Issue no.5
Making your Benefits work harder
Are you missing a trick on employee discounts?
How to model and manage salary sacrifice
Welcome
Contents 02. Editorial
03. Making your benifits work harder
04. Asperity pioneered Cashback for employee discounts schemes Cash is the most expensive way to reward people so when, as now, the focus in many organisations is on liquidity, making your non-cash benefits work harder is essential. It’s easy for employees to lose sight of the value of benefits, so benefits providers need to work with clients to maximise return.
For discounts, maximising return means having a scheme with relevant offers for everyone and driving use on an ongoing basis. For a death-in-service benefit, clearly it’s a different message. These two strands to a benefits portfolio, however, do have an important commonality - the value to the employee in hard terms is way in excess of the cost to the employer. Significantly, this is not the case with cash where £1 is a £1. With tax efficient salary sacrifice benefits like childcare vouchers and cycle to work, there is a net saving to employers - so no cost - but the employee still perceives and receives significant additional value.
06. Childcare Vouchers - tUnderstanding the theory, managing the risks and maximizing the savings.
08. Doing More for Less: Communication - The Value of Branding
10. FAQs
So as an employer, it pays dividends to make your benefits work harder for your employees and so for you. Benefits other than cash are key in maintaining the psychological contract between employer and employee, especially when the crunch is on.
Yours sincerely
All information correct at the time of writing and subject to change without notice.
Glenn Elliott MD, Asperity Employee Benefits glenn@asperity.co.uk
Asperity Employee Benefits Ltd, 90 Westbourne Grove, London, W2 5RT. Tel 020 7229 0349 www.asperity.co.uk email: benefits@asperity.co.uk
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© Asperity Employee Benefits Ltd 2008. All trademarks and registered trademarks and logos are the respected property of their owners.
Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
Making your benefits work harder By Caroline O’Keeffe, Marketing Director, Thomsons Online Benefits Employee benefits are typically one of a company’s largest employment costs. However, often there is little or no measurement of the return on investment companies receive from this spend.
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Total reward – make sure that you communicate the value of an employee’s total reward package to move their focus away from just base salary and to ensure they appreciate the full worth of their benefits.
In times of economic turmoil, all company costs come under increasing scrutiny as companies look for areas where savings can be easily made. It is therefore more important than ever that you seek to not only accurately measure, demonstrate and evaluate the effectiveness of your reward spend, but also have a strategy of how you can make your benefits work harder, to improve your return on investment.
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Take every opportunity to communicate your benefits. Although this is a time when many companies are focusing on costs and value, employers still need to motivate and engage employees, perhaps more than ever. For example: • Include your benefits in job adverts/career sites; • Survey each year to see what your people really think/want;
8 point plan Below is a eight point plan to help get you started!
• Make the benefits really clear when new people arrive at induction;
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• Consider one to one meetings;
2)
3)
easure your spend – Our research (Employee Rewards M Watch 2008) shows that around four in ten companies don’t even know how much they are spending on employee benefits. Without this basic information you cannot possibly demonstrate a return on that investment. Review what you have, why and what is working – much of the time when speaking to new clients we find that there are some benefits in place which were put in place for historic reasons and have never been reviewed (for example Permanent Health Insurance). Actively review each of the benefits you have in place, determine what the need is for it and whether it is meeting that need. Actively manage your benefit costs – • Whether you use a benefits adviser or you deal directly with the providers make sure you actively manage your benefit premiums. If you have an adviser get them to prove that they test the market each year - see the evidence! It’s a Financial Services Authority requirement, not an option.
• Introduce a three year rolling communication programme (remember your staff do turnover); • Become marketeers - deliver mini benefit campaigns throughout the year. 7)
dministration – consider implementing employee benefits A software to eliminate paper based administration which is both costly to run and leads to data errors.
8)
Health and wellbeing strategy – by introducing a well thought out health and wellbeing strategy, you can not only make your employees more healthy and engaged, but you will find sickness levels decline and most importantly employees become more productive.
• Make sure you also look at the terms on which you are offering group risk benefits, for example the deferred periods, claims periods, and benefit basis. Don’t accept that your rates need to rise when you implement flexible benefits. There is no evidence to support this and indeed if anything the evidence points towards the fact that employees take much more care in their selections in a flexible benefit arrangement. 4)
Look for other areas where savings can be obtained – a good example of other savings that can be made are through salary sacrifice benefits. Make sure that you actually measure the savings that you make and communicate this to your finance function.
Benefits Connection from Asperity
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Asperity pioneered Cashback for employee discounts schemes
Jaspal Channa, Head of E-Commerce at Asperity, explains why Reward Gateway still leads the field by a considerable margin. By Jaspal Channa, Head of E-Commerce, Asperity If you’re new to Cashback, email us at info@asperity.co.uk and we’ll give you access to our demonstration site and explain how it works. You might think that ‘there is nothing new under the sun’ and you might even be right, give or take an iPhone or two. But when we launched Reward Gateway three years ago, Cashback was new in the benefits space and we’ve invested significantly in keeping it well ahead of the game. Of course, there is a lot more to Reward Gateway than Cashback – vouchers, local offers, discounts and the rest – but it is important to keep every product in top condition. There are two areas in particular we have kept an eye on in terms of benchmarking Reward Gateway’s Cashback: public sites and our competitors in employee benefits. Many employee discounts schemes don’t have a Cashback offer at all; the resources, investment and expertise to get it right are clearly a barrier to entry. A recent comparison between Reward Gateway and another industry scheme reassured us that our policy of passing on all the Cashback we receive from retailers to our enduser employees keeps our rates, and therefore savings to users, at the top of the market. Cashback generally relies on making income for its operator by taking a slice of the Cashback, meaning that the rates on other sites are, on average, 30-40% less than the Cashback rates on Asperity’s site.
Asperity is employer-funded which means we always operate for the benefits of employees, because it is by maximising savings to employees that we deliver value to employers. Public Cashback sites are predominantly supplier-funded, based
A small selection of offer comparisons Vodafone
£40
£85
Expedia
3%
6%
Dell
2.50%
3%
M&S
3%
5%
Alliance & Leicester
£25
£50
Lastminute.com
2.50%
5%
WH Smith
5%
8%
Pru Health
£60
£190
Carphone Warehouse
£30
£45
QVC
3%
4.75%
Waterstones
3.50%
5%
A small selection of offer comparisons, indicative of the whole programme, are shown below. (Correct at 1/12/08)
Debenhams
2.50%
4%
Play.com
4%
5%
Sticking with employee discounts for the moment, a rounded offer for deals and savings is essential. Reward Gateway is unique in being the only site to offer a single package of negotiated employee-only offers, employee purchase programmes (such as Sharp, Apple, Dell and HP), discounted high street retail vouchers (with up to 11% extra free on a wide range of high-street outlets), management of a local offers portfolio, discounts and Cashback. So Cashback alone is not enough but it is central to a scheme’s success; about 65% of spend on Reward Gateway generates savings in Cashback for employees.
Pru Car Insurance £30
£55
Woolworths
4%
8%
Firebox
6%
10%
Jessops
2%
3%
Avon
7%
10%
Norwich Union
£30
£50
Thorntons
6%
12%
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Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
on a business model whereby their revenue and profit is the difference between the commission they get in and the Cashback they pay out. They achieve this in a number of ways, frequently by charging a withdrawal fee, sometimes by charging a joining fee but always by having much less generous customer service policies than we do, and very often by promoting deals in a highly attractive way that generate excellent commission but are not good for the consumer. Customer service is an area where things also differ significantly. We pay out untracked (missing Cashback) payments immediately, which consumer sites do not. There are lots of these each month (although a small percentage of the tens of thousands of transactions we process). These result from all sorts of things at
the user end - problems with a browser or security settings, user error, virus scanners etc. Where Cashback rates are capped on RG, the surplus is used for these payments to members so it does all go back to the end user. We also pay out an increasing number of transactions in 1-28 days, whereas you will almost always have to wait 2-5 months with a consumer site as they rely on a large number of users making a few purchases, getting bored waiting for the money and then forgetting to use the site again - which means the operator keeps all of the money. When you look in detail at the finances of consumer Cashback sites they gain an unhealthy portion of their earnings from unclaimed Cashback. We offer a broader range of payment options and encourage easy withdrawal, as we find lots of users prefer cheque payments, or to receive Cashback as vouchers... it’s all part of staying ahead of the game. The information above demonstrates how Reward Gateway offers significantly better value on Cashback alone. When local offers, vouchers, discounts and cost per user are factored in, it’s unbeatable.
Benefits Connection from Asperity
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Childcare Vouchers
Understanding the theory, managing the risks and maximizing the savings. By Sarah Millward, Employee Services Manager at Asperity Why have a CCV scheme? Having a childcare voucher scheme is a ‘fat diamond’, which means it is one voluntary benefit that all employers, large or small and regardless of sector, should make available to their staff (for further information on ‘fat diamonds’ see the last issue of Benefits Connection¹). It isn’t easy to establish exactly how many UK employers do provide childcare vouchers, but a working figure would be around 62%. This figure, taken from the CIPD Reward Survey in February 2008, hides a wide range, with 44% of employers with less than 50 staff providing vouchers and 69% of organisations with more than 5,000 employees doing so. The cost of childcare, however, is significant, so employees are likely to welcome any assistance employers can provide in meeting these costs2: • Average weekly cost of a full time nursery place for a child aged under two: £159 in England, £141 in Scotland, £142 in Wales
• Average weekly cost of a full time nursery place for a child aged over two: £149 in England, £128 in Scotland, £141 in Wales • Average weekly cost of childminder for a child aged under two (full time place): £144 in England, £139 in Scotland, £153 in Wales
• over a third of families with children under 2 have both parents at work • there are less than 200,000 ‘stay at home’ dads
• Average weekly cost of after school club (15 hours): £43 in England, £38 in Scotland, £36 in Wales
• “the choice of caring for your own children is rapidly turning into a luxury available only to those who can afford it”
• Average weekly cost of holiday play scheme: £92 in England, £83 in Scotland, £88 in Wales
• the number of ‘stay at home’ parents has hit its lowest level in 15 years with just 7% of all parents now staying at home to look after their children.
If you are, or are thinking of becoming, the scheme owner in your company, it’s good to understand the ‘theory’ of CCVs. You might think there isn’t a lot to understand; but as this issue of Benefits Connection is all about making benefits work harder for your company and your employees, how hard are CCVs working for you? And if, large or small, you haven’t already got a CCV scheme, this might help make up your mind. Company X For illustration purposes, we’ll work with a model for ‘Company X’ which has 4,000 employees, and gauge what sort of take-up it might expect for CCVs. Assumptions are inevitable here because statistics on the numbers of parents who buy childcare from a registered carer 1. 2. 3.
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are hard to find. An interesting article on www.insidemoneytalk.com3, however, finds that:
So let’s assume that 20% of Company X’s workforce have children under 16. If that sorts out the number of employees with children, one key question for CCVs is how many of those with children pay for registered childcare? And the second key question is how many more of Company X’s employees would like to have registered childcare and could afford it if they had CCVs? We’ll just take a guess and say 10%. In reality, a significantly greater number could benefit but getting the message across to parents is not easy, and take-up rates are frequently less than this. That means 320 employees sign up. So this brings us to some numbers to underlie our model. In the table below, you can see that 400 people taking CCVs at an average value of £2800 a year (the maximum being £2916) generates an annual voucher order of £1,120,000. Assume employer’s NI savings at 11%, less the provider’s management fee, and the net value to the employer is a substantial £56,000.
Please go to www.asperity.co.uk or phone us on 020 7229 0349 to request a copy of “Why Fat Diamonds are an Employer’s Best Friend” Figures from www.daycaretrust.org.uk, 24 November 2008 15 May 2008
Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
The modeling doesn’t quite stop there because it is sensible to factor in a small reduction in the employer’s saving to allow for the continuation of CCVs to employees on a second or subsequent maternity leave. We’ve assumed 2%, because a number of reasons mitigate against women being eligible for this benefit: • An employer does not have to provide vouchers if the woman leaves the scheme prior to starting maternity leave
be able to continue as per normal as long as the other conditions are met.
• CCV can be paid from, for example, holiday pay while on maternity leave
• Many women will voluntarily withdraw from the childcare voucher scheme because they do not want to incur childcare costs during maternity leave due to reduced income, and their CCV only contributes to part of the cost of childcare – perhaps as little as a quarter.
So we’ve allowed for 8% of Company X taking vouchers.
• It only applies to a woman who is pregnant for the second or subsequent time (i.e. has to have a child to be on the scheme in the first place)
• The change in family finances following the birth of a new child can mean that tax credits will become a better option for some women who were in receipt of childcare vouchers at the time they began maternity leave.
• If the employer provides contractual maternity pay then salary sacrifice may
• Some women will transfer the CCV to the baby’s father at week 17
And if we add in Cycle to Work... Savings from Cycle to Work are likely to be considerably smaller but if we add in 2% of the company taking advantage of a £500 salary sacrifice bike, you can add another £5120 to the bottom line. Overall Company X can look at a gain of £49,200 a year on salary sacrifice arrangements. And with the right provider to maximize engagement amongst eligible employees, these figures can be even higher. If you’d like to model your organization, give us a call.
Illustration for Company X Note: the assumptions made below regarding spend, take-up etc. are illustrations only.
Number of staff
4000
Ave Annual Childcare Voucher Spend
£2,800 (MAX is 2916)
Ave Bike 2 Work Spend
£500
Childcare Vouchers Childcare Voucher takeup %age
10%
8%
12%
Childcare Voucher Users
400
320
480
Total Childcare Voucher Value
1,120,000
896,000
1,344,000
Employers NI saving at 11%
123,200
98,560
147,840
Management Fee at 6%
67,200
53,760
80,640
Net value to employer
56,000
44,800
67,200
C2W takeup %age
1.0%
2.0%
3.0%
C2W Scheme Users
40
80
120
C2W Scheme Value
20,000
40,000
60,000
Employers NI saving at 11%
2,560
5,120
7,680
Cycle to Work
Overall
58,560
49,920
74,880
Benefits Connection from Asperity
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Doing More for Less:
Communication - The Value of Branding By Matt Waller, Managing Director, Benefex Brands are powerful. We buy into them; we believe in them, we spend millions of pounds each year on them. The most recognisable of brands have reached the peak of marketing success, with just a symbol or a strap-line representing the entire brand message.
Take the following:
Because I’m worth it
Hello Moto The real thing
Every little helps
I’m not suggesting that your reward brand will become instantly recognisable worldwide (it doesn’t need to); but the power of developing a great brand should not be underestimated. What matters is that your employees understand and value their benefit scheme – and that is all about perception. The biggest advantage you have over all of these brands is that a reward brand has the privilege of being able to be linked with individuals and their money, one of the most powerful and least utilised links in reward and benefits. In our experience with over 200 clients, great branding helps to create a positive employee perception by taking the best elements of what you’re offering, promoting them to your audience and wrapping it all up nicely in a well designed, recognisable and consistent ‘package’ – The Brand. When it comes to employee rewards and benefits the majority of employees don’t value what they have, and I would put most
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The best a man can get
of this down to a lack of communication of what is on offer – employees can’t value what they’re given if they don’t realise or appreciate what’s on offer and what it costs. But when it is done correctly the impact of effective and branded communications on the success of your scheme can be significant. Top commercial organisations spend millions on marketing campaigns to promote their brand and what it stands for, but there are ways to raise the profile of your own reward brand that provide maximum engagement at minimum cost.
Keep it together! One of the easiest ways to increase employee engagement is to ensure that you put all the information about what your employees receive in one place. This helps employees to see the full spectrum of what they receive in their Total Reward package, whilst reinforcing the link between their benefits and you as their employer.
The world’s local bank Once you pop, you can’t stop
Common communication methods used for this are Total Reward Statements (see below) induction packs, employer branded brochures and online systems/websites. Detailing all the reward elements together helps to achieve the ‘wow’ factor, as employees appreciate the full content and value of their benefits package – rather than seeing each benefit separately.
Get off to a great start New employees should be introduced to your reward brand and everything it includes during their induction to ensure that they begin to understand their benefit package from the very beginning – however, the process of on-boarding is rarely done well, if done at all. We would recommend that organisations focus on all employees receiving a consistent message from day one. A great benefit package is an effective recruitment and retention tool, so make sure you promote it!
Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
Keep communications regular In addition to a ‘definitive guide’ where all the benefits are explained together, we always recommend communicating regularly with employees to highlight the benefits they receive, so that the value of the scheme is reinforced at several points during the year. The most cost effective way to reinforce your reward brand is to ‘piggy-back’ onto existing communications, for example company newsletters, up-date communications and emails, which all help to keep the reward package on an employee’s radar. Be mindful that all communications consistently adhere to your reward branding, as this is the visual connection that links the messages to you as the employer.
Take a Total Reward approach When employees are asked to estimate the value of their benefits most say that their
package is worth 10% of their salary. In fact, the actual value is more likely to be 20 – 30%. The concept of Total Reward centres on ensuring that employees understand and therefore appreciate all of the benefits that they receive, including all aspects of cash and non-cash reward. The common driver for employers adopting a Total Reward approach is that if the value of all benefits is promoted for minimal cost, you can maximise the return on your reward and benefits investment. The key to adopting a Total Reward approach is to ensure that all communications are ‘on-message’. This means in addition to the details of each benefit, you need to reinforce the cost in both financial and non financial terms, of each element of the benefit package. This can be done using a dedicated
communication method, such as Total Reward Statements, or simply included as a key part of your existing communications to get the all important Total Reward message across. You don’t have to have a large budget to create a successful brand and communications strategy; using the tips above we have helped many of our clients increase employee engagement and appreciation with their scheme at minimum cost. Using a reward brand to cultivate a positive and well informed employee perception of your reward and benefit package is a powerful tool which all organisations can utilise, even when working with the most modest of budgets!
Sample: Total reward statement for 2007/2008
Benefits Connection from Asperity
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FAQs
Part 2 of our look at the questions employers ask about VB. By Tom Lavery, Head of Sales at Asperity Employee Benefits
We looked at some of our FAQs in our last issue and now consider some other queries that often come our way. How much branding is it reasonable to expect? Lots. You want your VB scheme to reflect your brand to your employees. You should expect full customization to include logos, colours, copy, style and images. You might have an image library and want to use images from this to mirror your public site, or you might want something completely different for internal branding. Similarly with colours and logos and the website URL – these should all reflect the investment you have made. In addition, clear identification with the employer-brand encourages your employees to use the site and trust the offers. It’s a central part of an employer benefits strategy to align employee-facing communications with the employer brand. What sort of Management Information can I expect? How do I know if my employees are using the scheme? Generally, you should be looking for MI in two forms. It is very helpful to have instant access to headline figures such as number of employees registered, number of visits and transactions and spend and for this you will need a web-based administration facility for designated internal users. This won’t provide you with any data on individual’s shopping habits but it will give you a sound overview of scheme use. In addition to your own online access, you should also benefit from a regular report from your provider with analysis of industry comparisons and a more detailed look at the metrics, including patterns of logging on and trends in use. It’s the old adage: “if you can’t measure it, you can’t manage it” - and this applies to a discounts scheme as much as any other benefit. So MI is essential, but it is not the whole story. The perception of employees of the look and feel of a scheme, the intrinsic value of providing VB (or not providing VB when employees expect this as a benefit) - these are all important too.
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Employees can order discounted vouchers online or by phone, pay by debit card with no delivery charge over £100 and mix vouchers from different retailers within an order.
Do employees really bother with gift vouchers? Aren’t they fiddly and a bother? Yes to the first and no to the second! We sell millions of pounds worth of vouchers a year to Reward Gateway users who use them for everything from big purchases – 10% off a new kitchen anyone? – to Christmas shopping to everyday groceries and petrol. Employees can order online or by phone, pay by debit card with no delivery charge on orders over £100, and vouchers from different retailers can be mixed within an order. With 5% extra free at major supermarkets, 8.5% at John Lewis and Waitrose, 10% at Mothercare and dozens of others, it makes sense to take advantage of these savings and thousands of employees do. We can offer particularly good rates because we are a closed user group. We know who our customers are and we have the security of knowing they have come to us through their employer. And a voucher scheme is no trouble at all for employers employees just order by phone or online and we do the rest. What about data security? Have I got anything to worry about there? Again, this is a yes and no. At Asperity, our single highest priority is the security of data and we have invested heavily in ensuring we are robust, tried and tested in this regard. Obviously it wouldn’t be sensible to go into detail here, but we are always happy to talk clients through our data security measures and provide reassurances. So as an employer, you need to concentrate on appointing a provider who takes the worry away from you. With salary sacrifice arrangements in particular, the data is highly sensitive and personal and it is essential it is in good hands.
Free, fully functional demo of Reward Gateway for all readers at www.asperity.co.uk
What happens when employees get a problem? Do they all end up contacting HR? Our Helpdesk is open 8am-8pm Monday to Friday and 10am-4pm on a Saturday and we deal with all the enquiries for Reward Gateway users. Common enquiries are: • • • • • •
I’ve forgotten my password I can’t log in What’s my registration code? Voucher ordering What the best offer you have got on plasma TVs / mobile phones / insurance? How do I withdraw my Cashback?
Our in-house team is well prepared to deal with all of these and lots of others. So employees don’t ring their HR department, they email or phone us.
Is Cashback actually cash? Yes, it is. We get asked this a lot both by employers who are considering a scheme and employees after a scheme has launched. Cashback accrues into an individual employee’s online account and when they are ready, they make a withdrawal. It is a bit like a store loyalty card, except all the savings from different retailers go into one pot, and the savings are cash, not points. This means that shopping on Reward Gateway delivers real additional money to employees. So how do they withdraw Cashback then? This is the most straightforward of all; once they have £10 or more, employees just log on and tell us if they want a BACS transfer or a cheque or gift vouchers. Then we dispatch it. It really is as simple as that. In practice, we find that employees tend to save up Cashback until they have a higher amount - but everyone’s different!
In a crunch you need all of your staff to be focused on creating value
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For more information call Tom Lavery at Asperity on 020 7229 0349.