The law requires all companies to offer certain benefits, but they can go above and beyond statutory requirements, this includes small to medium sized businesses – the SME market. An SME is defined as a small to medium enterprise with 250 employees. Employee benefits are also known as fringe benefits or perks offered in addition to a basic salary. Traditionally an attractive benefits package was only possible for larger companies with large budgets, however, as time has progressed and benefit provider costs have come down it is possible for even the smallest SMEs to be able to offer an attractive benefits package.
The reasons for creating an attractive benefits package are to recruit, retain and reward employees; this provides competitive advantage and helps to meet external as well as internal pressures.
At the heart of all forms of employee reward, including benefits, is motivation. Employees need to be sufficiently motivated by the reward on offer so that employee engagement is encouraged. Hardworking employees can be spurned on by a worthwhile incentive and, hopefully, those that do the bare minimum will strive to work harder. Improved productivity will increase profits.
When designing a benefits package there are key issues to consider. The main aim is to meet the aforementioned criteria so the SME has sufficient high quality committed employees. Value for money is particularly important as an SME does not have loads of cash to splash around and waste. Tax efficiency is important whilst refinement and tailoring is essential.
The first step is to decide the objectives of an employee benefits package. It should certainly meet the requirements of the employer but also the requirements of the employee. The objectives may look at matching benefit philosophy to SME strategic objectives.
Employees’ opinions can be sought in a variety of ways. A few years ago I drafted a reward survey for a charity that included aspects of both financial and non-financial reward. The results were illuminating as the most sought after forms of reward were non-financial and top of the list was flexible working. Opinions could also be gathered from focus groups and/or interviews. This process may be time consuming to gather and process the information, but is essential to develop a truly tailored package that employees will value.
Having collected the internal data related to benefit requirements, the next step would be to analyse what the competition is offering. There are many benchmark reports available offered by the CIPD, Xpert HR and IDS for example. By purchasing a report the data is readily available and all the hard research work has been done.
SMEs can also club together to create a pay club to share information on a confidential basis. They are an attractive and cost effective way to gather information on benefits. Membership can be tailored geographically, industry or company size, but a disadvantage is that it might be difficult to find SMEs to take part.
The internet can offer a wealth of information but this is also time consuming to find out where to look then sift through all the data available.
The next step would be to design an employee benefits system. The variety, extent and type of benefit needs to be considered along with tax efficiency. Employee benefits can come in all types of guises – both financial and non-financial. Financial benefits obviously have a cost attached to them so budget and affordability is quite key.
Such benefits can include private health insurance, occupational sick pay, profit sharing, death in service benefit, income protection, life assurance, dental insurance, pension contributions (including enhanced contributions), interest free season ticket loan, car mileage allowances, annual Christmas bonus, annual bonus in cash or vouchers, critical illness insurance, mortgage assistance, relocation packages, company discount on products, professional fees payment, gym membership, long service award, overtime, unsocial hours payment and retirement benefits. Since October 2012 companies must comply with pension auto enrolment according to their staging date. SMEs have been affected since January 2014. A company may choose to comply using the basic government package, NEST, but has the option to use a private pension provider provided the company size is large enough for the pension provider requirements. An employer can choose to pay in more than the basic contributions.
The company car has long been seen as a worthwhile benefit, but tax can be high so many companies now offer a car allowance and/or free fuel on a card which may be more tax efficient.
Tax free benefits include employee meals, child care in workplace nurseries, luncheon vouchers, Christmas parties up to the value of £150, small gifts to third parties, training, outplacement and redundancy payments up to the value of £30,000.
Personal needs can be addressed with employee benefits. These can include annual leave, maternity leave, paternity leave, adoption leave (all of which can be enhanced over and above the statutory requirement), compassionate leave, pre retirement counselling, financial counselling, canteen, and sports/social facilities, living accommodation, mobile phones.
Having non financial employee benefits in the mix is very cost effective and can vastly improve morale as well. Non financial benefits can include flexible working, appraisal, training and development, career development opportunities, an employee lunch, Friday afternoons off, career breaks, promotion opportunities, free car parking, free tea/coffee/water, an employee assistance programme, free pension planning, long service certificate, employee of the month certificate, suggestion scheme, and an employee recognition scheme.
For cost effective purposes an SME may decide to design a flexible (or cafeteria) benefits system where employees can choose the benefits they take up. The advantages of this are that costs can be controlled more efficiently and employees can tailor their own packages to suit their needs. The benefit requirements of a young male employee with a growing family might be quite different to that of an older woman who is facing retirement for example. Employees are provided with a shopping list of benefits and allocated a spend. At the heart of flexible benefits there will be core benefits which all staff enjoy such as pension, life insurance, income protection and holiday entitlement.
Flexible benefits offer greater individual freedom of choice and an employee appreciation of the value of the benefits provided to them.
In recent years salary sacrifice has grown in popularity which helps to fund flexible benefits. With salary sacrifice there are tax and national insurance savings. The employee gives up part of their salary in return for a non-cash benefit. The most popular types of salary sacrifice are childcare vouchers and pensions.
Flexible benefits can be introduced on a simple basis. For example one of my clients allows their employees to buy more annual leave once they are fully qualified. With a very simple system it is possible to manage this on spreadsheets and wordprocessed documents, but for a larger offering, an SME may need to consider using an in house or outsourced computerised system.
Another type of benefit includes voluntary benefits where an employee can choose to pay for a certain type of benefits. These include cycle to work, pension contributions and childcare vouchers, retail and leisure discounts, gym membership and discounts at local shops and restaurants.
Consultation with staff before finalising the benefits package is essential and, where possible, changes can be made before final implementation. Consultation can be undertaken using focus groups or with one to one interviews so that opinions can be sought. Consulting with staff will ultimately get buy into the finished product.
Following design of a benefits system it is important to set out in writing the framework in which it will operate – who gets what and the circumstances. Employees will need to be informed as to their entitlement and what they will gain from the package. Details on monitoring and costing are also important to document. Using total reward statements can help to show pictorially, the benefits value to individual employees. Using graphs or pie charts the benefit offering can bring a package to life so that it seems more worthwhile and understanding is greater. Total reward statements can be made available online or in paper format.
Whatever benefits system is implemented, it is important to monitor how much is spent on each benefit and how much it is used. There should be regular surveys undertaken with employees to ensure it is fit for purpose. Corrective action can then be taken if the budget is being exceeded or certain benefits are not being taken up. Also some benefits may become less tax efficient so SMEs need to keep abreast of HMRC changes.
The introduction of a benefits system needs to be well planned. Employees should know what is happening, why it is happening and how it will affect them. This can include the use of media and face to face discussions. Booklets, posters, newsletters, presentations and online communications can all be used to get the message across.
SMEs can now truly take advantage of employee benefits and design an attractive tailored package that will improve morale and ultimately the bottom line allowing them to effectively compete in the market.
The new Growth Vouchers scheme offers advice and guidance to businesses taking part and subsidies of up to £2,000 towards the cost of that advice to successful applicants. The programme will then monitor SME performance over the coming years in order to assess the impact that advice has had.
SJ Beale HR Consult can help put strong foundations in place to equip managers with essential HR skills and a strong HR framework to support the business. Employees are the life blood of any company and should be managed fairly and reasonably with employment law.
The Growth Voucher marketplace provides an accessible and cost effective stepping stone for those people forming a new business”.
The marketplace is designed to make it much easier for businesses to find providers of strategic advice on key HR topics like:
• Developing skills and employing staff.
• Improving leadership and management;
• Developing skills and employing staff.
Businesses that have been running for a year, with fewer than 50 employees, and have not paid for strategic external advice in the past three years will be able to apply at https://www.gov.uk/apply-growth-vouchers
They will go through a process which will help them identify what sort of advice they might benefit from. Small business network Enterprise Nation has developed a marketplace for business advice where participants will then be able to find a qualified adviser at www.enterprisenation.com/marketplace The Growth Vouchers programme will run until March 2015.
About Enterprise Nation Enterprise Nation is a small business network with more than 75,000 members. Its aim is to help people turn their good ideas into great businesses – through expert advice, events, networking and inspiring books. Enterprise Nation was founded in 2005 by Emma Jones MBE also co-founder of StartUp Britain. Enterprise Nation is also heading up a new initiative which seeks to represent the needs of entrepreneurs, called the Entrepreneurs’ Alliance. It is an umbrella pressure group that includes the Federation of Small Businesses (FSB), the Federation of Private Businesses (FPB) and School for Startups, BusinessZone.co.uk and think tanks Centre for Entrepreneurs and The Entrepreneurs’ Network (TEN) which between them represent 2.5m businesses.
For more information on the Growth Voucher programme and instructing SJ Beale as your HR advisor call 0845 241 1868.
I was recently approached by BBC Radio Northampton to talk about why people work – for the love of the job or the love of money.
For many people money is essential so they can live, buy food, pay their bills and look after their family and most do not have the luxury of being able to choose whether they work or not. In these cases in order to be fulfilled they must try and find a job that they love. If a job is laborious and they hate it, deep down they will not be happy and give their all to their employer. If someone has to work for the money alone it creates anxiety. They may live in fear of losing their job and the consequences that may occur from that. It is a sad and desperate situation. They will be miserable and the situation may consume all their life including their time off. Individuals who do, however, just work solely to earn as much money as possible may be soul less and selfish – only out for themselves and not enjoying any team spirit that may exist.
Some people work because they love their job. Volunteers, for example, are not paid, but they work because they get fulfillment from what they do. There are people who do not need to work because they have plenty of money, but they do so because it allows them to keep busy and prevents their minds stagnating. Some people who have retired say they miss their job. That is because work gives someone a purpose in life – something to get up in a morning. Going to work makes them feel good.
An interesting varied job will give someone job satisfaction, particularly if their efforts are noticed and commented on by their line manager. That will increase their self esteem and confidence.
Some people go to work for companionship and social contact. If they stayed at home they might not speak to anyone all day.
Going to work may stretch someone’s mind, allows them to use their skills and gain new experiences. Many people enjoy their profession.
Work is often an essential part of people’s lives and ideally employers should offer interesting varied work to encourage employee engagement whilst employees get fulfillment from a job well done.
Flexible working for all was implemented on 30 June 2014. Previously it was only available to women with children and carers, now all employees with 26 weeks continuous service can make a request. Many employers may be panicking at this prospect but there is no need as any request can be turned down for business reasons. In this blog I provide a guide to the new flexible working regulations.
There are quite a few changes to the procedure for making such a request, with the old, prescriptive, statutory regime being replaced by a “requirement to deal with the request in a reasonable manner”. This revised approach is reflected in a new ACAS Code.
The basic right to request flexible work is unchanged. Employees can still make up to one written request every year, which the employer can refuse on any of the existing eight business grounds. The maximum compensation for a failure to comply with the new legislation remains at eight weeks’ pay, with a week’s pay currently capped at £464 per week (2014).
Any request must now be dealt with quickly and within a three month time scale, at the end of which the employer must notify the employee of its decision. The ACAS Code recommends that employers should talk to an employee privately after receiving a written request, allowing employees to be accompanied at any discussion, then consider the request carefully before informing the employee in writing of any decision. The employer should then discuss with the employee how and when the changes might best be implemented or allow an appeal.
Although there is no requirement to allow an appeal, the ACAS Code suggests that employees should be allowed to appeal against a rejection. The appeal should be concluded, if possible, within the three month period. If more time is needed for any reason, a longer period should be agreed with the requesting employee.
The employee must make a written application which should also:
– state that it is an application made under the statutory provisions;
– specify the change that the employee is seeking and when they wish the change to take effect; and
– explain what effect, if any, the employee thinks the change would have on the employer and how any such effect could be dealt with.
It might be beneficial for an employer to draft a standard template to accompany a revised policy on flexible working.
An employer can treat a request as withdrawn when the employee, without good reason, has failed to attend both the first meeting arranged by the employer to discuss the employee’s request or appeal and the next meeting arranged for that purpose. The ACAS Guide suggests that the employer should find out and consider the reasons for the employee failing to attend both meetings before reaching any decision to treat their request as withdrawn. Employers must notify the employee of their decision.
Employers retain the right to refuse a request to work flexibly on the existing statutory grounds, which include cost; quality; performance; insufficiency of work during the periods the employee proposes to work; and planned structural changes. Although neither the Code nor the Guidance require it, employers should not only specify which of the statutory reasons applies when refusing a request, but also provide sufficient explanation as to why that reason applies. The Guidance gives examples of each of the business reasons.
Employers should also:
– Ensure any agreement to change employment terms is recorded in writing;
– Be very clear about what is being expected of the employee who will be working flexibly. Trial periods can be used if an employer is unsure if the flexible working may not work.
– Review current policies and procedures and amend in the light of the current changes.
All requests should be treated fairly and consistently to avoid discrimination. Keeping written records is essential.