The Republic of Ireland might be enjoying prosperity and new investment, but a buoyant jobs market has driven up the cost of talent, forcing perks into the spotlight, says David Woods
No longer seen as the butt of bar-room jokes, the Republic of Ireland is having the last laugh with a rapidly-growing economy and investment from a host of multinationals, particularly of US origin, keen to set up business thereWith an unemployment rate of just over 4%, this has put increasing pressure on employers to offer a competitive benefits package. Patrick Robinson, principal in human capital at consulting firm Mercer, explains: “We are seeing more firms looking at what’s happening in the market and enhancing their benefits.”
However, since the mid-1980s, there has been a move away from defined benefit (DB) pensions, although this has occurred at a slower rate than in the UK. According to Raymond McKenna, managing consultant at Watson Wyatt (Ireland), this trend is increasing and, as larger high-profile employers move away from DB plans, smaller organisations are following suit. Nevertheless, around half of employers in the Republic of Ireland still offer a DB scheme.
However, according to Martin Condon, director of Hewitt Associates in Dublin, only 55%-60% of workers in the private sector are currently enrolled in a pension plan. Although employers are legally obliged to provide a non-contributory personal retirement savings account, a number of retail and hospitality firms do not offer anything extra and even where employers provide additional stakeholder schemes, there is a doubt as to whether their contributions and those of their employees are sufficient to create an adequate retirement fund.
This is something the government is working to address. The Pensions Act (1990), for example, brought in an industry regulator, known as the Pensions Board, to increase occupational pensions coverage. More recently, the government has been prompted to take further action to tackle the adequacy of contribution levels and availability of schemes above the minimum standard. “The government has promised that by this summer it will publish draft legislation. We are waiting for this with some interest because it will hopefully tackle these issues,” says Condon.
The Irish Department of Social and Family Affairs has already published a green paper on pensions, which attempts to tackle the problems of gaining a return on investment on pensions, security of schemes, risk and cost. However, not everyone in the industry is happy with the contents. “We were quite disappointed with the green paper because it did not give any prescriptive solutions,” says Condon.
Nevertheless, McKenna adds: “The government is looking towards mandatory pensions or auto-enrolment as a potential solution. We will be putting pressure on the government to consider adequacy [of employer contributions to be] more important than [pensions] coverage now.”
One of the main areas of difference between the UK and the Republic of Ireland is healthcare provision. In Ireland, the state only provides basic emergency healthcare and patients have to pay for appointments with GPs and consultants. According to Mercer’s Total remuneration survey, Ireland 2007, 85% of employers in the Republic of Ireland provide private medical insurance (PMI) for staff, although the level of cover differs. The survey also shows that, of those employers which offer PMI, 68% provide it for employees, their spouse and dependants. In addition, 63% of firms offer an employee assistance programme (EAP).
“If an organisation was setting up in Ireland, [it] would have to seriously think of extending health insurance right the way down the organisation, whereas in the UK [employers] are more likely to apply it just for senior management,” explains Robinson.
If employees are off sick they can make a claim on the state for up to 26 weeks. Beyond this period, employers will often provide an income for them through long-term disability insurance.
Looking to the future, McKenna believes the number of organisations offering flexible benefits schemes will increase in the next few years. Currently, just a small number of organisations do so. “We are seeing organisations using flex as a way of potentially controlling their spend into the future,” he explains.
Environmental issues could also play a part in shaping benefits provision. McKenna says that the government may pave the way for tax-efficient perks such as bikes for work.
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- Low unemployment levels in the Republic of Ireland make it difficult for employers to recruit and retain staff.
- Some employers are now considering flex as a means of offering a competitive benefits package and cutting costs.
- Healthcare perks such as private medical insurance and employee assistance programmes are sought after by employees.
- Proposed government legislation around pensions includes changes such as auto-enrolment or mandatory pension contributions. An increasing number of employers are moving away from defined benefit schemes.