Tax savings ripe for copying

Substantial tax savings and greater powers of control have prompted Xerox to drop private medical insurance in favour of creating a healthcare trust fund.

The new scheme, which is offered to all employees of the electronic imaging firm as a core benefit, is exempt from insurance premium tax – typically set at 5%. Payments into such trusts are usually held in an interest-bearing account and managed by trustees who are responsible for signing off treatment needed by staff.

Howard Donovan, total pay manager, says the savings achieved by switching to a trust arrangement are significant. "With a benefit-rich scheme like ours costing several million pounds a year, a 5% saving of insurance premium tax is quite substantial."

Before making the switch, Xerox carried out a staff consultation programme. "We went through a careful consultation exercise and ran a number of focus groups to understand what the impact would be on employees and to understand how employees wanted us to communicate the changes to them."

Donovan added that this approach was vital to getting employees behind the move. "It was about being upfront and honest and explaining that in reality people’s healthcare levels and eligibility had not changed and wasn’t going to change.

The scheme rules and benefits offered are exactly the same as they were before." The company has appointed its four most senior HR staff as trustees to run the healthcare trust, primarily because they are also part of its HR policy committee and so would therefore be required to make future decisions about the arrangement.

However, in order to relieve the potential burden on these trustees, Xerox has also appointed Bupa to act as an administrator and deliver any necessary treatment to employees. Xerox intends to reinvest the tax savings back into subsidised or discounted benefits, such as a healthcare cash plan.