After a slow start, and a big push from the government this January, home computing initiatives are finally gathering momentum. “Awareness of these schemes among senior business decision makers has risen from 37% before the Department of Trade and Industry (DTI) launched the new guidelines in January to 72% at the end of June,” says Vivien Quinn, marketing director HCI Alliance, a BT/Intel/Microsoft joint venture. She adds: “And we’ve also seen pressure from employees and trades unions who are asking employers to [set up] schemes.”
This raised awareness has resulted in increased take-up too. According to the HCI Alliance, 137 UK organisations, covering more than 1.5 million employees, have implemented schemes. And, with implementation lead time of anything from three months to a year or more, these figures are certain to grow in the coming months.
As well as an explosion in the number of schemes, there are also a lot more providers in this market now. “In 2001 there were five players,” says Andy Lister, head of employee benefits at the Grass Roots Group. “Now the HCI Alliance website lists more than 25, with many of these having come into the market in the last year.”
Across these providers it is possible to access a wide range of different home computing propositions. At one end is the full service proposition, where the provider will help with everything from marketing through to delivery and ongoing support. At the other, it is possible to simply use a provider to obtain discounts on PC equipment. Chris Wells, CEO of BT Home Computing, says: “A few companies have done it themselves but most don’t want the hassle. There is a lot of work involved and an external provider can help with everything from the legal and tax implications through to the marketing and direct mail.”
Some providers focus on particular parts of the market, while others are set up to service any employer. John Helmer, marketing manager at home PC supplier Futuremedia, says: “We look after the Royal Mail scheme which is very large, but we also have a more self-service solution for schemes of two people.”
But although home computing schemes offer benefits for employers and employees alike, there are potential problems too.
Probably one of the biggest irritants is the Consumer Credit Act as Lister explains: “Employers need to apply to the Office of Fair Trading (OFT) for an exemption to protect against an employee’s right to cancel. It’s fairly straightforward but although the OFT stated there was a 10 day turnaround for these applications it’s now taking six weeks, and this needs to be factored into any implementation timetable.”
Delivery can also be a real bugbear. “The communications process at the beginning is great, as is the time when the employee actually has the PC, but the bit in the middle can be problematic,” says Anthony York, a consultant with Towers Perrin. The size and weight of computer equipment means home rather than office delivery is practical, which, for full-time employees, may mean taking time off work.
To get round this the Grass Roots Group has developed a voucher system, Select and Collect, where employees go into a branch of the group’s supply partner, PC World, to choose the equipment they require and either pick it up themselves or arrange delivery. York believes many of the other providers would like to do this but, without store-based suppliers, they can’t. “This could put pressure on the other providers,” he adds.
Take up can also cause problems. Although most providers can find extra kit, it may need to be a different model to that specified in the marketing literature. Likewise, sourcing extra PCs before Christmas, when demand is highest, can be difficult, potentially leaving employees disappointed.
“A good take-up rate is around 10% per iteration,” says Quinn. Some companies do much better. For example, Microsoft, Michelin and Toyota UK Manufacturing achieved take-up rates of between 25% and 30% when they first rolled out their schemes.
Certainly the technology focus of some of these companies may have lead to higher take-up but there are ways to increase the number of employees opting for the scheme. “A stand-alone scheme will have higher take-up than one within a flexible benefits scheme, as it’s not competing with other benefits,” says York. Offering options such as home installation and additional software can also improve take-up.
How the scheme is offered will also affect take-up. “A lot of companies are setting up home computing schemes with similar rules to their pensions,” says Quinn. “They’ll be open once a year and employees will need to have worked for three months or so to be eligible.” However, with no rules governing when the schemes are offered, there is room to shape them to the employer’s requirements. For instance, larger employers such as BT run the scheme every month.
The Home Computing Initiative (HCI) won’t be relevant to all employees. According to Wendy Fleet, head of marketing at Youatwork, it’s important to consider options for part-time employees and those that are close to minimum wage as salary sacrifice can affect other benefits as well as not necessarily giving them tax advantages. “In these cases it’s important for the employer to explain why they might not be offering the scheme to these employees and perhaps promote a discounted PC deal instead,” she explains.
But, while there are still issues to overcome, many believe the HCI market has only just begun to realise its potential. “HCI schemes will become one of the main ways of delivering home computing,” says York. “This will mean consolidation in the market and the bigger and better organised providers coming to the fore.”
THE FACTS
What are home computing schemes?
Home computing schemes enable employers to loan computing equipment to their employees for personal use, free of income tax and National Insurance. The tax break applies to the computer and anything functionally dependent on it (for example a printer, support and delivery), although many providers will also offer additional services such as e-learning packages. Using salary sacrifice, employees accept a reduction in their gross salary in return for a loaned computer.
What are the origins of home computing schemes?
Home computing schemes were introduced in 1999 following the Chancellor’s announcement of a £500 annual tax exemption on loaned computers. Other countries have also run similar schemes. For instance in Sweden, it helped to increase access to computers from around 40% to more than 85% of the population.
Where can employers get more information and advice?
The DTI’s website, www.dti.gov.uk/hci, has information on how to put a scheme in place. Additionally the HCI Alliance – which is made up of BT, Intel and Microsoft working with the government to promote its Home Computing Initiative (HCI) – can also help. It runs workshops, briefings and can provide free consultations. Its website is www.ukhomecomputing.com or it can be contacted on 01753 691215.
NITTY GRITTY
What are the costs involved?
Employers pay administration costs to the providers of home computing schemes but, taking into account the savings on employer National Insurance if these schemes are operated under a salary sacrifice arrangement, the overall cost should be neutral with larger employers even adding to their bottom line.
What are the legal implications?
Because the home computing initiative (HCI) falls under the Consumer Credit Act, employers must apply to the Office of Fair Trading for an exemption to protect against an employee’s right to cancel. Additionally communications and employee documentation must be compliant to qualify for approval as a tax-exempt scheme.
What are the tax issues?
There is a £500 annual tax exemption under the HCI. To qualify for this, employers must ensure it is provided as a benefit-in-kind. This enables the employee to save tax and national insurance on the £500, while the employer also saves National Insurance at 12.8%, equal to £64 a year. Care needs to be taken though for part-time employees and those close to minimum wage because salary sacrifice may not offer tax breaks for them and may also affect other benefits.
IN PRACTICE
What is the annual spend on home computing schemes?
According to the HCI Alliance, 137 organisations, covering 1.56 million employees, have a home PC schemes. It is estimated that between 100,000 and 150,000 computers will be offered through a home computing scheme this year.
Which providers have the biggest market share?
Of the 30 or so providers in this market three dominate. These are BT Home Computing, the Grass Roots Group, and Futuremedia.
Which providers increased their share the most over the past year?
Difficult to say as many of the providers launched this year.