Different reward packages for new recruits risk upsetting existing staff

Closing final salary pension schemes and offering new starters a different rewards package in a bid to save costs risks causing a divide between new and existing employees who believe the changed deal is more appealing, employers have been warned.

Oil giant BP has told Personnel Today it will launch a flexible benefits scheme when its final salary pension scheme closes in April 2010, offering new joiners 15% of their monthly salary to spend on flexible perks, such as childcare vouchers, mobile phones or salary sacrifice pensions contributions.

Though the new flexible scheme will be open to all staff, the 15% cash sum will be exclusive to new entrants.

But Peter Reilly, director of HR research and consultancy at think-tank the Institute for Employment Studies, warned unless the changes were communicated properly, they could cause animosity among workers.

“If you are doing the same job and getting different benefits simply because of when you joined, the question will be around whether this is seen as fair. And this will be dependent on how it is explained to staff,” he told Personnel Today.

Simon Dudley, reward director at BP, said he wanted to keep the scheme competitive, adding: “We wish to ensure that we are managing our costs going forward and potentially we won’t have the volatility of the costs that a [final salary] scheme can bring.”

Earlier this year, the National Association of Pension Funds warned the final salary pension scheme was in rapid decline, after one-quarter of major private sector firms revealed they would close their plans to existing members.

As well as BP, last week saw banking giant Barclays contact staff with a proposal to close its final salary scheme, and retail chain Morrisons said it was shifting its plan to a ‘career average’ scheme, making payments based on the average amount of money workers earned throughout their time at the company rather than their final salary.

David Bird, principal at reward consultancy Towers Perrin, suggested that the longevity and overall cost of final salary pension schemes had left companies with little option but to make changes.

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