Supermarket chain Tesco is constantlydeveloping the range of flexible benefits available to its staff, using itsscale to bring competitive discounts and offers to shopfloor staff, whileoffering packages to compete with blue-chip and global organisations at seniorlevels. “There are four things we consider when designing benefits,”says Tesco reward manager Richard Sullivan, “Legislation, value, choiceand affordability.”Changes in legislation around employee share ownership plansand car tax and emissions have impacted on rewards offered to Tesco staff. Thecompany recently switched from a money purchase pension to a pension builderplan designed by Watson Wyatt, reflecting concerns for the value of theprevious scheme while also aligning the benefit closer to the lifestyle of GenerationXers. “The pension is now based on total earnings throughout an employee’scareer rather than relating to final year earnings,” explains Sullivan,”This means you don’t need to be at the top of your earnings in the lastyears of your career. You can contribute however much you want according toyour life priorities.”The company is also considering offering graduate recruits alump sum to be used either to pay off student debt or help finance a futurecareer break. “There has been a swing away from the importance of thefinancial package,” says Sullivan, “But it is not a very significantswing. I am seeing more people taking career breaks, going part time and so on,and it is important that the company supports these kinds of activities.”Sullivan claims the store is moving towards monetarisingbenefits – offering cash alternatives wherever possible. Core benefits areretained – the pension plan and basicholiday entitlement – but car, life assurance and private health benefits canbe taken as cash instead. The company recently capped the 10 per cent storediscount for staff at £6,000 per year in order to guarantee the benefit remainsaffordable. “For the past four or five years we have been issuingpersonalised benefits statements so all employees understand the value of thebenefits we provide,” says Sullivan. “Those went out to 150,000staff, so it represents a massive communication exercise.”Case study: The Bank of ScotlandPerks options empower bank staff Rewards scheme at the heart of Bank of Scotland’s culture change,putting choice and flexibility first The Bank of Scotland introduced itsflexible benefits scheme in October last year with help from William M Mercer.The initiative was designed to fit in with wider changes to the companyculture. “We wanted to promote a culture of flexibility in staffbenefits but also to empower them and give them responsibility,” says thebank’s HR manager Jacqui Comerford. “We made the analogy with ourcustomers – as a bank we give our customers more choice and flexibility, it isthe same thing with our staff.”Covering all 16,000 employees, the paper-based flex system alsohelped with the integration of a number of businesses within the bank, whichwere previously operating diverse benefit packages. The new system offers corebenefits plus the ability to flex items such as holidays, life assurance andprivate medical insurance. Employees can also purchase dental insurance,discounted childcare and retail vouchers.”Staff make their annual selection in August eachyear,” explains Comerford. “Although if they have lifestyle events –marriage or childbirth, for example – there is additional flexibility along theway. “We are very keen to support family-friendly initiativesat the bank and the childcare vouchers are considered a major benefit by ouremployees.” All employees receive a reward statement detailing the totalvalue of their reward package.Comerford believes the scheme will transfer to a technologyplatform as the bank develops intranet and Internet use. For the time being,however, the scheme is communicated to through brochures, videos andpresentations. Previous Article Next Article X-rated rewardsOn 25 Sep 2001 in Personnel Today Related posts:No related photos. Companies are quickly learning that to win the loyalty of Generation X theyhave to be flexible. Under competitive pressure, they are replacing thetraditional contract with an enticing package of variable work practices andbenefits. By Simon Kent The needs and aspirations of “Generation X” are impacting on therecruitment and retention strategies of many organisations. In his recentreport Managing Talent – Exploring the New Psychological Contract, TimOsborn-Jones of Henley Management College concludes that the traditionalpsychological contract has been replaced by a complex mix of values, attitudesto work and benefits. Quantitative solutions – offering more money to employees– no longer spell recruiting success since they are too easily matched andtopped by competitors. Add to this the current demographic challenges facing the UK and it is clearwhy companies need to take a flexible approach to rewarding their staff.According to Eddie Hodgart, a consultant at Watson Wyatt, the number of 16- to 25-year-oldsin the UK has dropped significantly over the past 25 years. This statistic iscompounded by the trend for this age group to absent themselves from theworkforce – taking years out travelling or engaging in further and highereducation. “Industries relying on customer-facing staff or those areas with highstaff turnover need to find new ways of recruiting staff and retaining themonce they are on board,” says Hodgart. “Flexible benefits is one ofthe options they can use.” According to Jan Paxton, head of product development at RebusHR, flexiblebenefits are popular for addressing another common phenomenon of today’sindustry. “When companies merge or form partnerships there are usuallydifferences in benefits. It can be hard to keep someone motivated when they aresitting next to someone with extra holiday entitlement,” she says.”Flexible benefits can help with that integration, as well as working as agood retaining instrument.” In some sectors flexible benefits are the norm for attracting skilledemployees. “We are seeing the high-tech firms along the M4 and M5 corridorusing flexible benefits as a matter of course when recruiting GenerationXers,” says Cathy O’Bright, a consultant with Hewitt Associates. “Often with these workers there is a desire to have as much cash aspossible. So while a pension could be a good benefit, they may feel more valuefrom receiving that benefit in cash. That way they can pay off their studentdebt or get on to the property ladder. They will worry about the pension laterin their career.” While being driven towards flexible benefits by the demands of theworkforce, new technology is working to make it reality. Company intranets arebeing used as interactive communication platforms where employees can view theirentire benefits package and select how many days holiday they would like, whatlevel of private medical insurance is suitable for them, and whether to buychildcare vouchers, retail vouchers or even pet insurance. The same facility is open to companies without intranets. Solutions offeredby companies such as VebNet and mycompanybenefits.co.uk bring Internet-basedbenefits sites to organisations of any size. Eurobenefits, an application service provider (ASP) aimed at largercorporations, runs a website through which employees can view their benefits,experiment with benefits modelling and even send their options to an externalfinancial adviser for impartial advice. Chairman Robert Paterson believes there is a demand from younger employeesfor increased control. “There are greater expectations from employees toget information relating to their rewards package,” he says.”Companies can no longer compete on salary. They have to be innovative inthe way they reward people. Smart companies are gaining the edge by addressingthe wider issues of communication, flexibility, education andempowerment.” Even cash plans – traditionally associated with blue-collar workers – areproving popular among the younger generation. According to Stephen Duff,marketing director of the Hospital Saturday Fund, some organisations offer cashplans in addition to private medical insurance. “Looking at some of the computer companies who use our service, theaverage employee age is 26,” notes Duff, “The areas in which theyparticularly appreciate help are with dental and optical costs andcomplimentary health practices.” Rahman Sakaran, marketing director of the HealthSure Group agrees thathealthcare cash plans are one of the fastest growing employee benefits.”They are seen as an affordable and valuable benefit and, most important,a repeatable benefit,” he says. While companies flex benefits in all directions, they must still ensurestaff appreciate the value of the entire package they are receiving.”Companies who use ‘flex’ are moving towards a total compensationmodel,” says Mike Elworthy, European partner at William M Mercer.”While you want to promote choice, you also want to maximise the value toemployees.” Hewitt’s O’Bright says the consultancy and its clients have adopted totalreward statements. “There is no reference to basic pay,” sheexplains, “even on job offer letters we state the total value of the flexfund rather than breaking the figure into basic pay plus benefits.” Watson Wyatt’s Hodgart contends that flexible benefits are simply oneelement of an effective recruitment and retention strategy for Generation Xers.”Companies are using flex but they are also combining it with flexiblework arrangements,” he says, “and that is far more powerful thanflexible benefits on their own.” This is the approach adopted at Arthur Andersen, where the point at whichflexible benefits stop and flexible working starts has practically disappeared.Using their extensive Internet and internal communications system, Andersen employeescan make an annual selection of benefits, including private medical insuranceand holiday entitlement. But alongside this a free second phone line at home,free Palm Pilots, mobile phones and use of laptops means every employee canchoose where and when they work. Staff are entitled to a six-month sabbaticalafter three years’ service which can be used for whatever they desire – charitywork, travel or simply staying at home with their family. Generation X may have inspired the drive towards flexible benefits but suchbenefits are certainly not their exclusive entitlement. Benefit programmes maystill recognise status and longevity of service but there is no guarantee thatolder employees value share options over increased holidays any more then youngemployees. At the end of the day, benefits should be flexible across the entireworkforce, offering each individual the chance to express how they can bestfeel valued by their employer. “When we design flex programmes we try to view benefits from the employee’sperspective,” says Helen Freeman, a principal at HR consultancy TowersPerrin. “We carry out employee research to make sure we do understand whatmotivates and drives people.” In this way the employer can be sure thatthe rewards offered really do benefit everyone. Case study: Ernst and YoungConsultancy offers benefits at a click Ernst & Young’s flex scheme recognises the value of choicein its bid to recruit and retain young talent”Recruitment and retention werekey in our decision to give employees more choice in their benefitprogramme,” says Richard Gartside, reward and employee relations managerat consultancy Ernst & Young. “Many of our potential employees arebeing offered well developed reward propositions so there was competitivepressure too.”Ernst & Young’s flex scheme is deployed across thecompany’s intranet. Employees can log on at any time to view their currentbenefit selection and make changes to their selection every year. “Wewanted to make sure our benefits linked in with the company,” explainsGartside, “We decided not to compete with discount retailers so we haveavoided making offers of mobile phones or similar goods.”Total reward information was a key requirement for the company.With employees well aware of their value in the market place, Gartsidemaintains telling employees the worth of their total benefits package wascrucial to getting maximum value out of the provision of benefits such as lifeassurance and pension schemes.The intranet site also offers the chance for the firm to interactwith flex users. “Our employees are engaged in a dialogue about theirrewards,” says Gartside, “If suggestions are made we will considerthose benefits next time.” This feedback has already raised the company’s awareness of theneeds of Generation X. While benefits such as childcare vouchers and medicalinsurance may appeal to older employees, new recruits are seeking benefitswhich reflect their own current priorities.”The flex scheme meant that we could signal that thecompany was updating its reward offering generally and reflect a move to lookat a more flexible work life processes,” says Gartside. “It wasimportant that this was seen to affect all employees.” This side of the initiative was particularly valuable in acompany where focus traditionally falls on valuing the work of senior partners.Case study: TescoFour-point plan for food store chainLegislation, value, choice and affordability are the fourfactors that shape Tesco’s benefits package Comments are closed.