Flotation was the major driver behind Standard Life’s move to flew as it sought to maximise its return on investment through improved recruitment and retention, says Kirstie Redford
Back in 2004, Standard Life went through some big changes, not least a significant strategic review, which led to a repositioning of the business. It was during this time that the decision was made to introduce a flexible benefits scheme to ensure the company and individual employees could get the best value from any benefits spend.
Aileen Newall, compensation and benefits consultant, explains: “This supported the general move towards maximising efficiency in the run up to potential flotation of the company. At the time, we already offered a comprehensive package of benefits, but the general perception of the package was that it didn’t offer a great return on investment. Delivering benefits under a new flexible benefits umbrella was seen as a platform to maximise value, while offering staff greater choice and flexibility.”
When the organisation announced its plans to introduce flex, it also announced its decision to ask staff to contribute towards their group personal pension scheme through a salary sacrifice arrangement in the flex scheme. Prior to this time, it had provided a final salary scheme for employees, which is now closed to new entrants. “Contributing towards the pension through salary sacrifice was a big change for staff, but we decided to announce the launch of the flex scheme at the same time as it gave people something to look forward to,” says Newall.
After carrying out a feasibility study into flex at the end of 2004, implementation of the scheme began in January 2005. Throughout that year it focused on three strands: plan design, communication and administration. The scheme was then launched for staff in June 2006, with a total choice of 17 benefits options.
When it came to the scheme’s design, providing best value was a key consideration for the organisation. “As staff were contributing to pensions, we felt that benefits should be practical and help staff achieve real savings. We tried to focus on developing practical everyday benefits that staff were already spending money on rather than introducing new luxury benefits,” says Newall.
This became the key campaign message when launching the scheme, using the strap line ‘get more for your money’. Posters were used in a teaser campaign in the run-up to the launch, followed by a suppliers’ roadshow and articles providing information on the scheme that were published in the company magazine. Large group presentations were also provided for staff, to which 80% of employees chose to attend despite attendance being voluntary. “We used a broad range of communication techniques so if people didn’t read the magazine, they would see a poster or go to the roadshow,” says Newall.
From the organisation’s perspective, any new benefits had to be cost neutral, so it focused on making benefits more tax efficient to help money go further and provide better value for staff.
This strategy seems to have worked. In the scheme’s first year, 70% of staff made changes to their existing benefits package. “This exceeded our expectations as we launched at the same time as floating on the stock exchange, so there was a huge amount of disruption for staff, with many working very long hours. To make time to come to presentations and make elections was a really positive result and showed that our communications had been effective,” she says.
Private medical insurance has received the highest take up. Although this is not a new benefit, flex offers more scope for staff to tailor cover, with a choice of different plans and excess levels.
In some cases, however, the organisation has taken a more leading-edge approach. It is one of just a handful of employers that have taken advantage of the government’s tax breaks around bus travel for staff, for example, in the form of its Ridacard benefit, which provides an annual season ticket for travel in Edinburgh, paid for through salary sacrifice. “As the benefit is subsidising local transport it attracts tax benefits. It was quite complicated to set up but after working closely with Lothian Buses, it now means that staff can opt for an annual ticket, tax and national insurance (NI) free,” explains Newall.
Other tax-efficient benefits offered through the scheme include tax-free NCP car parking and a cycle-to-work scheme. “This has been very popular with cycle enthusiasts and encourages people to cycle to work. A 40% tax payer could get £1,000 worth of bike equipment for £590, plus discounts on accessories” explains Newall.
Employees can also save money on further perks, for example, by trading down their life cover from four times’ to one times’ salary for which they receive cash back.
The scheme also enables staff to buy and accumulate holiday each year. Staff can opt to buy up to five days’ annual leave from the forthcoming year or ‘bank’ up to five days a year. When they have banked 20 days, employees can take a month off work in addition to their usual holiday entitlement. Staff can even bank up to 40 days over eight years and receive two months off.
“This doesn’t suit everyone, but can be really good if you want to work towards an extra long holiday,” says Newall
The scheme has a few luxury benefits thrown in too, including a concierge service provided by Ten UK, which can arrange hotels, travel and book tickets. In 2007, a wine case option and a Ticketmaster Corporate Priority benefit were added to the scheme, bringing the total number of benefits to 19.
However, Newall explains that one of the main aims of the scheme is to genuinely add value to help staff get the most out of their money. “This is all part of our strategy to improve our ability to recruit, retain and motivate staff. We want to encourage people to stay with Standard Life and feel that flexible benefits really add to our proposition. We’ve had a lot of good feedback from the scheme and also got senior buy-in from the start. Its introduction was a top-down decision,” she says.
To make the scheme as cost efficient as possible, it is run in-house. “We didn’t want to have to pay a third party to administer the scheme. Instead, we wanted to build our own in-house expertise so we could tailor support and make changes to the system without huge bills,” says Newall.
The plan’s administration is built around the notion of self-service, so staff can log in and access benefits themselves. Newall explains this streamlines the administration and empowers staff, who can access the system seven days a week from an external website or via the company’s intranet.
The scheme has also aligned benefits in each part of the organisation and improved employees’ understanding of their value. “Staff didn’t used to understand the value of the benefits we were providing. The flex scheme has created a brand for benefits and definitely improved awareness,” she says.
Newall adds that it has also given a clear message of empowerment, creating a “more adult” relationship with employees. “Traditionally, we have been very paternal. We feel giving staff more control over their benefits helps transparency and builds a more honest relationship with staff. We no longer decide what staff want, we let them decide,” she says .
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Career profile She then became compensation & benefits adviser in 1999, effectively taking on the role of remuneration consultant to specific business areas. Her responsibilities included facilitating salary planning, job profiling, and sizing and establishing remuneration solutions. In 2001, Newall’s title changed to compensation & benefits consultant, which she retains today. In 2002, she took on a higher-level consultancy role with two strands – managing company benefits, which involved policy changes, implementation of changes and management of supplier relationships; and responsibility for packages and policies for expatriates working on overseas assignments. In 2004, the decision was made to introduce flex and Newall became responsible for the overall co-ordination of the project during its implementation phase. She also took on specific responsibility for determining the design of the benefits. Since its introduction in June 2006, she has managed the scheme’s development and direction. Newall also has a BA in Business Studies and spent time with Dumfries & Galloway Police HQ as a personnel assistant before embarking on further study with her post-graduate HR course. |
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At a glance The Standard Life group of companies includes Standard Life Investments, an investment manager which last year had approximately £125bn funds under management; Standard Life Bank, which offers a range of mortgages and savings products; and Standard Life Healthcare, which offers products such as private medical insurance. |