Employer Profile of Sony Ericsson’s benefits package

In summary

The merger of Sony and Ericsson brought together staff from two very different nationalities and cultures. To help ease the transition, a benefits package was created from scratch to put all staff on an equal footing. Flexible benefits was taken out of both organisations in favour of a fixed package.

Article in full

Sony Ericsson is the latest sponsor of the Woman’s Tennis Association. While one may presume that the deal breaker for this arrangement would have been the frequency of meetings between Sony Ericsson executives and players such as Anna Kournikova and Maria Sharapova, apparently there was more to it. The woman’s tennis tour has long been in the shadow of the male game, however, it has always been considered sexier and more glamorous. As such its popularity is expected to overtake that of the men’s in the next few years. And this is exactly how Sony Ericsson sees itself in relation to some of its rival mobile phone manufacturers such as Nokia and Motorola. Hew Evans, compensation and benefits manager at Sony Ericsson, explains that profit is king for the foreseeable future. “We are coming from a background where we lost a lot of money, millions of euros. Whereas in 2004, we made a profit of nearly Eu500m so we want to continue that momentum.” And, as the benefits orchestrater since the firm was created, Evans knows that benefits have both played a part in setting up its success and will have an impact on its future. Staff at the two companies, following the setup of the joint venture between Sony and Ericsson in October 2001, had a range of different benefits packages, salary rates and cultures, which was not ideal when trying to get a new launch up and running. “We looked at benefits as helping the transition from two very big companies with their own cultures. Ericsson was very benefits rich whereas the salary wasn’t as high and Sony had a different model,” says Evans. So to ensure that it could bring the two sets of employees together, it started from scratch when it came to offering perks. “We had a real opportunity when we came out of the parent company to say ‘we’re a smaller company with a lower age profile so let’s look at the models we can use.” The first step was working out what sort of person it needed to recruit and how benefits could help with this. “When Vodafone wants to bring out a phone that has video screening of David Beckham, we need to provide it with the phone at the right time that fits their specifications.” In order to do this, Sony Ericsson staff not only need to know who David Beckham is but how to build a phone that can video screen him. Once it has found these staff, who usually hail from other technology sectors such as music, films and pictures and are in their 30s and 40s, it needs to make sure it rewards them well enough to stay at the firm. “The salary’s competitive, but there’s a high gearing on the bonus so that’s where [they] really earn the cash. People in their 30s and 40s appreciate that more. We’ll make sure there’s a certain level of healthcare, holidays and cars, but we’re not competing on benefits. We compete on variable pay and salary.” Both organisations previously offered flexible benefits but it was decided that this was not the best option for the new company. It decided that it could put in place a plan that provided better value for money and was more suited to its staff. “Both [Sony and Ericsson] had flex plans but when we brought it in to Sony Ericsson, we said we needed to do our own thing. That’s when we backed out of the plans, to ensure we had value for money.” Evans says that this was the same as when it introduced a stakeholder pension plan for employees in the UK and moved from a defined benefit scheme to an enhanced 401k pension in the USA. “We’re taking opportunities around the world to get value for money, create our own identity and get control of the plans. “The strategy was trying to help overcome the usual set-up teething problems. There’s so many examples of joint ventures in the past that go wrong for the wrong reasons. We were very conscious that the culture of the company will always defeat the strategy. So the benefits was one of those things to say ’we’re bringing everyone together on the same package’,” he adds. With the core of its workforce coming from Japan and Sweden – two very different nationalities – ensuring this cultural clash doesn’t go bad is a challenge. For example, the way decisions are made varies; in Sweden they are made in the boardroom and in Japan they are made outside of it. Holidays is another hot topic of conversation. “In July and August in Scandinavia people save up their holiday and have a six week break – they just disappear. People who aren’t used to that culture will turn up to work one day and expect projects to be ongoing and [find that] a quarter of the organisation has gone off.” Avoiding procrastination is also essential. “If there are little things in the office or niggly relationships, that’s when the good people get upset. They are important but it also doesn’t mean you focus all the time on them; just get it done if it makes sense.” This particularly applies to arrangements on working flexibly, where Evans says decisions are made depending on circumstances rather than in line with a preconceived policy. While benefits played a big part in the company’s beginnings, they are not left to fester. Pensions will be causing the most trouble over the next year and, with forthcoming pension legislation due to hit soon, Evans hopes to change the way pension contributions are accrued. Currently, the firm has an age-related contributions system but he hopes that he can tie it more in to the company’s pay-for-performance ethos rather than rewarding for service. There is also likely to be an awareness campaign based on these changes to ensure employees know what is going on. “There’s a burden on employers, where you have a defined contribution pension and the risk is on the employee to invest, to educate and make sure staff are aware that they have a lifetime to build up a fund. “The newspapers will have their angle on it, but we need to deliver the facts. So we have a duty to personalise it. That doesn’t mean we necessarily want to do personalised compensation statements, rather [tell staff] how it affects [them],” he explains. And some staff are more affected than others. Some arrangements, meanwhile, will have more effect. “There’s an impact if you’re recruiting high earners who have already hit the limit on pensions. Providing a scheme’s not going to be useful to them so we need to ask what alternatives we have got to be looking at. There’s lots to be done.”

Career profile Hew Evans

started out in the world of employee benefits in the same way many of us start our working lives; at the mercy of newspaper adverts. After gaining a degree in economics, he joined Mercer HR Consulting. “I was just trawling [through] the graduate press and I saw the recruitment ad,” he says. In his time as a benefits consultant, under the watchful eye of Marcus Underhill and Mark Edelsten, he focused on flexible benefits. And after four years in the reward and performance practice he went out and found himself a firm to manage in the guise of Sony. At the consumer side of the firm’s UK division he worked across compensation and benefits policy, as well as getting involved with other HR policies and processes. “I was only there for a year before I was asked to join Sony Ericsson,” he explains. Having been at the mobile phone firm since it came into existence in 2001 means he has been a key player in its success. “[I’m very proud of] being part of a team which set up a company that’s now going places on a global level. It’s quite an achievement to be part of that.”

Employee case study

Finance manager Giles Duffy has worked at Sony Ericsson’s London headquarters since it was created and from an Ericsson perspective saw how its benefits changed when the two organisations merged. The defined benefit (DB) pension scheme, of which he is a member, is one of the main benefits he enjoys. But he hasn’t always thought this. “Discussions in the last few months as to whether we’re going to be able to remain in the defined benefit pension scheme have made me realise how valuable a DB pension is. Otherwise you don’t think about pensions. It’s a long time since I joined and you don’t think about what you got at the time when you progress,” he says. He adds that many of the insurance benefits such as private medical insurance (PMI) are also handy, but often go unnoticed too. “You don’t think about it unless you have to make a claim. [PMI] has been handy. I made a claim recently and immediately got put to the front of the queue.”

Company at a glance

Sony Ericsson was created as a joint venture in October 2001 between Japanese electronics firm Sony and Swedish phone firm Ericsson. The company was set up to manufacture mobile telephones, and currently has around an 8% market share. It is concentrating on peripheral devices that have started to become associated with mobile phones such as digital cameras, MP3 players and computer game machines. Its head office is based in Hammersmith, London, and it also has offices in Japan, Sweden and North Carolina, USA. It employs around 4,500 staff worldwide.

Benefits box Pension

  • Defined benefit pension, which is closed to new members, for staff who were previously at Ericsson. Stakeholder scheme with age-related contributions for all other employees.
  • Healthcare Private medical insurance offered to all staff with family cover for managers. Income protection and dental insurance provided for all employees.
  • Discounts Staff can receive a-third off all Sony items except Playstation2.
  • Company cars Company car or cash allowance. The majority of staff that are given the option, take the cash allowance. Fleet management provider also offers employees an affinity deal to buy their own cars with heavy discounts.
  • Holidays All Sony Ericsson staff receive 25 days holidays per year. This was one of the main differences between staff before the joint venture so in a bid to make it fairer for all, it decided to offer everyone the same number of days to avoid any problems.