As the recession bites, Nottingham City Council is working to get maximum value from its salary sacrifice schemes, HR director Ben Browne tells Tom Washington
If we are to believe what we read, employers in the public sector are faring better in the financial downturn than many of their private sector counterparts. Indeed, in March this year, John Philpott, chief economist at the Chartered Institute of Personnel and Development (CIPD), said the public sector was an entirely “recession-free zone”, while data from the Office of National Statistics shows that private and public sector pay appears to be heading in opposite directions. Its Average weekly earnings report, published in March, revealed an annual pay rise of 3.4% in the public sector, while private sector pay fell by the same amount.
But Ben Browne, director of human resources at Nottingham City Council, believes this is a distorted view of the situation. “The impact of the global recession, contrary to popular belief, has had an impact on many public sector organisations, including Nottingham City Council,” he says. “The economic climate has meant our income is greatly reduced and things like fuel costs have risen, which has meant we are currently proposing to reduce employee numbers to balance the budget.”
Browne believes the economic climate and ongoing financial problems have increased the importance of benefits that can save employees cash, particularly those that are tax-efficient. “I think it is becoming more important to get the message out to staff that all these perks are about saving money,” he says. “For example, employees can save up to 41% on our bus pass scheme, which is a substantial amount of money, and the cost can be spread over 12 months, which really helps.”
The council, which employs about 14,000 staff, offers three main salary sacrifice schemes: childcare vouchers, known as Childcare Plus; bus travel, Greentravel2work; and bicycle loans, Cycles2work, which is run with providers Halfords and Cycle Plus. The authority also used to offer a Home Computing Initiative (HCI) scheme via salary sacrifice before the tax break was withdrawn by the government in April 2006.
The council’s salary sacrifice schemes sit within its voluntary benefits programme, Works Perks, which also includes local and national discounts on products and services such as retail vouchers, holidays, restaurants, theatre and cinema tickets, gyms, motoring and gardening, as well as other green and ethical offers.
In August 2007, Nottingham City Council became the first organisation to implement tax-free bus travel via salary sacrifice for its employees. “We designed and implemented Greentravel2work in partnership with provider P&MM to replace the HCI scheme,” explains Browne. “It took about 18 months to get this scheme up and running. Because it was so new, there were high-level discussions with HM Revenue and Customs (HMRC) specialists to ensure that it complied with tax rules, and with the bus companies to ensure that they were on board.”
The scheme’s introduction coincided with the council’s launch of new employee identity (ID) badges, so administration processes were developed to enable the bus passes to be uploaded onto the ID cards. Nearly two years after the launch, the council continues to refine and improve the scheme. “Further work needs to be done as we would like to extend the boundaries for our Greentravel2work scheme, which could encourage more people to travel to work by bus,” says Browne.
The council’s primary reason for offering perks is to attract and retain staff. “It was a way of making Nottingham City Council more appealing to potential recruits and to compete with other big employers in the city, such as Experian and Capital One,” he explains. “We also want staff to stay with us, so giving them extra perks is a way of saying ‘thank you for your contribution’.
“We also want to contribute to the city council’s corporate social responsibility and green agendas, and are working very closely with our transport planning teams to ensure our tax-free travel options link in with the staff travel planning process.”
But Browne says more work is needed to promote the bus travel scheme and boost take-up. About 470 staff currently use subsidised bus passes, but the council estimates that 3,000 of its workforce travel to work by bus. “The fact that Greentravel2work does not cover trams may put some people off,” he observes.
Although the authority’s childcare voucher and cycle-to-work schemes continue to grow in popularity, Browne says more could also be done to boost take-up of these perks. “We think there are a lot of parents who need childcare but do not use Childcare Plus, so we know there is a lot more work to do to get the message across.”
The national insurance savings the council makes through its salary sacrifice offerings are used to fund the schemes’ administration, and any surplus money is ploughed back to help fund further improvements and developments. However, Browne says that there are no plans in the pipeline to introduce further tax-efficient benefits. Instead, the organisation is focused on making the most of its current offering.
“We are always looking for new opportunities but, at the moment, our focus over the coming few months is on increasing the number of employees who use our existing schemes,” he says. “We are sure there are many more people out there who would want to join up if they knew more about how the schemes actually work and what savings they can make.”
The benefits are communicated through a variety of channels. New staff are given a Works Perks booklet and DVD as part of their induction, and a benefits website is updated regularly with monthly and seasonal offers. Flyers and posters are also used to raise awareness of new and updated perks, such as the Cycle Plus scheme, which opened for enrolment in April.
The organisation has also created a Works Perks champion group, which will be used to communicate the benefits package more informally to employees within its individual departments. “We hope that this will improve access to, and take up of, all the Works Perks offers,” explains Browne.
“We also have a Works Perks page in the monthly staff magazine, Impact, where we feature real-life case studies and give examples of how staff have saved money. We are planning to do more work through employee manager briefings, as well as working more closely with staff based in schools. We are sure the benefits will appeal to this massive audience.”
But offering tax-efficient benefits via a salary sacrifice arrangement is not always straightforward. HMRC has often been criticised for a lack of clarity on certain perks, and there is particular confusion over whether employers are required to continue to pay noncash benefits, such as childcare vouchers, when employees take maternity leave, even though they may not be receiving any salary that can be sacrificed.
“We would like further guidance from HMRC on a number of issues,” says Browne. “Perhaps the most important ones are how the changes to maternity leave practically impact on the payment of all benefits, including salary sacrifice, and on those staff being placed at the risk of redundancy.”
Browne believes that overcoming confusion in these, and other areas, could help to further boost take-up of the benefits. “There is also still confusion about green travel and why the salary sacrifice scheme cannot cover trams, which are classed as rail,” he says.
“This would be of great benefit in Nottingham, not only because many of our staff use both buses and trams to get to work and are put off from applying for Greentravel2work as it only covers buses, but also because we are expanding our tram network to incorporate two additional lines in the future.”
Nottingham City Council at a glance:
Nottingham City Council is a unitary authority that provides all local government services for its 286,400 residents. With an annual budget of about £1bn, the council’s stated priorities are to make Nottingham a cleaner and safer city.
It is currently ranked as a two-star authority by the Audit Commission, and has been named the cleanest of the UK’s eight core cities.
The council is Nottingham’s largest employer, with a workforce of about 14,000 staff spread across a variety of locations. Perks which employees have access to include the final-salary Local Government Pension Scheme, a minimum of 20 days’ holiday a year, a minimum of three days’ training and development a year, and access to an occupational health unit.
The council says it is committed to providing the support its employees require to achieve a healthy work-life balance, for example by providing options for flexible working hours.
Ben Browne has been director of HR at Nottingham City Council since 2005. His career began with a variety of administrative and personnel roles in local government before embarking on an HR management career in the further education sector.
Browne worked in the further education field for 12 years, at Arnold & Carlton College, and Lincoln College, where he was director of personnel. He then moved into the National Health Service (NHS) as deputy director of HR for Queen’s Medical Centre, part of Nottingham University Hospitals NHS Trust, before joining Nottingham City Council. At the council, Browne quickly became involved in tackling retention by improving benefits. “We knew we had to improve reward provision because we were in a competitive recruitment market and knew retention was poor,” he says. “Since the launch of voluntary benefits, take-up has been good and we have successfully improved retention rates.”