requests on reasonable business grounds. Consequently, access to FWAs remains a negotiated employment arrangement, influenced by organisational policies, practices and culture (Williams, McDonald and Cathcart, 2017). The negotiated aspect of FWAs makes FWAs distinct from other human resource (HR) policies that specify employee entitlements. This negotiated aspect also distinguishes FWAs from employee benefits, which are pre-defined and involve implied company discretion in altering the benefits offered to staff.

This study is conducted within a large Australian financial and insurance services organisation where flexible employment arrangements are presented as an employee benefit. The study draws on a survey of over 5,000 employees to explore whether utilising FWAs reduces employee understanding of, or ability to access, the other benefits available to them. Further, this paper canvasses the implications for the financial planning profession, both as employees of Australian financial sector organisations, and as advisors to employees in this sector.

FWAs provide employees with negotiated variations to when, where and how much they work (Maxwell, et al., 2007). These variations might be formalised in an employment agreement, as is the case with part-time work, or they might be informal adjustments to work arrangements negotiated between the employee and their supervisor on an ad hoc basis. FWAs frequently include arrangements such as teleworking/working from home; caring and support arrangements (personal/carer’s leave or child care facilities); flexible working hours (time off in lieu, variable start and finish times); and reduced-load work agreements such as part-time or job share (McCarthy, Darcy and Grady, 2010; Yuile, Chang and Gudmundsson, 2012).

The Australian Bureau of Statistics (2011) identifies the availability of FWAs as a stimulus for labour participation rates and the provision of FWAs has subsequently been supported in Australia by industrial and legislative protections such as paid parental leave and the right to request FWAs (Fair Work Act 2009). Many aspects of flexible work are therefore employee entitlements provided by law. The variability inherent in flexible working means, however, that the implementation of many FWAs is tailored to organisational and individual needs, providing benefits to both (Timms, et al., 2015). The understanding of FWAs as an employee entitlement or an employee benefit hence becomes obscured.

Australian organisations have subsequently developed FWA policies that outline the FWAs available to employees and provide guidance on the process for requesting and, for managers, approving or declining FWAs. The financial services industry was an early adopter of FWAs, and over 73 per cent of finance companies in Australia now have a written flexible work policy, compared to 52.3 per cent of all industries (WGEA, 2016b). This is not surprising given the demographic characteristics of the industry. Almost 56 per cent of the workforce in financial services is female (WGEA, 2016a). Women more frequently access FWAs despite FWAs being available regardless of gender (ABS, 2011).

The gendered use of FWAs has been widely researched. It has been demonstrated that an underlying assumption that FWAs are designed to support women, influences the low uptake of FWAs by men (McDonald, Pini and Bradley, 2007). For example, within the Australian finance industry, 89.5 per cent of part-time employees are women and 10.5 per cent are men (WGEA, 2016b). This gendered perception of policy use has been identified as one dimension of work-life culture that influences employee access to FWAs and contributes to negative stigma associated with FWA use (McDonald, Brown and Bradley, 2005). Numerous studies have identified that both male and female employees believe that accessing FWAs will have negative career consequences, such as reduced opportunities for promotion or development (Eaton, 2003; McNamara, et al., 2012), and there is some empirical evidence to support these perceptions. For example, in a study of Fortune 500 companies, Leslie, Manchester, Park and Mehng (2012) demonstrated that FWA use can result in reduced measures of career success (salary, job levels, recommendations for promotion). Similar results were found in a more recent study of a Dutch financial services firm (Noback, Broersma and Dijk, 2016). Such career penalties are also likely to have immediate and longer-term financial implications for FWA users.

Even though it is a leader in offering FWAs, the Australian financial services industry faces many gender equity challenges. Despite the predominantly female workforce, only 37 per cent of management and leadership positions in the financial services sector are held by women (ABS, 2017; WGEA, 2016a, 2016b). The sector also has the largest gender pay gap of any Australian industry, with the full-time average weekly earnings of female employees 32 per cent lower than that of male employees. This is significantly more than the Australian average gender pay gap of 14.6 per cent (WGEA, 2018). While some of the difference is due to occupational segregation, the gender pay gap cannot be fully explained by the fact that female workers are concentrated in lower-paid administrative and clerical positions (WGEA, 2016a). The long-term implications of pay differences become evident in women’s financial security, particularly as they approach retirement age. Previous research has highlighted the role of gender in retirement adequacy (Basu and Drew, 2009; Neelakantan and Chang, 2010; Sunden and Surette, 1998).

Existing literature has not examined employees’ understanding of the long-term financial implications of accessing particular benefits, yet benefits are a (non-wage) component of an employee’s total remuneration package. The small existing benefits literature deals with benefits satisfaction, benefits type preference and communication preferences, finding that each vary according to employees’ demographic characteristics (Dencker, Joshi and Martocchio, 2007; Lawton and Chernyshenko, 2008; Freitag and Picherit-Duthler, 2004; Shields, et al., 2009). Many employee benefits provide a form of additional financial reward for employees. Some benefits, such as salary sacrificing or discounted products or financial services, allow employees to save money immediately, while others such as study assistance are likely to result in sustained longer-term salary increases, with consequent increases to superannuation. In contrast however, FWAs provide non-financial benefits for the individual employee, such as more control over their time and work locations, leading to a reduction in work-life conflict (Haley and Miller, 2015). Associated career and wage inhibiting effects mean that the long-term financial situation of employees is rarely improved by utilising FWAs (Draco and Green, 2004; Glass, 2004; Green and Leeves, 2013; Noback, Broersma and Dijk, 2016). Given the perceived stigma associated with FWA use, this study proposes that when FWAs are positioned as an employee benefit, employees utilising FWAs may be reluctant to access further benefits or may not be aware that other benefits remain available to them. Further, using FWAs that reduce time in the office may limit access to information about other benefits, compounding the financial downside of FWA use.

Focusing on the finance sector, this case study aims to uncover if FWA use influences an employee’s knowledge of available benefits or understanding of how to access those benefits. The study answers the research question: is the utilisation of FWAs associated with lower understanding of employee benefits? The implications for all FWA users are discussed but given that women are the largest group of employees in this sector, and also the predominant users of FWAs, this study gives attention to the experiences of female finance workers. The following sections outline the method and approach taken to address the research question.

This study utilises a case study approach. Theoretical sampling for single cases involves selecting cases that are exemplary or provide a unique opportunity to critically explore phenomena (Eisenhardt and Graebner, 2007; Yin, 2013). The case organisation, hereafter referred to as Bank 1, commissioned a reward management consultancy to develop and conduct an all-staff survey on the suite of benefits offered by Bank 1. Within the survey FWAs were specifically included as part of the suite of benefits. This study analyses the responses to seven open-text questions and two interval scale survey questions, with respondent demographic data, to investigate if employees who perceive and use FWA as a benefit, understand and know how to access other employee benefits. Consideration is also given to the survey design and administration as it pertains to employee perceptions of what the case organisation offers as an available benefit.

The survey focused on issues of benefits satisfaction, benefits understanding, benefits value, flexible work arrangements, health and wellbeing, and financial services discounts for employees. The survey was conducted via an online survey platform and was open to all staff across Australia for a one-month period in mid-2015. Participation was voluntary and no personally identifying information was collected. Participants were offered the opportunity to enter a draw for some retail and cinema vouchers. The survey was advertised via three all-staff emails, the company intranet and internal social media. The 36 survey questions included seven demographic questions, seven open-text questions, four nominal scale and 18 interval scale questions. Demographic data collected included age range, gender, working location (office-based or working from home), pay band, type of employment (full-time, part-time, casual, other) and business unit. Each question was voluntary; however, missing responses on demographic questions were minor (1%–2.4%). The data was subject to analytical and thematic research techniques to address the research question. While the primary method employed was qualitative (thematic analysis of open-text responses), data from the responses to two quantitative survey questions was statistically analysed to complement the insights gained through the qualitative analysis. In particular, independent samples t-tests were conducted to test for differences between (1) gender, (2) types of employment, and (3) working locations.

Drawing on data from an employee benefits survey conducted in a large Australian financial services company, this study set out to understand if using FWAs influenced employee understanding of available benefits. The findings have implications for financial planners, both as employees of Australian financial sector organisations, and as advisors to employees in this sector.

Even though the right to request FWAs is an entitlement provided by the Fair Work Act 2009, in Bank 1 FWAs are communicated as an employee benefit and positioned as part of the total reward, remuneration and benefits package, yet FWAs are distinct from the other benefits that provide some form of financial gain for employees. In Bank 1, female employees perceive FWAs as the most highly valued benefit and indicated that they access FWAs more than other employee benefits. The identified lack of understanding in relation to the financial benefits being offered by Bank 1, and limited knowledge of the full suite of benefits available to them, may reinforce the perceived value of FWAs over other benefits. The findings further identify that those employees accessing FWAs are also least likely to understand what other benefits might be available or how to access those benefits.

Viewed collectively, the study’s findings suggest that where FWAs are valued as a benefit, users of FWAs are less likely to understand benefits options, or have knowledge of how to access other benefits (available alongside FWAs) that may improve their financial situation. This situation is further exacerbated for women who are the primary users of FWAs and are least likely to understand available benefits or have knowledge of how to access them. FWA use appears to limit access to information required to make informed benefits decisions. FWAs that reduce time in the office may also reduce an employee’s availability for training or information sessions on employee benefits or may simply restrict access to benefits information provided formally and informally to office-based staff. An alternative explanation—in the context of Bank 1—is that employees who perceive they are accessing FWAs as a benefit do not then seek out information on other benefits or believe they can access other benefits. Further research in other organisational contexts is needed to fully understand the factors that contribute to this apparent relationship between FWA use and access to benefits information.

The FWA literature links FWA access to reductions in hours and career opportunities, lower pay and lower superannuation (see for example, Crowley and Kolenikov, 2014). This study explains how in one organisation where FWAs are framed as an employee benefit, they are also largely perceived by employees as a benefit that is highly valued. Employees who use FWAs as a benefit then tend to have less understanding and knowledge of how to access other benefits available to them. Within the legislative framework and within organisational policy however, FWAs are not provided in lieu of other benefits. Rather, employees need to be aware that their use of FWAs should not preclude them from accessing other benefits with greater financial reward, such as salary sacrifice, product discounts or career development opportunities. When providing advice, financial planners have an opportunity to prompt individuals to investigate and use the full range of benefits available to them, regardless of their work arrangements.

Additionally, the finding that female employees and all FWA users are less likely to understand and know how to access benefits has implications for financial literacy. The financial literacy literature indicates that women have far lower financial literacy than men (Lusardi, Mitchell and Curto, 2014; Hung, Parker and Yoong, 2009). Further research is needed to explore whether FWA users are less financially literate than employees who do not use FWAs. For the financial planning industry these findings do, however, suggest the need for greater education on the financial implications of benefits decisions for employees who use FWAs.

The Future of Financial Advice (FoFA) Bill 2016 provided a clear indication that regulators of financial planners are seeking to raise the standard of financial advice provided to Australians. As an aim of the financial advice profession is to assist people to manage their finances effectively in order to achieve financial wellbeing (Johnson, Brimble and Zanetti, 2016, p.107), it is important that financial planning professionals understand and communicate the implications of employees perceiving flexible work as a benefit. While further research is needed, there is potential that employees—particularly women as the heaviest users of flexibility—may be forgoing other benefits because of their lack of understanding of the benefits available to them and how to access them. Since benefits have important long-term financial implications in terms of career development and consequent pay and superannuation increases, financial planners are well positioned to advise their clients to become educated about how they can maximise benefit use, and to inform clients using FWAs that they do not need to forgo access to other benefits simply because they have accessed flexibility.