Can you have recognition without reward?

I work for a 90,000+ employee global organisation which is considering introducing a global recognition scheme whereby employees who have gone "above and beyond" are thanked for their contribution but without any financial reward. This contrasts with our UK scheme whereby an employee who is recognised receives both an e-thank you card and a small award, usually between £20 and £100. This payment is made into an on-line account which they can use to purchase shopping vouchers or products from a catalogue.

I thank my team regularly either verbally or by email for their contribution but it does not have the same impact as turning up at their desk, publicly recognising them and presenting them with a small gift. I have experienced this myself when presented with a reward for the inconvenience to my family of being away from home over a series of weeks when I was presenting to groups of employees across the UK. My family have all enjoyed since the iPad that I purchased with that money.

I believe local, public recognition backed by a small financial reward is by far the most motivating experience. This is backed up by some research carried out by the Corporate Leadership Council which shows a greater return on investment in terms of employee engagement from a recognition arrangement than an annual bonus scheme.

If an employer were only to use a small proportion of their pay review budget to allocate to a recognition and reward program this can have a very positive impact on employee moral and engagement.
In the UK we use  0.1% of our annual pay budget in this way.

I will try to encourage my employer to introduce such a global recognition and reward initiative next year.

Are employee portals the future?

If you have not already seen the Corporate Platform Guide published last week by "The Platforum" in conjunction with Employee Benefits magazine then I would recommend a read. It is in my view a comprehensive and accurate summary of the current market landscape for employee platforms. These are propositions new to the market where employees can access group  financial products, such as GPP and ISA, and financial information and guidance. A link to the publication is below:



http://www.theplatforum.com/files/Corporate_Platform_Guide.pdf

This guide contains my own interview on the experience of CSC, who were the first employer to offer the Scottish Widows "mymoneyworks" portal to our staff. But a year on how successful has this new proposition been and is there any possibility of it being the future delivery mechanism for pension provision in the UK?

The interest from CSC employees to date has still been centered around the GPP offering and the pension planning tool contained within the portal. We have had little take up on the cash ISA and internet savings account which we launched a year ago (a take up of approximately 80 employees out of a workforce of 7,000) and we will not know until the new year how many employees decide to pay into the equity funds ISA which we will start to offer from January 2012.

Bearing in mind it is easy for an employer to set up a GPP for its staff and the ISA industry is generally well understood and easy to access for individuals, why would an employer be considering offering such a platform? From an HR perspective this has, in my view, to do with your employer brand and overall benefits offering.

A company's EVP (employee value proposition) should take account of different employee segments (both from a generational and affordability viewpoint) and the varying needs in relation to benefits provision this brings. If trying to attract the best graduates in the industry will they be more interested in the company's pension provision or how they can affford to pay off their student debt in the first few years of employment? With auto-enrolment coming over the horizon will graduates see the benefit to them of the company's standard pension funding? Would it be better to provide a lower level of pension funding to start building up a retirement pot and a contribution into a shorter- term savings vehicle which can be accessed when they need it rather than being locked away until retirment?  This is all about ROI on your company's benefit spend. What will make your employees best appreciate the benefits package on offer.

However, a total flexible approach whereby each employee can decide how the company's funding is allocated to best suit their needs, has to be backed up by comprehensive financial information and guidance so that employees fully understand the impacts of their choices both in the short and long term. This is where the educational part of the employee portal with easy to read guides, interactive tools and case studies ("people like you ....") adds the real value. This enables the employer to offer cost-effective, tailored guidance to its workforce via technology, with additional face to face advice being concentrated towards those who have more complex decisions to make.

It is the continual investment in technology from the providers who are offering these platforms which will influence whether they become the future, or a fad of the time!

The picture is of myself with "mymo" the character embedded into the look and feel of the portal at our launch in 2010.

Auto-enrolment U-turn impacts even the biggest employers

When Steve Webb first announced on Monday that employers with less than 50 staff would not need to comply with auto-enrolment until after May 2015, I did not take much notice working for an employer with more than 7,000 employees in the UK. However, when the DWP subsequently announced it would postpone the increase in employer contributions from 1% to 2% from the current date of October 2016 to some future date, not being announced until January, then I started to read with more interest. These changes mean that even the biggest UK employers will be unclear about their obligations until the new year.

For those employers like CSC who have been working on their strategy for auto-enrolment for some months this delay and lack of clarity is not at all helpful. I am sure that those employers who need to comply with the requirements from 2012, or those choosing to comply early next year, will need to have embedded any increase in their pension costs into their financial plans and budgets already. These financials are likely to include a prediction of pension costs into the future as pensions are a long term investment for an employer, and not just for 2012 alone. Many employers will I expect be automatically enroling their current non-joiners at their standard rates of pension contributions: but what about those employees who cannot afford to pay the matching arrangements in your scheme (and that is why they opted out in the first place).

Some employers may be considering introducing a "minimum compliant" strategy for those employees who have not joined their employer's pension arrangements due to affordability. Standard Life are even suggesting that a "nudging" strategy whereby contributions start at a low rate and then increase each year as the auto-enrolment requirements increase could be more of an affordable option for many who are not currently saving for their retirement. This is where the recent U-turn from the Government can delay the finalising of any strategy decisions that need to be made until after the new year. For some this uncertainty, which may appear small to the Government, could have a real business impact.

Julie Parker-Welch, the pensions strategy manager at M&S, has gone on record this week declaring that administering auto-enrolment is "an absolute nightmare", trying to figure out who in their workforce to auto-enrol and how to communicate with them.

It is not at all helpful to those larger employers who need to be making decisions on their pensions strategy from October 2012 (less than a year away) for the Government to be changing the goal posts at this time.

Whilst on the topic of auto-enrolment the biggest uncertainty we have as an employer at CSC, whose workforce needs to be globally mobile to meet the needs of our clients, is the definition of who to enrol - similar to M&S but for different reasons. Why would it be at all benefitcial for a US employee who has been contributing to his 401k plan throughout his career to be enrolled into a UK pension scheme for the 6 month period he is working on a project in the UK?  Again more clarification (or amendment) required and we will be speaking to the Pensions Regulator and others on this issue in the new year.

We await clarification in January with interest!

Dedication deserves you a gold plated pension

Dedication deserves you a gold plated pension: that was Unison’s message in today’s Metro article on why we will have up to 3 million workers take part in the largest strike Britain has ever seen on Wednesday this week. Dedication by those looking after our children (teachers), our elders (nurses), our planet (recycling collection). Don’t get me wrong, I do appreciate the education I had, the help delivering my two children and having my bins emptied every week. But why are those working in the private sector or for a charity, who could equally be as dedicated to helping others, not be as deserving as those who have managed to find and sustain work in the public sector.

The comparisons used in the Metro article to illustrate the existing public sector schemes are of a hospital porter and a nurse. I have not checked the maths but they are quoted as follows:

“A hospital porter earning £15,000 on retirement after a full career could receive £6,600 a year with a lump sum of £19,700. To get that from a private sector personal pension you would need to put away at least £200 per month.“   This means that together with the new proposed flat rate state pension of £7,280 the hospital porter could retire on an income which is 92.5% of his (or her) earnings at retirement. Plus a lump sum equal to more than a year’s pay.

The second example: “A nurse earning £30,000 a year on retirement after a full career could receive £13,100 a year with a lump sum of £39,400. To get that from a private sector personal pension you would need to put away at least £400 per month.” Again adding in the new proposed state pension the nurse could be retiring on 2/3rds of her (or his) earnings at retirement. Plus of course the lump sum on top.

No statement was made as to what investment or annuity assumptions have been made for the private sector equivalent!

Even with the changes proposed by the government; which will see a career average rather than a final salary scheme being introduced from 2015, with retirement being increased from 60 to 65 for those not already within 10 years of retirement, and with employees earning more than £15,000 being asked to pay on average 3.2% more into their schemes, the public sector pensions will still be pensions that “you simply cannot get anywhere else” as Ros Altman states in the article.

Perhaps a little more work on engagement by the Government so those in the public sector realise what a generous benefit their employer (and the tax payer) is providing to them may avoid further strike action and disruption to those working in the private sector whose working arrangements need to change as a result.

Pensions strategy is now moving to the HR agenda.

Last week I facilitated a discussion at an HR Directors event on how employee benefits can be used as a tool to enhance recruitment, retention and the productivity of your workforce. The general consensus amongst the HR professionals who attended was that it is the “non-financial” benefits of working for an employer such as flexible working and on-site childcare which are influencing retention rather than the pension scheme offered.

This is further supported by some recent PWC research interviewing employees in the UK

where “72% of employees said a closure or reduction in their pension provision would not impact a decision whether or not to stay” and “only 12% of employees said they consider the generosity of an employer's pension scheme when deciding to accept a job offer”. The exception to this seems to be those working in the public sector who are striking on November 30^th!

So what is the role of the employer?

Pensions strategy is now moving to the HR agenda. Agreed that finance will continue to play a vital role in the DB environment, but with many DB schemes now closing to future accrual, de-risking on both the liability and asset side now being pulled under control, HR need to be taking a more pro-active role. HR should formulate their own point of view on whether pensions have a role to play in their Employee Value Proposition or whether they allow Finance to continue to drive the agenda from a purely cost perspective.

Granted pensions will not form part of HR's “pay for performance” or talent strategies, but they do have a role to play in supporting your company culture and the relationship your employees have with the company. The cost of providing pension schemes, even in the new DC environment is significant so make sure you are getting a good ROI by ensuring your employees are better engaged, educated and informed about the need to save.