Construction firms are rethinking benefits

Fierce competition for staff is forcing construction firms to rethink their benefits offering, says Victoria Furness

These are boom times for the UK’s construction industry. The housing market may not be experiencing the growth of a few years ago, but the 2012 Olympics has given a huge boost to the sector, not to mention numerous other government-proposed projects, such as London’s £16-billion Crossrail development and Labour’s pledge to build three million new homes before 2020.

For construction businesses, this means there are opportunities for tremendous growth, but also a huge challenge in finding people to carry out the work. ConstructionSkills, an employer-led skills council, estimates that the industry needs an extra 87,000 workers every year for the next five years to deliver the 7,500 new projects, worth almost £190 billion, planned over the same period.

Consequently, competition for staff is stiff, putting pressure on pay and compensation packages. BDP, the largest architectural practice in the UK, reported losses last year due to higher wage bills, which many in the industry attributed to action taken to prevent staff being poached. Toby Turner, managing director of Holtby Turner, an executive search agency covering the property and construction industries, says: “We have seen pay rises in various areas to compensate for the lack of people out there and extra demand for staff.”

Staff shortages
Employees that are in demand include quantity surveyors, engineers, and project and site managers. But it’s not just at the management and professional end where there are staffing pressures. Brian Griffiths, chief executive officer at B&CE, a supplier of financial services and employee benefits to the UK construction industry, says: “There’s a shortage of skilled operatives in the South East, for instance.”

Some 7,000 employers use B&CE’s employee benefits package, Template, to provide 230,000 operatives, who are generally paid weekly, access to a stakeholder pension scheme, life and accident cover, and holiday pay. “It can be used as a competitive differentiator, as a lot of organisations wouldn’t provide a benefits package,” says Griffiths.

This year, B&CE plans to extend Template and offer a wider package of add-on benefits, not just to operatives but also to clerical and professional workers, as well as those who are self-employed.

One of the defining characteristics of the construction industry is that it is made up of a diverse number of different firms, so attitudes towards benefits vary enormously. A typical package for monthly-paid employees might include a pension, death-in-service benefits, accident cover, private medical insurance (often depending on level), a company car for mobile staff and sometimes childcare vouchers or a range of voluntary benefits. For the next five years, the industry can also continue to take advantage of holiday pay fund schemes, through which employer and staff contributions are exempt from national insurance contributions.

Tax savings
Isabel McGarvie, a partner in human resource services at PricewaterhouseCoopers, says: “[Construction firms] tend to be quite old fashioned in their thinking about reward. Many are unaware of the tax savings and that can amount to substantial numbers. However, particularly in places where, for some skills, they need to compete with other industries for people, there is a lot more activity looking at employee engagement [in terms of] ‘how can we keep our good people and save the hassle and expense of finding replacements, and what are the different ways of rewarding people we can think about that will help us compete with industries that typically are perceived to be better payers?'”

These are some of the issues Ian Bassett, head of people at Midas Group, a construction company based in the South West, admits he has been faced with. The company rebranded in May last year, which he believes has helped with recruitment and retention, as has talking to people about what they want from their benefits package. As a result, staff turnover has fallen to around 18.5% in the last 12 months, which is below the estimated industry average of between 20%-30%. “I’d like to say [this] is in response to the staff survey and us changing the benefits package,” he says.

Bassett has also addressed the harmonisation of benefits and holiday allowances across the organisation.

Like many other fast-growing sectors, mergers and acquisitions are a common feature of the construction industry, which often requires perks to be brought into line.

The sector also has its own complexities to overcome. It can be difficult to communicate benefits given the highly-mobile and transient nature of the workforce, for instance. Mark Eaton, director at Personal Group, says: “We have used posters, leaflets and, if it’s a reasonably big site, we’ll have people on site to speak to individuals, although this needs to be done in conjunction with the site manager to ensure health and safety rules are observed.”

More employers could also make use of flexible benefits schemes to help harmonise benefits post-merger and give workers more choice. Tony Morgan, head of flexible benefits at KPMG, says: “It’s only in the last couple of years [that] we’re seeing flex implemented in some organisations and some firms wanting to do feasibility studies.”

Jon Bryant, head of flexible benefits at Jardine Lloyd Thompson, however, is not so sure flex is the answer. “Weekly-paid staff wouldn’t have much to flex and would be better off with a voluntary benefits scheme. It’s also difficult to do salary sacrifice if people are on the minimum wage and there are a lot of administrative issues if they are not using a computer-based system.”

That said, he adds firms that dare to “step outside the box” or show some creativity around benefits will “create a huge competitive advantage as they’ll stand out a mile”. In the war for talent, it’s only a matter of time before more companies act on this advice.

Case study: Perks framework helps engage at Morris & Spottiswood†

The mission statement at family-run construction firm, Morris & Spottiswood, sums up the company’s attitude towards its 600 staff, stating that it’s aim is “to create a special place to work”.

By HR director Allan Boyd’s own admission, the company’s benefits package is “pretty standard”. Employees have access to private medial insurance, life insurance and a pension scheme. Where the firm stands out, however, is in giving its employees access to a wider package of benefits, “which relate to the employment experience as a whole” adds Boyd.

This includes offering flexible working in the form of giving people time to recuperate after a lengthy construction project, or supporting an employee’s family with problems like a burst pipe when staff are away working.

It is also about good communication and listening to staff, which is why its 20 senior managers spent the first half of last year holding breakfast briefings with every employee to find out how they felt about the business. As a result, some changes were made to areas such as work wear, canteen facilities and pay rates.

This is a strategy that seems to resonate with its employee base. “Our experience has been that people who have left our business have come back again as, by and large, they find life outside doesn’t always match what they have here,” claims Boyd. Indeed, its longest serving weekly-paid employee has been with the firm for almost 50 years.

Case study: Kier builds on communication

Kier Group has beefed up benefits communication in the face of heightened competition for staff.

As one of the UK’s largest construction firms, it is perhaps not surprising that the company offers a fairly comprehensive benefits package including a pension, company car or car allowance, life insurance, income protection for those in pension arrangements, personal accident insurance, private medical insurance and an employee assistance programme. Staff also have access to a Personal Group-provided voluntary benefits package featuring retail and holiday deals, as well as childcare vouchers.

Keen to improve the communication of its benefits, the organisation has implemented total reward statements, and has begun to promote its benefits package at recruitment stage with potential candidates through the use of a benefits summary booklet.

It is also working to address staff retention by looking to introduce a new sharesave scheme in June this year and is extending its employee share ownership plan to offer matching shares. With the latter scheme, employees that have been a member for more than three years, receive one free company share for every two they purchase. Frank Maybin, rewards and benefits manager, says: “It provides a certain amount of tie-in, and it also allows employees to buy into the firm’s success.”