Employer profile: Coda

Coda’s recent demerger provided the ideal opportunity to review and update overlapping pensions provision, says Debbie Lovewell

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Dealing with a demerger, restructuring pension arrangements and launching a new share plan are large enough tasks on their own. Embarking on all three simultaneously, however, is a huge undertaking, not least when Coda, the company concerned, doesn’t employ a specialist compensation and benefits team.

It is not surprising that last year marked a period of significant change for the global software company. The challenge was complicated further by high levels of competitiveness in the software industry, which meant that it had to continue to increase profits and turnover, while concentrating on new goals.

Its preliminary results for the year ended 31 December 2006, published this month, show Coda increased revenue by 5.7% – up from £50.6m in 2005 to £53.5m. Dave Belmont, group company secretary, explains: “We have a number of major competitors as you would expect in a number of markets. The price per unit is going down, as in a number of other businesses, so we have to sell more to stand still and sell even more to do even better. The challenges are effectively to get the Coda name known now we’ve moved from [being under] the umbrella of the CodaSciSys Group.”

Prior to the separation of Coda from the technology company SciSys in September last year, pension provision was reviewed, a move that was triggered in part by the pending demerger. “Back in October 2005, we were in a position where we were CodaScisys [but] it was obvious we were going to split at some point. We had, at that stage, three pension schemes, three advisers, two administrators, two auditors and two sets of trustees. There were only 600 of us [in the UK], so we had to do something,” explains Belmont.

At this stage, the company operated three schemes, two of which were closed to new members. A plan emerged to incorporate these into one pensions offering that would be accessible to members online.

The number of employee trustees employed by these schemes also proved problematic for the organisation, particularly in light of the increased trustee responsibilities imposed under pensions simplification legislation, which came into effect last April. “Our trustees were [employees] and have a job to do. Some staff earn [the business] £1,000 a day as a consultant. Now if you have a number of trustees going to a number of meetings and training, [losing] £1,000 a day all adds up, so it seemed like a good opportunity to ask ‘do we actually want trustees?'” he adds.

In addition, the previous pension plan that was open to staff did not provide any online access as its third-party administrator did not have the capability to provide information in this form. The two closed schemes had been set up so that members could access information online. The aim going forward was to provide all members with online access.

Belmont explains Coda perceives itself as a people-oriented business, so involving its existing trustees as employee representatives when deciding on which course of action to take was considered a key part of the process. Its review body, therefore, consisted of 10 trustees and just three management figures.

The result was the introduction of a group personal pension (GPP) offered through a salary sacrifice arrangement, which launched in April last year. As the majority of Coda’s employees are higher-rate tax payers, this was deemed the most tax-effective way of providing a GPP.

The salary sacrifice arrangement also meant that the plan could be offered to employees based in Germany who are not UK tax payers and would not normally be eligible to make contributions out of their salary into a scheme. “[Now] they [are not] paying contributions, because we reduced the salary [so] they could join it because [before] it was all employer contributions. The last thing we wanted to do was bring three schemes into one, then have to have a small scheme for Germany,” explains Belmont.

The national insurance (NI) savings gained by the company, meanwhile, have enabled it to increase its employer contribution levels by ploughing this money back into the scheme. All staff previously contributed a minimum of 3.25% while the company put in 6.75%, a figure that has now increased to 7% under the new scheme. The employees’ minimum contribution level has remained the same. The company has also introduced a range of contribution bands, which means it could contribute up to 8.5% depending on how much staff put in.

Another issue that needed to be dealt with following the demerger, was the management of individuals who had remained in the previous schemes. “We have had quite a big job in getting people to transfer their money out of the old schemes. Most of it was people who had left the company who we hadn’t been able to get in touch with, but we have written to everyone now and have forced them to move,” says Belmont. All remaining monies were finally transferred out of the previous plans at the end of last month.

The company has also run a communication campaign targeted at employees who haven’t yet chosen to join the new scheme. “We’ve already got 76% membership of the pension scheme. That’s a good number but we still would like to encourage people to join [or] at least make sure they can’t say ‘you never told us’,” says Belmont.

Further plans include the launch next month of a self-invested personal pension in order to offer staff greater investment choice.

The demerger last year also meant that it was necessary to launch a new share incentive plan (Sip) specifically for Coda. However, following the November launch, take up of the plan at 25% was not as high as it could have been. “The [previous] CodaScisys’ scheme [had about] 20% take up. We didn’t push it very hard because we knew we were going to demerge at some stage. I thought we might get some more but the feedback I got was that [staff] reckoned our share price was fairly full. The share price has gone up since the [the launch of the new Sip]. We’ll push it again, but it’s their choice not mine. So 25% was good, but based on the 20% before it’s ok. There was a surprising number of people who didn’t join it that were in the old one, say 20 or 30 people,” adds Belmont.

Despite focusing on the demerger, Coda has continued to recognise the need to remain competitive in order to attract staff. As a consequence, it has also increased its minimum holiday entitlement. Belmont explains that this has built up gradually over the past couple of years, before finally being set at 25 days last year. “That was because of market pressure. We were taking people on who’d built up a reasonable holiday entitlement [somewhere else] and the last thing [they] wanted to do is go from 30 days a year after they’ve been somewhere else for 10 years, to 20 days [holiday a year] somewhere new,” Belmont explains.

Going forward, a staff survey is planned for this year in order to establish what employees really think about their benefits package. This will be the first time that Coda has formally surveyed employees’ opinions on the topic. “We are looking, now that we are independent, at doing a proper comparison with what’s out there in the market and [if] we are getting value for money, and trying to do things a bit more scientifically because effectively as part of a group we had certain compromises to make,” says Belmont.

He adds that the company adheres to several key principles when it comes to reward, which it now wants to check are working as they should. “People need to feel valued because you might pat them on the back and say ‘thank you very much’ but you prove it in other ways as well. Most of our benefits are there to make sure that people feel valued and ensure there’s a safety net in terms of life assurance [and] disability benefits.”

In most cases, all employees are entitled to receive the same benefits, however, there are a handful of exceptions. Company cars, for example, are allocated according to grade or business need. “We are very profit centred, [so] if someone isn’t up to the mark they won’t think us very altruistic and won’t stay very long. We are not a charity in that sense. We like to do to others as we are done to ourselves. Everyone is treated the same,” says Belmont. Dave Belmont will be speaking at the Employee Benefits conference on 2 May

Career profile

Dave Belmont, group company secretary at Coda, has spent much of his career at the company, in which time he has witnessed several mergers, demergers and acquisitions.

After beginning his career in the IT industry with organisations such as ICL (now known as Fujitsu) and Olivetti, he joined Coda in 1985 to work in its customer services department. From here, he transferred to its accounts function where he was promoted to the role of chief accountant, before becoming company secretary.

When Coda was acquired by a Dutch company in 1998, he left to join SquareSum, a small local software firm only to find himself back with the organisation five years later when CodaSciSys took over the business. “In that sense, I have been with Coda or similar since 1985. I don’t get the service medal [though] because there was that gap in between. When you are with a small company, you learn so much more but [then later] it was the right time to get into somewhere bigger again,” explains Belmont.

Extremely passionate about his work, it is not surprising that he rates Coda’s move from several defined contribution pension schemes to a single group personal pension (GPP) as among the achievements he is most proud of.

On a personal level, Belmont’s work at Coda led him to be named Company Secretary of the Year by the Institute of Chartered Secretaries and Administrators (ICSA) last year. “That was on the basis of introducing a new executive share plan, which itself was shortlisted on the ICSA’s 2006 awards as the most innovative employee share plan. It was up against [schemes at] BAT, easyJet and HBOS,” he explains.

Employee case study

Farah-Naz Staniforth has worked for Coda for the past 14 years, both as a software developer and team leader.

As a working mum, she particularly values the flexible working arrangements offered to her by the company, although she admits that these are not available for every member of staff. “I start work at 6.30am and finish at 3pm and I appreciate there’s not many [employers] that would let me do that,” she explains.

Staniforth also appreciates Coda’s pension scheme. “It’s looking to the future and not a lot of companies are as generous as Coda,” she says.

She adds that the move to a group personal pension (GPP) from several defined contribution schemes last year didn’t prove much of a problem. “It was handled in a very fair way. The changes have been in some ways very positive [as] you’ve got a lot of funds available to you [and] you can make any switches online so that’s been very good,” explains Staniforth.