The right choice

Employees are a company's most valuable asset. The attraction, retention and incentivisation of staff are fundamental to the success of a business. In today's competitive market, it takes time and cost to get the right people and keep them, regardless of role.

This 'war for talent' is revolution- ising the employer/ employee relationship. Mounting research shows that employment is no longer just about salary. Successful companies are actively engaging their employees at a level that delivers fair reward, a challenging role and stimulating career opportunities.

The consequent interest in employee benefits not only benefits employers and their staff, but advisers can also gain new business as more employers call on the their services.

Professional advice is needed to put the package in place, and more employers are now offering staff subsidised access to individual advice as a further benefit, so they can dovetail their personal protection with employer-paid benefits.

However, before offering onsite services, advisers should be aware of the growing number of employee benefits currently available and the value they can provide.

The construction and delivery of employee benefits has evolved beyond belief in the last decade. New technology enables flexible and pick-and-mix schemes to be set up, allowing employees to decide which benefits best incentivise them.

Fundamentally, there are two main types of employee benefits: core and voluntary. Core benefits are predominantly paid for by the company, while voluntary are discounted but paid for by the employee.

Core and voluntary benefits can be combined together to create solutions to a number of employers' problems, or to add value to the employer/employee relationship.

Staff absenteeism rarely has a specific, easily identifiable cause and implementing strategies to solve it can be a problem for the employer. Age, gender and health profiles vary enormously throughout most organisations, and absenteeism can be caused by both physical and mental stresses. In a Swiss Life survey, conducted in March 2001, the main cause of long-term illness was mental health (37%), closely followed by muscular skeletal ailments (24%).

Managing absence

However, there are a number of means by which an employer can mitigate, and minimise the consequences. An employer should seek to implement plans that:

• Minimise the root cause.

• Minimise the time taken off, once absenteeism commences.

• Financially reimburses the company when absenteeism has evolved.

It has been scientifically proven that mild to moderate exercise can reduce stress, anxiety and depression. Therefore, if an employer provides the facility for employee sport participation, they can help reduce absenteeism. Offering corporate gym membership as an employee benefit, or organising regular sporting events would be one suggested method.

However, there will be employees who do not enjoy exercise. Perhaps the incorporation of voluntary benefits such as subsidised health clubs, providing saunas, solariums and massage facilities may be an alternative to reducing employees' stressful lifestyles. Equally, stress counselling can be used to help identify and reduce stress-related problems before they occur.

Once employees become ill, it is important to get them well again as soon as possible. The most cost efficient and effective method for this is private medical insurance (PMI), a core benefit.

PMI can reduce time in waiting for treatment and can provide better facilities and recovery opportunities. It provides a wide range of treatment for medical ailments, from GP and stress counselling helplines to alternative medicine and psychiatric treatment.

A group scheme can be used to ensure most medical ailments are covered, and that treatment is cost effective. This can be preferable to an employee using more costly private schemes, or gambling on NHS waiting times. It can also be incorporated as a key benefit to incentivise and motivate employees.

Covering costs

Equally, other protection can be used for employee benefits, such as the voluntary benefits of dental protection, healthcare vouchers, personal accident insurance and long term care insurance.

The cost of paying an employee's salary when they are absent can be a significant burden for most small to medium-size enterprises (SME). Companies can protect against this burden through introducing a group income protection (IP) scheme.

Group IP, which falls under core benefits, caters for income needs for long-term disability or absenteeism. The employer will usually pay the employee for a specific time when absenteeism occurs, after which an IP plan will pay the cost of the employee's income.

Since this also safeguards the salary of the employee, it can be incorporated into an employee benefits scheme.

It is important that companies protect themselves against the financial and resource costs of absenteeism. The premium for group insurance schemes are calculated using average figures which leads them to be more cost effective than private measures, and they can then be used as a key employee benefit.

On the whole, voluntary benefits such as share options have become the must-have employee incentive over the last decade. Owner-drivers have used options to enhance employee performance and to reward through sharing in the success of the business.

There are a number of ways of incentivising through share schemes, and there are even some specific share schemes that are designed to help SMEs to attract and retain the best people. However, if a company's share price drops due to extraneous market pressures, options can have the opposite effect, creating a disincentive for employees.

There are obviously revaluation options open to employers. New share options could be issued, or existing ones revalued and re-issued at a new price. This could maintain incentivisation, albeit with the possibility of further price falls.

There are, however, other ways for employers to incentivise employees in bearish times. Large corporations, for example, have recently offered performance-linked, with-profits company bonds to employees, though this is an unlikely option for smaller companies.

Employers could consider profit-related pay, an incentive linked to company profit performance without being subject to market forces. Equally, a simple performance-related bonus could be used to circumnavigate depressed shares.

Employers can further incentivise using 'share save schemes', which allow employees to buy shares, while guaranteeing their initial investment if share prices fall below the purchase price. Base rate-linked interest can be guaranteed on the initial cash, ensuring an employee gets back their investment in real terms. This allows participation in successful shares, but protects from bearish markets.

Equally, certain financial products can be used to reward top performance. This might include access to subsidised loans and mortgages, with the degree of subsidy related to the specific performance, although these are taxed as an employee benefit. Equally, a very beneficial means of incentivising employees while benefiting the company is to offer job-related training as an employee benefit, which can then be used to raise the productivity of staff.

Another key benefit is clearly pensions, the most valuable of the employee benefits.

Top-up benefits

There are some employee benefits that add value to employees, helping to strengthen the employer/ employee relationship and create a happy work environment conducive to long-term employee satisfaction and performance.

Examples include travel incentives, such as a company car, private fuel benefits, season ticket loans or company travel insurance for private and work travel. Equally, buy and sell holiday entitlement, which allows employees to either pay or be paid for increasing or decreasing their annual holiday entitlement.

Employees can also be given pecuniary benefits through retail vouchers, home computers, childcare or even luncheon vouchers.

One of the best means of adding values to employees is by giving them access to subsidised expert legal or financial advice. As schemes become more sophisticated and individually tailored, so does the need for employees to access professional independent financial advice.

Dovetailing an employee's overall package with their personal planning requirements can optimise their overall financial position and reinforce the value of employer's provision.

This value helps to achieve one of the most important goal for most companies: the attraction, incentivisation and retention of their most valued asset ' their staff.

Charles Ansdell is head of corporate communications at Inter-Alliance Group