Amid uncertainties within the rail franchise process, GNER is keen to use perks to dispel continuity issues, and HR must speedily deliver to a demanding workforce expertly trained in customer service, says Jamin Robertson
Article in full
Enjoying a hitherto smooth run from London to Great North Eastern Railway’s (GNER) office at York station, my journey on the busy east coast line is delayed by the news that a train up ahead has struck a herd of cows. Although a minor misfortune, it is symbolic of GNER’s current business obstacles, with two of its business rivals currently set to increase their use of its tracks.
In June last year, GNER negotiated an extension of up to 10 years to its franchise agreement which allows it to run passenger trains on the east coast main line between Edinburgh and London. The profitability of the arrangement – which will cost GNER £1.17bn in payments to the government should it last the maximum 10 years – was dealt a hammer blow by the Office of Rail Regulation’s decision to allow rivals Grand Central and Hull Trains greater scope to operate along some sections of the route.
GNER had expected that the price it has agreed to pay to hold the government franchise, and the £125m it is investing in providing better-quality train services, would be offset by revenues from operating exclusive east coast services.
But the rail regulator’s decision to allocate spare carrying capacity to other carriers prevents GNER from adding planned extra services, so jeopardising its future revenue. The dispute has attracted national headlines and is destined to be resolved by the courts.
The financial difficulties of Bermuda-registered parent company Sea Containers has not helped GNER’s cause, and there is plenty of speculation the franchise could be up for review a lot sooner than 2012 should the UK rail company change hands – rumours that may be unsettling for its 3,288 staff. Despite such challenges, GNER remains committed to continuing to develop its reward offering for staff.
John Hayhurst, manager HR business services, explains that the show must go on. “Whether somebody’s trying to run services on what you might call your line [or not], we’ve just got to make sure we’re giving our staff the best benefits we can give them.” Its focus is on traditional benefits, which are complemented with new perks where they are deemed useful and cost-effective. The train operating company can boast a final salary pension scheme that is open to new members, and an extensive travel package for journeys on GNER services for free or at reduced rates.
Mark Edelsten, head of reward consulting at Mercer HR Consulting, describes the travel benefits as generous. “Doling out a first class pass to employees constricts the space available for people paying for [seats]. In some rail companies, management would like to address that,” he says. When providers come knocking, Jane Birch, benefits manager, adopts a cautious approach, stating that benefits must fit with GNER’s well-established and long-term business strategy. Technology has been a key focus.
At the same time as wireless internet technology was installed on its trains for customers, GNER facilitated the delivery of 900 discounted computers for employees through a home computing initiative. It has also just completed an online rollout of its voluntary benefits package. “We implement things because we feel there would be a real benefit from it rather than because it’s the hot topic,” Birch explains.
GNER employees are well represented by trade unions and the company works in partnership with them to ensure new benefits are ratified by all parties before they are formalised. “We’ve got a good relationship with [the unions]. Before we even get to any stage of signing any contracts or agreeing anything we’ve probably spent six-to-nine months in the background agreeing what we both want.” According to Edelsten, many employees have seen their conditions improve following rail privatisation.
“Some groups of employees have done much better than I think anyone ever envisaged. One group that has done particularly well is the drivers. If you look at rail crews, experienced drivers can earn well over £40,000.” GNER’s relationship with the unions, however, is now undergoing another test in light of threats of industry-wide strike action because of proposed increased contribution levels for employees in pension schemes across the rail industry. Unions have also expressed concern at the number of industry schemes and varying conditions.
The National Union of Rail, Maritime and Transport Workers (RMT) intends to ballot members early this month regarding possible strike action. The results are due on 6 June. At the time of going to press, a spokesman for the RMT said informal discussions between employers and unions were planned to address industry concerns about the future of rail workers’ pensions.
Other unions representing GNER staff, however, including Aslef, the Transport Salaried Staff Association and the Combined Service Engineering Union have agreed to delay discussions on strike action until a later date. The GNER final salary pension scheme is currently still open to all staff who contribute 9.32% of annual salary. Hayhurst explains it is working to resolve the issue.
“There is a proposal on the table to raise contributions to 10.56% over a period of three years. The difficulty for us is that we had a pensions valuation as at 31 December 2004 which – and it’s the same in all rail companies – was right after 11 September 2001, and the stock market crash. Since then, investments have improved.
We are hopeful that the next valuation that we have at the end of 2007, with the results [due] in mid-2008, will show the deficit we’ve got has recovered. We need to increase contributions to take account of it and hopefully [the deficit is] only short term.” He adds that the 2004 calculation valued the pension deficit at about £20m. Aside from the developments around its final salary pension plan, GNER has recently completed a makeover of its voluntary benefits scheme, which now incorporates a new Halifax/Bank of Scotland Lifestyle discount package.
This also includes a popular Super Breaks package that offers GNER employees discounts on a contra-deal basis. In return, the provider receives good deals on GNER train travel. “The idea of voluntary benefits is from a few years ago when there was very little cash that the company could plough into benefits. The company could organise discounts for people and it wouldn’t cost the company any cash because there wasn’t that much around. We went through [some] serious incidents a number of years ago [including] Hatfield and they were our trains involved.
That was about picking up the morale of the staff. That’s why we did voluntary benefits and it’s grown from there,” explains Hayhurst. Birch has steered the organic growth of these benefits, and is keen to ensure they equate to more than just a 5% discount voucher at a national retailer. “We’ve got quite tight franchise commitments to meet but we need to concentrate on our staff and keep morale high while we’re trying to achieve those [goals],” she explains.
Birch is keen to uphold current service levels and wants to see maximum impact from offered perks. “We’re always looking to improve it. I think we’ll see how the online choices goes, and possibly build on that success. Because [employees] give such a high level of service they expect it in return,” she explains.
Jane Birch, benefits manager, joined GNER in 1999, following administrative roles at Moores Furniture Group and Abbey National. She initially joined GNER as finance secretary before moving into HR where she has experienced a variety of roles. “I spent a little bit of time in each of the areas of travel facilities, appointments, recruitment, medicals and staff changes and got a little bit of grounding in GNER’s HR way.” Birch was appointed to a temporary role in benefits management in 2004 when staff were seconded to work on the GNER franchise application.
“I was really proud of that. I started in the role and within three months we launched the computer scheme. There was a lot to learn and a lot to do, and the computer scheme was part of it. I didn’t just project manage that, I was obviously learning [to be a perks] manager as well.”
Juggling the role of manager and mother has been a challenge, so she has made use of the company’s flexible working arrangements. “I was working four days [a week] with a little girl in nursery, so I made full use of the childcare vouchers which [helped] a lot to me being able to do that.” Birch was appointed as a full-time benefits manager in January, and now works a compressed four-day week.
Staff case study David Hartford, manpower resource assistant, coordinates the rosters of safety-critical staff, who are responsible for the running and dispatch of trains, including drivers and station dispatch teams. He is based in GNER’s Newcastle office. Having been on board during the days of British Rail, he makes ready use of the available travel allowances. “Because I’m from the olden days before the restructure I get wider benefits. That means I travel anywhere [on trains] in Europe normally free of charge.”
While Hartford enjoys that additional perk, all GNER employees are entitled to free or cheap UK travel, and Hartford is fully conversant with his allowances. “I get 22 [options on first class tickets] a year, which is 22 blocks of 48 hour travel.
If I’m travelling to London with a friend I can fill in another box for them and it gets them free travel. I travel down there quite a lot so it’s really good.” Hartford is also planning to update his bicycle in the next bikes for work scheme and is an enthusiastic participant in the hotel discount scheme.
Final salary pension
All staff are eligible for a final salary pension. Employees contribute 9.32% while GNER contributes 13.98%
22 days as standard rising to 26 days holiday after 10 years’ service, plus up to 12 bank holidays and associated days each year.
All staff are eligible for free or reduced rates on GNER trains. This perk extends to partners and dependants after three months of service. Reduced rate travel is available on most other train operators.
A profit-related bonus is paid to all staff at the end of the year. Performance and profit-related bonuses for managers.
GNER operates flexible working policies including compressed working weeks and part-time hours.
Private medical insurance, critical illness insurance and income protection for directors and senior managers. An employee assistance programme is available to all staff.
GNER operates an online voluntary benefits programme, incorporating salary sacrifice benefits such as bikes for work. A high interest bank account savings scheme is also available.