Several words characterise the current landscape of employee benefits. The first is “flexibility”. Candidates are seeking a degree of choice both in the ways in which they are rewarded for their labours and the ways in which they work. It’s clear that, for many, salary alone is no longer sufficient recompense. Consequently, “package” is also a term with growing currency.
Another word one could apply is “upheaval” – this appearing in the shape of the national pensions crisis, which has caused seismic rifts for workers and organisations alike.
Other descriptors would include the now-familiar “candidate-led”. Experts in the recruitment consultancy sector agree that in a market with a finite – and inadequate – level of talent, such as HR, the pressure is on employers to offer innovative ways of attracting, retaining and engaging those elusive, talented individuals.
“Employees are demanding flexibility and choice,” says Mark Richardson, editor of the Incomes Data Services reports, HR Studies. “They have different priorities and lifestyles which change over time, and employers are now recognising this by developing an element of choice in the benefits they offer.”
This extends to how and where people work, he adds. “Employers are increasingly prepared to accommodate working from home and flexible working, as they appreciate the value that employees place on work-life balance. Flexible working, for example, is now often considered integral to attracting and retaining staff.”
Trudy Searle agrees. As senior consultant at Sterling Selection, she has witnessed this growing trend. “Work-life balance is an important issue and candidates are comfortable asking questions about flexible working options, whereas even five years ago that wasn’t the case,” she says. “Forward-thinking organisations realise that employing staff who work from home can increase their talent pool. This not only reduces overheads but also allows them to cast their net much wider than their local area, which may not offer the skills they need.”
Given that candidates are seeking choice and control, flexible benefits remain in demand. “Flexible benefits continue to be popular,” says Matt Brooks, manager at Frazer Jones. “For larger firms, they have been very successful. Most organisations we deal with are looking to implement a flexible offering in one way or another.”
Many recruitment consultancies are seeing more flexible benefits on offer. “In 2005, around 10 per cent of firms we dealt with offered flexible schemes; now that’s nearer 25 per cent,” says Carole Bodell, managing director of HRi. “New software means implementing and administering schemes is easier and cheaper, and it has allowed medium-sized firms to enter the market.”
Although they are popular and give employers an opportunity to differentiate their reward offering from that of competitors, flexible benefits are not as widespread as may be expected. “More organisations are looking at them but few have adopted them,” says Charles Cotton, CIPD adviser, reward. “But that may change this year. Our latest annual Reward Management survey shows that the number of firms offering them is set to almost double. Currently, 32 per cent have them and 28 per cent are planning to introduce them.”
The top-three benefits being introduced, according to the CIPD survey, are childcare vouchers, bicycle loans and dental insurance. Other offerings include extra holidays (or cash instead of holidays), pension payments and a variety of insurance and assurance provision covering life, income, private medical and critical illness.
The biggest change in benefits has been the fundamental, and much feared, shake-up of pension provision – the move away from final-salary policies. “Most final-salary schemes in the private sector are now closed to new entrants, and many are being closed to current staff too,” explains Cotton. “There has been a move away from defined benefit schemes to defined contribution, or money-purchase, schemes.”
The CIPD survey shows that 20 per cent of employers are planning changes to their pension arrangements in 2007, with the most popular options being to increase employee and employer contributions and introduce salary sacrifice arrangements.
If defined contribution schemes are well funded, Cotton sees no problem with them. Evidence suggests this is not happening, however. “Employers are taking the opportunity of transferring to new systems to cut contributions and reduce costs, leaving a gap. If employees don’t make up that shortfall, then in 20 to 30 years’ time we will have people who will not be able to afford to retire,” he says.
Recent research by performance improvement business P&MM and graduate recruitment consultancy Pareto Law into the benefit requirements of graduate job starters appears to show that today’s stark pensions warnings are being heeded by young people. Asked which benefits they were seeking, 60 per cent said tax-efficient benefits, which would incorporate pensions and private healthcare. Gym membership and “duvet days” were well down the list. (Perhaps less realistically, however, more than half of the graduates said they expected to retire between the ages of 51 and 60.)
Many public-sector workers still enjoy final-salary schemes. This will help those public-sector organisations wanting to attract talent from the private sector; recruitment consultancies report that any inter-sector movement tends to be from private to public.
Candidates who have enjoyed final-salary schemes and are considering a move to an employer that doesn’t offer them are commonly asking for an increase in salary to compensate. Consultancies report mixed levels of success with these bids.
Brendan Keelan, partner at executive search consultancy Howgate Sable, believes that the increased mobility of the workforce will affect pension provision. “The concept of long service has changed. People are not going to work for 20, 30 or 40 years for one firm any more, and they are keen to have a portable pension,” he explains. “It is also partly a measure of their mistrust of corporations with regard to pensions.”
So what are the other trends in the benefits arena? Company cars, it seems, are waning in popularity, taxed out of favour in successive budgets. Organisations are now more likely to offer car allowances and pool schemes.
More and more organisations are offering enhanced training and development opportunities to attract and retain staff. The CIPD survey shows that 80 per cent of employers offer training and development as an employment benefit. And it’s popular with candidates.
“We’ve seen a marked trend in employers offering good schemes for staff, supporting them either in terms of paying course fees or by agreeing time off to study,” says Christopher Laver, managing consultant at Barbara Wren & Associates. “It’s attractive to prospective employees if they see that they can grow with the business, continue ongoing development and achieve professional qualifications.”
Another non-financial benefit that is evolving is an organisation’s commitment to CSR. “Candidates are becoming more interested in how an employer deals with the community and its wider responsibility, and we see more people asking about this,” says Simon Young, manager of the HR division at Badenoch & Clark. “Companies that offer one or two days a year to become involved in CSR projects are increasingly stating the fact in their benefits packages.” (See “Scales of responsibility”, PM Guide to Recruitment Consultancies 2007.)
According to Hilary Hurt, company director at Ashley Kate Associates Group, another growing trend is the concept of reward packages. “People are looking for more than just a salary now and want to see a package of benefits on the table,” she says. “They are more switched on to the options available. We are commonly asked in detail about the package, the benefits, the bonuses, the percentage of employer contribution, and so on. More candidates are also looking for total reward offers, incorporating the whole gamut of financial and non-financial benefits.”
The CIPD survey records that 41 per cent of those employers questioned offer total reward packages, while 32 per cent are planning to adopt them. The report also notes a significant increase in cash-based bonus schemes and incentives, more commonly in the private sector. “This year’s survey found extensive use of short-term bonus and incentive schemes, with larger organisations operating up to four separate incentive plans,” says Cotton.
Consultancies are noticing a greater trend linking these bonuses to performance, even for HR staff at management level. One recruiter reports that most permanent HR appointments they handle now have some component linked to performance. Cotton concurs. “More HR people are being rewarded according to contribution, even in the public sector. It is trickling down slowly to line managers, rather than being exclusively for senior staff,” he says.
Signing-on bonuses, or “golden hellos” (a familiar inducement to candidates in investment banking or the energy sector), are still uncommon in HR, with the exception of two scenarios. “Some top-end HR positions will offer signing-on bonuses,” says Peter Sandham, deputy chairman of executive search firm Hoggett Bowers, “but, increasingly, so-called golden hellos are being offered to attract senior reward specialists.”
Once a job for number crunchers, today’s reward professionals are required to be far more creative. “The innovation and creativity required to develop successful reward strategies across organisations are scarce – and therefore highly prized – skills at present,” Sandham says.
Ultimately, the ability to entice an HR candidate to join a firm goes beyond the financial inducements it places on the table. “It’s not just about pay and rations,” says Paul Armstrong, regional head at human capital management consultancy Penna. “Many HR professionals, particularly at senior levels, will look at the weight and gravitas the role has. They will try to find out whether the HR function is staid and old-fashioned or a key power-broker in the organisation.” Given the trend towards outsourcing in the HR function, candidates will also want to know how secure the role is.
While most candidates are attracted by the dynamism of the HR function, sometimes the opposite is attractive, Armstrong says: “One HR director I worked with was attracted by an organisation with an appalling employer brand. He found the challenge of turning it around irresistible.”
Perhaps the final words to characterise the benefits landscape for HR professionals might be “occasionally irrelevant”. According to David Graham, head of UK business for Capita Resourcing’s HR and finance divisions, an employer’s HR environment is crucial.
“Senior-level candidates, in particular, focus keenly on the organisation’s culture,” he says. “Any business that portrays its HR function as an ‘old-school’ personnel department, divorced from the heart of the business and unable to drive strategies across the organisation, will struggle to recruit talented individuals. It’s a real turn-off for candidates and, in cases like these, it really doesn’t matter what benefits are on offer.”
And the kennel fees…?
Being a nation of dog-lovers, it’s perhaps not surprising that many of the more unusual requests from candidates regarding extra benefit provision focus on canine care. One woman asked a prospective employer if they would pay for a daily dog walker (they wouldn’t), another wanted to bring his mutt to work, while another candidate turned down a high-powered job because the car on offer was too small for her two large pooches. Yet another put in an expenses claim for kennel fees incurred during a business trip.
Aside from animal care, candidates have reportedly asked for relocation fees for a harp and grand piano, insisted on being given underground car parking and requested a full-time chauffeur (declined). Trailblazing employers keen to keep staff are offering free tickets to football and rugby matches, subsidised haircuts, driving lessons, free drinks sessions and personal coaches.
One firm allows kids to join parents in the staff canteen at lunchtime; one offers carbon credits in its menu of flexible benefits; and another gave every employee a bicycle for Christmas.