News update – RAC earmarks absence cash

RAC is to introduce an all-employee share scheme using savings it has made by reducing sickness absence.

The automotive firm has been able to set aside an amount of money earmarked to help offer staff free shares through a share incentive plan. It did this after it calculated how much it had saved by achieving low staff turnover and low absence levels. The company set up a ‘people profit and loss account’ which highlights the cost of employees to the business.

Debbie Hewitt, managing director of RAC Roadside, and former group HR director at the company, said that since this was introduced, it has been able to quantify these costs and was then able to do something about them.

“We measured absence; so many organisations don’t. We got a process to capture it. Then we got a process to benchmark it so we could see across the businesses where it was being managed and where it wasn’t, we then gave people some proper training.”

She added that by training managers who look after large numbers of employees, RAC saved significant costs.

“We’re a very people intensive business; we don’t make anything. So how we differentiate around our people is absolutely critical.”

Last year RAC was able to keep its final salary pension scheme open because of absence savings. Hewitt said that it was considering changes because of a large pension deficit. She added: “We have profoundly changed what we decided to do on pensions as a result of savings we made on absence.”

Now it is looking at launching other benefits, such as the all employee share scheme. But it did look closely at the figures.

“There’s a defined pot of money you have to invest in colleagues. It’s not a bottomless pit. So very often companies don’t realise what that pot is; they either underestimate it or overestimate it and by being able to put a number on it means we can do things that are slightly more creative,” said Hewitt.

Over the past four years, since it has been measuring the cost of employees, RAC’s share price has risen from around £3 per share to £7. While Hewitt said RAC could not directly link the two results, with so many other business factors contributing, putting a pound value on people activities obviously helped.