How banking firms use benefits to motivate

Banking firms use benefits to motivate and boost engagement in the workforce, says Victoria Furness

The banking sector is one of the largest industries in the UK – employing close to half a million people – but it is also one of the most innovative, whether through its adoption of new technology or working practices. The Royal Bank of Scotland (RBS), for instance, has been offering employees a flexible benefits scheme for nine years, while Lloyds TSB prides itself on giving all employees the option to request to work flexibly, a commitment that goes beyond the basic statutory requirement.

As you would expect from such a forward-thinking industry, many banks have readily embraced employee benefits as a way of boosting recruitment and increasing motivation. Jim Cowan, senior consultant, remuneration and benefits at RBS, says: “We have got evidence that where people take up three or more benefits, we see an increase in their engagement score by up to 20%.”

While both retail and investment banks are, on the whole, convinced of the business case for offering an employee benefits package, there are some interesting differences between the two sectors in their approach to, and choice of, perks. Andy Lister, head of employee benefits at Grass Roots, says: “Retail financial services companies have quite a paternalistic approach. So a lot of the core benefits packages include traditional financial and security-based benefits.”

Most retail banks have closed their defined benefit (DB) pension plans to new entrants in favour of offering a defined contribution (DC) scheme. The bigger banks also tend to offer a wide range of benefits including private medical insurance, life assurance, company cars, share plans, personal accident insurance, cycle-to-work schemes and childcare assistance. David Wreford, principal at Mercer, says: “Some businesses are also trying to address work-life balance issues with employee assistance programmes (EAPs) or concierge services.”

Outside of the ‘big five’ retail banks, comprising HSBC, RBS, Barclays, Lloyds TSB and HBOS, the range and level of perks on offer can vary. Nationwide is one of those recognised for being innovative in its benefits provision, but other banks are catching up fast. The National Australia Bank Group (which owns the Clydesdale and Yorkshire Banks), for example, has recently launched an affinity reward scheme for its 10,000 UK employees to help it recruit and retain staff. The scheme offers employees voluntary access to discounted banking products, an EAP, a payroll-giving scheme, health benefits and discounts from high street retailers.

Catriona McDonald, affinity marketing manager for the Clydesdale and Yorkshire Banks, says: “Before, employees could buy reduced mortgages and loans if they went into a branch, but there were no lifestyle benefits or anything like this.”

Smaller investment banks are in a similar situation to banks like the Clydesdale or Yorkshire, in that they need to ramp up their benefits provision if they are to compete more effectively against others in the sector. Martha How, head of reward consulting at Hewitt Associates, says: “Benefits are becoming a need-to-have in the investment banking sector. Smaller investment banks with under 1,000 heads are very concerned about their benefits position.”

Cash equivalents
According to Andy Evans, managing director of financial recruitment firm Morgan McKinley, the benefits package for investment bankers has not changed considerably over the last five-to-ten years. “Employees typically now [receive] a defined contribution pension, most still get healthcare, which has been extended to include dental cover for an individual and his or her family, and a lot of individuals don’t take a car but the cash equivalent,” he explains.

With many benefits schemes comfortably established in the investment banking sector, banks have had to become more creative in finding new options to add to their package. Two popular ones, according to Hewitt’s How, are staff restaurants and gym membership offered to employees on a salary sacrifice basis. “If you think about their workforce, you can see why. A lot of these organisations have highly-paid individuals who work long hours and may well use the staff restaurant for breakfast, lunch and dinner,” she explains.

Although the banking sector is relatively forward-thinking in delivering benefits, its uptake of flexible benefits schemes is not yet universal. Just under a third of respondents to Mercer’s 2007 Survey of benefits in the UK financial services sector revealed that they already operate flexible benefits. That said, such schemes are generating interest on a wider scale. In the investment banking arena, Grass Roots’ Lister attributes this to people’s propensity to change jobs, which means it is important for employers to offer the same package as their competitors.

In the retail banking sector, flexible benefits schemes used to be a sure-fire way for banks to differentiate their offering from competitors. But with flex now more commonplace, it is becoming harder for employers to make their benefits package stand out – especially when, like RBS, the scheme has been in place for almost a decade. “Every year, we will revisit the content of our programme, but [we] also have to keep the communications fresh,” says RBS’ Cowan.

Investment banks face the same problem in making the benefits package as compelling as an employee’s salary and bonus. However, it is arguably a greater challenge given the average basic salary is £51,707, according to Morgan McKinley’s London employment monitor published in August, and bonus payouts can be six-figure sums.

Gareth Ashley-Jones, head of flexible benefits at Aon Consulting, says: “In some cases, benefits might look pale in comparison to bonuses. But when you are working long days, you don’t have the time to look for dental insurance [or any other insurance]. One of the values of flex is that it neatly lays out everything staff need in everyday life.”

Fight for talent
That said, it is rare for benefits to be a deal-clincher in recruitment decisions, unlike a candidate’s potential salary or bonus. But generally, once employees have worked in a bank with a good benefits package they normally expect to receive a similar level of benefits – if not more – at another bank.

However, the recent turmoil in the financial markets due to the credit crunch has led to rumours of lay-offs, and it could be argued staff are no longer in a position to quibble over the finer points of their package. Irrespective of this development, however, employers will still need to fight to attract or retain the best talent. It just so happens, in financial services, the level of reward at stake is considerably higher than in other sectors.

Case study: Morgan Stanley

Morgan Stanley’s family focus
Morgan Stanley uses its benefits package to gain a competitive edge, and has responded to employee requests for more choice and family-friendly policies During the 13 years, Dawn Nicholson, managing director of HR for EMEA at Morgan Stanley, has worked in investment banking, she has seen a increase in the number of perks offered to staff. “When I joined Morgan Stanley, the classic three core benefits were standard risk benefits, pension and medical,” she says.

Since then, the investment bank has broadened its offering to include an on-site medical service, a near-site emergency childcare facility, childcare vouchers, a cycle-to-work scheme, a new pension plan (introduced last year in response to pensions simplification), subsidised gym membership, and several health and wellbeing initiatives.

Morgan Stanley is one of the growing minority of investment banks that doesn’t offer a flexible benefits plan. Instead, benefits are available on top of salary to all 6,500 UK staff. “Benefits have an important role to play. In this industry, it is important to have a competitive package and we are always looking to offer the best and most competitive benefits,” Nicholson explains.

Case study: RBS

RBS selects perks that fit staff
With 110,000 eligible members, the Royal Bank of Scotland’s (RBS) benefits scheme is one of the largest in Europe.

When RBS first introduced its flexible benefits scheme, RBSelect, in 1998, 17,500 employees were eligible to join. Now, 110,000 employees in the UK and Ireland are eligible to join, and the programme has been so successful, the bank is rolling it out to some overseas operations.

Through the scheme, staff can access a wide range of leisure, lifestyle, wellbeing, and protection benefits. Employees also receive some benefits as core, such as holiday entitlement, life and disability cover, and an employee assistance programme (EAP).

Jim Cowan, senior consultant, remuneration and benefits at RBS, explains that the choice flexible benefits gives to staff suits its varied population. “Put simply, our population is too diverse to make any assumptions about what would be the ideal package for each employee.”

Employee take-up of the flex scheme is measured by the number of employees who opt to take the default package of benefits. “So, at the moment, 60% of our population choose to take a package that’s different to our default delivery of the benefits package (which would be cash and the core benefits). But I would say that this figure understates it. Given we provide a lot of information at the point of joining and a three-month window for employees to tell us how they would like to take delivery of their benefits, I would contend it is an active choice [if] an employee decides to take cash,” says Cowan.