Doubt over the benefits

employee benefits lost their allure for new recruits and is salary the only
incentive they need? Personnel Today invited HR professionals to discuss the
issues at a round-table event

Around 10 to 15 years ago, you took a job hinged, by and large, on the
salary that was offered. Nowadays, the competitive challenges of recruiting and
retaining staff, increased employee mobility, the end of the job for life,
globalisation and staff demands for more flexibility, have changed all that.
Employers are having to be increasingly creative in how they utilise
compensation and benefits.

Yet, there is still confusion about the best way to go about recruitment and
retention. For instance, in January, employee benefits firm Youatwork reported
that just one in 10 firms provided staff with assistance when it came to
putting family-friendly policies in place, despite nine in 10 believing it will
be an important issue in the next five years.

Conversely, earlier this month the Engineering Employers’ Federation
published research suggesting that simply rewarding people with bigger salaries
can give a competitive advantage, with cash still a key factor in attracting
and retaining staff.

So, how much does salary still count? In an ever tougher recruitment market,
how are trends changing, what do graduates want and what impact has the
pensions crisis had? With these questions in mind, Personnel Today invited a
select gathering of HR professionals to take part in a round-table discussion,
drawing on their experiences to look at where the compensation and benefits
debate is going.

Flexible benefits versus more cash

With an innovative flexible benefits package in place since 1997, serving
some 20,000 staff, PricewaterhouseCoopers (PwC) has been very much in the
vanguard of the flexible working revolution.

One of the largest schemes of its kind, it works by allowing employees to
choose how they are going to take a percentage of their remuneration package
from a central ‘menu’ of benefits – company car, extra holiday, cash, insurance
and so on. It operates through the company intranet and is administered through
an HR transaction centre in the Midlands.

"By giving choice you make yourself very attractive. In a diverse
workforce, some people want cars, some people want holidays, some people want
insurance and that is all very appealing," explains head of resourcing
Charles Macleod.

But he adds: "One of the things you have to recognise, is that it [the
scheme] is not cheap. There is a lot of administration behind it, and its
impact on the employee only lasts a certain amount of time."

There could be a backlash against flexible benefits, particularly as the
employment market gets tougher, says Martin Tiplady, HR director for the
Metropolitan Police. He argues there is an increasing desire among staff to
move away from what are often perceived as fringe ‘add-ons’, to something more

"With concerns about pensions, final salary schemes and the like, I
have a funny feeling that what we are missing is the bit that says people’s needs
in terms of flexibility may be moving back to the type of more traditional
benefit where people want more security," he explains. "As HR
professionals, we need to be thinking what we could do about it."

Similarly, among employers, there is the concern that you only have a
flexible benefits package because everyone else has it, and therefore the only
competitive advantage you get for some considerable outlay, is the fact that if
you don’t have one, you are disadvantaged.

Karen Smith, reward manager with HSBC, agrees. "It’s not so much the
clerical level entrants, but with graduates it is definitely a problem if you
don’t have flexible benefits, because it is expected of an organisation of our
size," she says.

Tiplady muses: "I wonder whether cash as opposed to the ability to sell
cash benefits might by default make its comeback. Bonuses, which were
criticised, could find their way back."

Of course, the ability to offer flexible benefits is very much constrained
by the industry you are in. Ray Ryan, HR director of construction firm
Montpelier Group, points out that in that industry, companies are lucky if they
make 2 per cent profit on a contract.

"All these nice things that we in HR would like to do, such as flexible
benefits, are out of the question," he says. "Most companies in our
sector do not have to do any more than our competitors are doing, because no
one expects you to be doing it."

Where lower pay is an issue, HSBC, for instance, finds total reward
statements to be a useful tool, Smith says.

"At HSBC Special Retail section, we don’t claim to pay above the market
– that is not what we’re about. It’s the benefits and security that we try to
sell ourselves on. We have found total reward statements are a powerful tool
because people can see what their actual worth to the company is on one piece
of paper," she adds.

Due to housing and living costs, the Met has to pay officers more than other
forces, but it also has to be careful not to poach from other forces. But,
stresses Macleod, one advantage of flexible benefits is that they can be a
great leveller.

"Under the old scheme I had to be at a certain grade to qualify for a
company car or certain benefits, whereas now I have exactly the same
entitlements as someone who has just joined," he explains.

"The maximum percentage is set as regards your notional base salary. It
used to be that 80 per cent had to be taken as cash. You get four weeks’ leave,
but can buy an extra week on top of that. Depending on what your base salary
is, you may not be able to afford to do all these things.

"One of the things we have to be careful of is that someone doesn’t
spend absolutely everything they have in terms of benefits on a really upmarket
car that they then cannot afford to run. So there is a certain amount of
self-control," he adds. "There is also a degree of scepticism among
joiners who often express surprise – they say: ‘it can’t be as flexible as
that’, but it is."

Where do pensions, and particularly final salary schemes, fit in?

With the collapse in value of stock market-linked pension schemes and the
rising number of firms closing their final salary schemes, they are becoming a
much more important element of the compensation and benefits mix, Ryan

"The biggest draw now to attract people is companies that offer final
salary pension schemes. I wouldn’t have said that two years ago, but I would
now. So few companies are now providing them that those that do are still
attractive to individuals," he says.

In the past, people joined a company not really knowing too much about the
pension and just being happy there was one, he suggests. "Now they are
having to think a bit more purposefully about the type of scheme they are being
offered and whether they actually accept the job.

"It has seriously hurt employee relations because of the number of
companies that have had to offer money purchase schemes to people joining, or
at worst, having to forcibly defer people from final salary schemes and offer
them the chance to go to money purchase schemes," Ryan says. "It is a
significant problem and it is not limited to any particular industry."

Pensions have also played a major part in the shift in popularity from the
private sector to the perceivably more secure public sector.

"Three or four years ago, the employers of choice were the banks,
consultancy firms and dotcoms, because they offered no security with high
material rewards," says Macleod. "If you look at surveys now, it is
professional services firms that have a dull but secure image – the army,
police, public sector, local health authorities – that can offer a different
sort of reward that are popular."

The Met is currently recruiting some 3,500 officers and, despite no
corporate advertising for the past six or seven months, is still receiving 200
requests to join each week, says Tiplady.

"I do think security is a bit of an issue in terms of the relative
privilege of working in an organisation where you are not going to be prone to
the vagaries of the stock market," he explains.

How important are flexible benefits to school leavers and graduates?

School leavers and graduates may be becoming more sophisticated in what they
want. But, particularly as student debt levels rise ever higher, cash still
remains one of the biggest motivators, Tiplady believes. Yet at the same time,
according to Macleod, students do not appear to be as mercenary as they once

"They are much more interested in what your overall contribution is,
not only to the business, but to society," he says.

"They are going to employers where they are investing in their personal
development which makes their future progression more likely." .

Seven to eight years ago, the focus was very much on salary, whereas now it
is more on creating greater personal capital and getting the right sort of
experience under your belt to progress, he argues.

While younger people may be no more interested in pensions than they were 10
years ago, they are more aware of them, Ryan suggests.

"I don’t think whether you offer a good or a bad pension is really an
issue when you are recruiting someone direct from university, because they have
time on their side," he says. "But I think they know enough to make
up their minds whether it is important to them to play, or put their money into

Is equal pay an issue?

HSBC carries out a pay audit each year, which it reports back to the union
and management. "We do have disparities, but it’s always because we have
clusters," Smith explains. "Females do tend to remain in the lower
paid roles, they could be the second income generator and so on. But where the
job is like-for-like, we don’t have any disparity there."

At the Met, says Tiplady, the big issue is the fact that just under 17 per
cent of its officers are women, and most of those are constables. For each
intake of new recruits – there are about 10 a year of 300 people or so – only
about 70 to 80 are women.

While there is a fair gender balance at the top, the experience you need to
move up as a commander is an area of concern. The force has just introduced a
fast-track detective scheme for women.

Meanwhile, PwC has just carried out an equal pay audit, but the results are
not yet available. "What we know is that when we bring people in at
grassroots level, we bring in equal numbers of men and women," says

"When you look at partner admissions at the top end, there is an
unequal number of men and women. Somewhere between joining and that [level]
there is a fall away of females, and whether that is around something we do or
something that happens to them independently of us, we don’t know."

Ultimately, argues Macleod, the debate around compensation and benefits is
not so much about whether one benefit system works better than another, but
about the notion of the employee as stakeholder and the nature of that stake.

"Whereas before the debate was around equity stake or a particular
financial stake, now it is more about the fundamental mode of connection
between the employee and employer," he argues.

Report by Nic Paton

The participants

Charles Macleod, head of resourcing,

Ray Ryan, HRD, Montpelier Group

Karen Smith, reward manager, HSBC

Martin Tiplady, HRD, Metropolitan Police

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