| Jumping
on the IT bandwagon
While online benefits schemes have become
increasingly common in the private sector, the public sector is
only now just starting to bite. Nadine Wojakovski
looks at the advantages
Although online
benefits schemes have become increasingly common in the private
sector, the public sector has been cautious to embrace them, so
much so that until the end of 2005 not one NHS Trust was offering
such a service.
Last December that all changed when Westminster Primary Care Trust
(PCT) launched its online employee benefits service branded “It’s
all about you”.
One of the key reasons for setting up the service was to make staff
more aware of the benefits and their value. Staff members had been
saying they did not know what they were entitled to, or how much
their whole remuneration package was worth, so making it clearly
visible and comprehensive was a necessary objective.
As a result of the new system they can now look online at a breakdown
of their package, including salary, London weighting and add-ons,
such as how much the PCT spends on their training and development,
annual leave and pension.
“This adds up to thousands of pounds more than their base
salary and staff have a better idea of the true cost of the Trust’s
investment in them,” says Karen Broughton, director of human
resources and corporate affairs, of the PCT.
Set up in conjunction with thomsons online benefits the service
forms part of a long-term strategy to improve recruitment and retention
at the Trust. “We needed a competitive advantage to attract
good staff, and non-pay related benefits are one way we can do this,”
concedes Broughton.
Moreover, PCT staff members have been involved in the set up of
the scheme. For example, they were consulted on such things as what
further benefits they would be interested in.
The results include a home computing initiative in which staff can
buy a computer tax-free and pay for it from their salary. A similar
tax-free scheme is available for staff to buy childcare vouchers
and also bicycles. Work is already being done to find a way to offer
cheaper mortgages.
Indeed, lifestyle benefits provider Xexec believes that with the
growth of online benefits companies are opting for other add-on options
to incorporate to their existing platform. It says it is about being
seen to do “more than the basics”. Says Xexec director
Jacqueline Benjamin: “We have found salary sacrifice schemes
such as retail vouchers from supermarkets and high street stores
to be very popular. In addition, companies are looking at using
our online concierge lifestyle management and discount programme
to boost their new or existing benefits platform.”
Many wonder why it has taken so long for the public sector to follow
a trend set by the private sector many years ago. One reason, offers
Iain McGowan, head of market development for corporate pensions
at Scottish Widows, is that core pension provision within the public
sector remains final salary and therefore more fixed in its nature.
By contrast,
in the private sector, the principle of increasing an element of
pension contribution by offsetting against other elements of the
benefit package is more straightforward and widely used.
“We also see online benefits packages being used by employers
in the private sector to differentiate their offer to employees
–and to encourage staff recruitment and retention,”
he adds.
This is particularly relevant as there are very few private sector
final salary schemes remaining open for new entrants. By contrast,
in the public sector, the availability of final salary benefits
has often been the main tool.
Charlie Carrick, director of online employee benefits consultants
Orbit Benefits, highlights another issue. He argues that online
benefits are typically being offered by white collar companies where
employees have access to screens and therefore are able to easily
operate in an online world.
This would therefore rule out a lot of public sector employees partly
explaining why they are lagging behind. But, this looks set to change
somewhat going forward.
For one, A-day is around the corner. “After A-day there will
be greater flexibility for members of final salary schemes to make
additional contributions on a money purchase basis. Essentially
these employees could then enjoy membership of two schemes,”
says Scottish Widows’ McGowan. And even without A-day, interest
within the public sector is being generated.
Caroline O’Keeffe, spokesperson for thomsons online benefits
who helped design the communication and branding of Westminster
PCT’s scheme, says there has been a big increase in the number
of enquiries coming through from the public sector.
She believes
that thanks to various recent initiatives, public sector employers
are ready to embrace change, with a number looking to put something
in place this year.
“There are two main reasons for the change in mindset,”
she argues.
“Firstly, there are a series of government and public sector
initiatives that, amongst other things, are promoting higher standards
and efficiency in the workplace. Secondly, there are recruitment
and retention issues as the public sector faces the same skills
shortage as the private sector.”
The government initiatives include the Chancellor’s Budget
speech in Spring 2003 in which he announced a cross–cutting
review of efficiency in the public sector. This would identify the
scope for efficiencies in public spending that would release resources
to priority frontline services. The resulting Gershon review has
required substantial business process re-engineering including systems
development in order to provide for a radically improved and unified
HR Service in the public sector.
Indeed, the NHS’s own “Improving Working Lives”
initiative (as part of its Agenda for Change) influenced Westminster
PCT’s decision to offer its online benefits service.
O’Keeffe believes other initiatives should encourage a further
growth in the public sector, such as salary sacrifice which, she
notes, is really taking off. “All these initiatives should
in theory see change, but it will still be slower than seen in private
sector,” she says. “This is because the procurement
process tends to be slower and more lengthy and the organisations
are typically very big.”
Diane Smith is business development manager of flexible benefits
at Northgate HR, which has over 300 public sector employers using
the company’s Integrated HR/Payroll &
Pensions applications. However, in spite of the government’s
encouragement for local government employees to interact with computers,
when it comes to online flex her clientsare
typically cautious.
“I think in general there is willingness for them to want
to explore the on-line service, and it’s generally
not technology that holds them back. Within local government there
is huge focus on optimising the cost of human capital however, with
all of the recent press around the government pension scheme,
there is also a general lack of clarity around whether they
can generally encourage employees to make changes to
their pensions contributions once it is up and running.”
Ultimately, says Smith, it is very difficult for local government
to justify the spend on flexible benefits unless it can be seen
to be cost neutral or providing value.
Smith says there are individual cases where the case for implementing
flex online can be justified. For instance, one client is experiencing
extreme staff retention issues which have not been made easier by
the fact that a commercial competitor locally is
offering flex.
All in all, the online benefits market has enormous potential and
one has to just look at benefit schemes within the private sector
to see what a long way the market has gone. “In the past online
benefits has been quite reactive with little member input, but that
is changing with members ‘managing’ rather than just
‘viewing’ their statements and accounts. It is much
more about being proactive,” explains Carrick of Orbit Benefits.
At the simplest level, this could mean adding a new family member
to a healthcare plan. At the other extreme it could involve a member
sharing access to his or
her investment plan with an IFA at the same time (but not necessarily
in the same location), using a modelling tool to see how the fund
value fits in with the retirement date, and then increasing contributions
and switching funds as necessary.
“Moreover, the system itself can be proactive,” he adds.
“For instance, it can inform you by SMS text messaging when
notable events are happening, such as a major fund
movement, which will encourage a member to make proactive decisions.”
In the meantime, for public sector employers not willing or able
to offer online benefits, there are other options available. The
technology exists to present benefit options through mobile phones,
television screens or on-line kiosks.
Again this limits employer interaction but is still seen as an attractive
benefit, so long as the individual scheme has considered the implications
of managing the administration coming out of the choices made.
Lifestyle benefits provider Xexec says the challenge is to
get public sector employers comfortable with the concept of
online benefits schemes. “Once that is achieved,” notes
director Benjamin “they will see how many opportunities
for offering innovative initiatives for employees exist”.
Nadine
Wojakovski is a freelance journalist
-
Pensions Age February 2006 -
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