Multi-employer benefits plans can help to shelter staff from wide discrepancies on perks, says Alison Coleman
Case study: Shepherd Construction
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Offering benefits to staff can be a costly and time-consuming process, which many employers choose not to pursue beyond their legal obligations. Industry-wide or multi-employer schemes provide these organisations with the opportunity to group together to offer benefits such as insurance cover and pensions. As well as time and administration savings, a multi-employer scheme can allow participating employers to offer a better benefit at a lower cost. Operated mainly in the not for-profit-sector, multi-employer schemes have yet to be adopted by mainstream private sector employers, although a number of industries, such as construction, plumbing, and hairdressing, have been running them for years.
B&CE is the largest supplier of financial services and employee benefits to the UK construction industry. Around 6,000 employers use it to offer benefits to approximately 300,000 workers. B&CE's employee benefits package, Template, allows employers of all sizes to provide their operatives with membership of a stakeholder pension scheme, plus life and accident cover, and holiday pay. John Jory, deputy chief executive, says: "We offer a one-stop-shop solution for workplace benefits provision, where employers can access all the services, literature and benefits communications they need. "The only drawback is it does require a limited amount of admin work on the part of the employer, but far less than if they were setting up an occupational scheme."
But if this multi-employer model works so well, why is it not more prevalent in the private sector? Roland Jones, a senior pensions consultant at Towry Law, agrees that the concept is an excellent one, but sees its widespread adoption by industry as unlikely. "In [sectors] like retail and leisure, the major employers are less likely to want to be part of a standardised benefits scheme. They see their benefit offerings, including their pension schemes, as a way of badging themselves as an employer of choice," he says. A scheme which provides staff with portability - enabling them to take the same pension and benefits entitlement with them to another organisation - may not appeal to employers facing high staff turnover rates. "The main obstacle will be getting the large organisations, which prize their employee benefits as a valuable recruitment and retention tool, to agree," explains Jones.
Others would argue that benefits, particularly pensions, have been devalued as staff recruitment and retention currency, and say the real reasons for the lack of multi-employer schemes are more political. Richard Stroud, chief executive of The Pensions Trust, which runs multi-employer occupational pension schemes for not-for-profit organisations, explains: "Because of the hefty insurance levies incurred on a defined benefit (DB) scheme, the Department for Work and Pensions, and the Pension Protection Fund have effectively killed off any prospect of these schemes being taken up on an industry-wide scale. The more likely option, a defined contribution (DC) scheme, would still require the combined efforts of several organisations to facilitate the cost savings of a multi-employer scheme. With the lethargy that currently exists in the private sector, this is unlikely to happen." Employers operating in the heating, ventilating, air-conditioning and refrigeration contracting industries can provide benefits to their staff through an industry-wide scheme run by Welplan.
These include sickness and accident benefits, death-in-service benefits, occupational and stakeholder pension schemes, healthcare perks, and holiday pay which is free of national insurance. Eric Lazenby, deputy chief executive, believes it is the nature of the contracting industry that has propelled the scheme. "Why do other industries not do the same? Possibly because employers in the contracting services industry tend to be more aware of what their contract workers, who have a high degree of mobility, really need in the way of benefits provision," he says. This does imply that industry culture is a factor in the introduction of these schemes.
Those that foster a community spirit, for example, are typically well suited to multi-employer schemes. Last year, the British Horseracing Board (BHB) set up a steering group to push forward improvements to pay and benefits for its 7,000 stable staff, following the publication of the Independent Stable and Stud Staff Commission's Report in 2004. Sara Hay-Jahans, BHB head of recruitment and training, says: "People tend to stay in the racing industry for a long time, so in that respect it is a community, with a strong sense of providing for the people in it." One of the priorities identified by the steering group was pensions provision.
Through a stakeholder pension plan, administered by the National Trainers' Federation, stable staff receive an employer pension contribution of £400 per annum, with no employee contributions required. The report also found that employer contributions in racing were just a third of those in many other industries, so recommended that a new scale of employer pension contributions for certain staff, which recognises length of service, be negotiated to allow more senior employees to receive a contribution on a par with other industries. The possibility of introducing contributions based on a percentage of salary was also proposed. It also advocated a better system of benefits communication because it transpired that many employees were unaware of their entitlements, such as the Racing Industry Accident Benefit Scheme (RIABS) which provides benefits for stable yard staff following accidental injury or death. But the one factor that can really influence take-up of benefits is education, and if a multi-employer scheme is to succeed, employees must fully understand the value of what is on offer.
The National Hairdressers' Federation currently has just over 6,000 members, including salon workers and self-employed hairdressers, who have access to the Hairdressing Industry Pension Scheme. General secretary Ray Seymour says: "This is a stakeholder [plan] which quite simply enables salon owners to meet their legal obligations, and for staff to retain the same pension arrangement if they change jobs or decide to become self-employed." Although the scheme is open to members and non-members, he believes take up has been disappointing. "In an industry of relatively young workers, pensions are not on the radar, but there is a deep mistrust of them generally. People are confused about them [so] need clearer guidance and better education. The fact is, they have to think about their future, and a scheme that is offered as standard across the industry is highly portable so they only ever need to have one pension, [that] sets out clearly the value of their fund," he explains.
Withdrawal from multi-employer schemes
The Pensions Regulator has published guidelines for organisations which want to withdraw from multi-employer pension schemes. Since September 2005, employers wishing to withdraw from such schemes have had to fund any remaining debt on a full buy-out basis, which is the amount it would cost to buy out the members' benefits by purchasing annuities. This gives members greater protection should an employer stop participating in a pension scheme. But employers can modify their share of the debt owed to the scheme by entering into a withdrawal arrangement with the trustees and the guarantor to guarantee part of the debt. But they must gain approval from the Pensions Regulator to do so. The guidance from the Regulator sets out how, and in what circumstances, employers can apply for a withdrawal arrangement, focusing on what will be required from organisations and what the Regulator will consider when granting approval. If the Regulator does not approve an arrangement, the withdrawing employer is liable to pay the debt calculated on a full buy-out basis. All employers are responsible for the pension liabilities of members in a multi-employer scheme.
Case study: Shepherd Construction
York-based Shepherd Construction offers its staff access to B&CE's industry benefits scheme.The scheme offers a range of benefits, including access to a stakeholder pension plan EasyBuild. The company makes a weekly payment of £2.50 into the scheme on behalf of each of its operatives, and for those working under the Construction Industry's Joint Council's Working Rule Agreement, it can match any employee contributions to EasyBuild of between £2.51 and £10. Currently, around a third of the company's operatives make regular contributions to the EasyBuild scheme. Sharon Copland-Jones, HR director, says: "The beauty of this scheme is that it is presented to staff in an [understandable] way. "It achieves the objective of getting them to think about things like insurance cover and retirement funds, and actually do something about them. I can't see any reason why employers in other industries don't operate similar schemes."
