FirstGroup boosts pay through salary sacrifice

FirstGroup, which has more than 120,000 employees worldwide, has offered a pensions salary sacrifice arrangement since making changes to its employee benefits in 2005-2006.

First Group

John Chilman, group reward and pensions director, says: “Initially, we called this ‘pay boost’ because existing members going into the scheme boosted their take-home pay, because they paid less national insurance. However, we changed the name to ‘salary adjustment’ in the UK, because the ‘pay boost’ term was not appropriate for colleagues who were saving into pension for the first time.”

FirstGroup reinvests some of the NI savings made as additional benefits to staff in the scheme.

When deciding which members of staff are most suitable for the scheme, FirstGroup auto-enrolled those under the age of 22 on a contractual basis, as well as those below the qualifying earnings threshold.

It has also had to consider its approach to temporary workers. Chilman says: “We’re looking at the approach we take to casual staff, as auto-enrolling them can cause frustration when they come back to work for us for a short period, and find that a pension deduction has been made.”

When implementing pensions salary sacrifice, to both its defined benefit (DB) pension scheme for existing members and a new trust-based defined contribution (DC) scheme for new members, First also had to decide whether to allow employees to opt in or opt out was a key consideration.

Chilman explains: “If you make it passive you will get a much higher take-up. Once we found this out we used the opt-out approach, and most individuals don’t.”