Train operator East Coast Mainline is on track for a suspenseful 2014.
It is in the process of being re-franchised but will have to wait until October to learn which bidder from a shortlist of interested parties has succeeded. The re-franchising process will be completed in February 2015.
John Hayhurst, head of HR at East Coast Mainline, aims to keep the organisation’s benefits programme moving forward as the re-franchising process carries on in the background. “We don’t want to stand still for 12 months,” he says. “That’s not what we’re about. We will still be looking for innovations from employees. It is more about ideas and making things happen, even when we are in the re-franchising process.”
Part of the HR team’s responsibility in the re-franchising process is to compile employee data so bidders can see how much the business spends. This includes information on sickness absence, turnover, salaries paid and benefits offered to staff. [Profile continues after video interview]
East Coast Mainline’s most popular benefits are free train travel for all its 3,000 employees and its final salary pension scheme, which is still open to new entrants. The travel perk includes unlimited standard travel for employees, their partners and dependants. Staff also have the option of free first-class travel but must pay an extra £5 to receive the food and drink normally offered to first-class travellers.
“A good salary, free travel and a final salary pension scheme are quite attractive,” says Hayhurst. “Then we supplement that with as many benefits as we can conceivably come up with that won’t break the bank.”
However, the organisation’s pension, which is part of the Railway Pension Scheme, could prove another challenge this year, with the results of its triennial valuation expected in April.
After the scheme’s 2010 valuation revealed a deficit of 7.5%, East Coast Mainline consulted with its employees, offering them the option to keep their contributions at 10.56% but reduce their early retirement benefits, or increase their contribution levels to 11.9% and keep all benefits the same. They chose the latter.
“Three years ago, we got around [closing the scheme] by changing the contribution levels,” says Hayhurst. “Contributions are quite high. Employees currently pay 11.9% of their pensionable pay and the organisation pays 1.5 times, which is 17.85%. There is also the facility to pay additional voluntary contributions if employees wish.”
Almost all (90%) of the train operator’s workforce is in its pension scheme, so Hayhurst does not expect auto-enrolment to create much of a challenge. “We already operate an auto-enrolment process, because our scheme is open to all new entrants that come in, from day one, even if they’re on a fixed contract,” he says.
East Coast Mainline’s auto-enrolment staging date was August 2013 but it has deferred this to September 2017, taking up an option for employers that operate a defined benefit (DB) pension scheme.
About 20 employees who have retired and drawn down their DB pension but returned to work have been auto-enrolled into a trust-based defined contribution (DC) plan, which is also part of the Railway Pension Scheme.
Over the past two years, Hayhurst and his team have focused on refreshing and revitalising the organisation’s voluntary benefits scheme. “Voluntary benefits, in my view, are the easiest way to get something that is completely cost efficient, but provides a massive range of discounts,” he says. “We are on to salary sacrifice arrangements as much as we possibly can, because they are cost neutral.”
East Coast Mainline introduced its voluntary benefits scheme just under two years ago using provider Salary Exchange. At its launch, the scheme included retail discounts, the travel perk and the pension scheme.
Since then, it has gradually added other benefits to the scheme, including bikes for work in May 2013 and a smartphone and computer scheme in September 2013.
Employees can buy a smartphone, to a maximum cost of £900, via a salary sacrifice arrangement, paid for over two years. The computer scheme, which includes laptops, desktops and tablets, is available via payroll deduction, with a set maximum limit of £2,000 and payments made over three years.
“There wasn’t any real incentive when the voluntary benefits scheme first launched, other then ‘come and have a look at these great benefits’,” says Hayhurst. “The real incentive was when we launched our first additional scheme, bikes for work. Each time we launch a new scheme, more employees sign up to the website.”
Alongside its voluntary benefits revamp, the train operator relaunched its recognition programme, known as Shine. It initially handed out a card, loaded with £25, as a thank-you to all staff. It can be used as a debit card at any store that operates flexi-cash. Senior managers carry cheque books and can reward any employee deemed to be going above and beyond their standard responsibilities.
Hayhurst explains: “It was first introduced around the time of all the floods and snow in the winter of 2013, because a lot of our employees were going the extra mile, working late, having difficulty getting to work, and helping passengers through some difficult transportation issues. The individual does not have the option to add cash to the card, but we use it within the business as a recognition mechanism.”
East Coast Mainline has also aligned its long-service awards to the Shine card. “When an employee has been with the organisation for 10, 25 or 40 years, we can credit the Shine card with £250, £400 or £500,” says Hayhurst. “It has become recognised among employees. Every now and then, we also do a blanket thank-you payment.”
The card is also used for the organisation’s innovation scheme, which was launched in January 2014 to encourage staff to share their ideas.
As the overarching brand of East Coast Mainline’s benefits package, Shine is recognised by all employees, says Hayhurst. “From word of mouth, employees ask for, or suggest, schemes,” he adds. “We are known for listening to what employees are asking for and seeing if there is something we can do. Our engagement scores are the best they have ever been.”
The organisation conducts an employee survey every summer. Its 2013 survey was completed by 78% of staff, the best response it has ever seen. Employee satisfaction with its pay and benefits package has also risen, up from 58% in 2012 to 68% in 2013.
“One of the questions is around getting praise for a job well done, feeling valued for the job they do, feeling recognised, and also whether their pay and benefits are appropriate for the job they do,” says Hayhurst.
“A 10% shift in satisfaction scores indicates, to me, that the changes and revisions put in place have had an effect. Almost 80% of the workforce took part in the survey, so this is a great indicator that we are hitting the spot with our reward schemes.”
When communicating benefits, East Coast Mainline must consider its very widespread workforce. For example, about two-thirds of its employees, at locations reaching from Inverness to London, do not have access to computers on a daily basis.
It communicates via its employee magazine, Coast Life, posters in communal staff rooms, benefits details on payslips, a weekly e-newsletter and management conferences.
The train operator has also begun to introduce smartphone technology for its guards and drivers, who need up-to-date operational information. “That doesn’t necessarily mean they have easy access to the benefits portal, because it is best viewed on a computer,” says Hayhurst. “The log-in process to get into the benefits website might not be accessible on a smartphone, but texting information to them is possible in that way.”
Looking ahead past its rejuvenated voluntary benefits scheme and the re-franchising process, East Coast Mainline aims to add to its benefits offer by looking to local shops and suppliers along its train lines.
“It does tend to be the brands or groups that have facilities along our route,” says Hayhurst. “We will continue to look to the market to see what the current trends are around benefits and if there is anything that fits our employee demographics.”
East Coast Mainline at a glance
East Coast Mainline is a train operator that runs frequent services between King’s Cross station in London and the East Midlands, Yorkshire, north-east England and Scotland.
It has almost 3,000 employees working at stations, depots and offices between Inverness and London. Its headquarters are in York.
The organisation was set up as a franchise in 2009 by the Department of Transport using the Directly Operated Railways body. Although it is government owned, it is not a public sector organisation. It is currently being re-franchised, a process that will be completed in February 2015.
The average age of its employees is about 42, and the average length of service around 12 years. Two-thirds of its employees are male. Head of HR John Hayhurst says: “Certain roles, such as train drivers, tend to be male because of the history of the industry.”
Business objectives impacting benefits
- To continue to develop the benefits package while the re-franchising process proceeds in the background.
- To focus employees on customer service and ensuring the reliability of train services.
- To tackle difficult decisions around the final salary pension scheme, which will have its triennial valuation in April 2014.
John Hayhurst has been head of HR at East Coast Mainline for four years. He was previously head of HR at National Express, during the two years when Great North Eastern Railway (GNER) was part of the National Express Group. He has also been an HR business services manager at GNER, formerly part of British Rail.
Hayhurst, who has worked in the railway industry for 30 years, says: “I’ve seen a considerable amount of change through the industry, from the British Rail days to the big split of train-operating organisations.”
His first job was as a clerical officer for British Rail Engineering, then a subsidiary of British Rail. He then moved to the personnel office at eastern region headquarters.
“It was the personnel office at the depot, which covered everything from uniforms to payroll,” he says. “I progressed through the grades up to head of HR, which is where I am at the moment.”
Hayhurst has taken part in the centralisation and decentralisation of HR throughout the UK railway industry’s years of change. “One of the key things I did as part of GNER’s franchise was to centralise the HR team,” he says. “We used to have four or five people at each particular hub along the route: Edinburgh, Newcastle, York, Leeds, Doncaster and London.
“Each one of those hubs had an HR team, a payroll team, and a learning and development team. One of the main objectives was to become more efficient and, as technology improved, we were able to do that. So we centralised to a single HR service centre.”
Employee case study
David Thorpe has been a customer service assistant at East Coast Mainline’s Peterborough station for more than two years.
“I started on a casual basis for six months doing luggage assistance, then I applied for a full-time permanent role as a station customer services assistant, despatching trains at Peterborough,” he says.
Thorpe’s favourite benefit is the bikes-for-work scheme, which is available via a salary sacrifice arrangement through the organisation’s voluntary benefits plan.
“I was already a keen cyclist and had owned a mountain bike for about five years,” he says. “The bikes-for-work scheme allowed me to purchase a road bike, which meant I was able to go longer distances and train longer. It has dramatically changed how I use my bike, how I get into work, as well as my training and the type of cycling I do.”
Thorpe also considers the organisation’s computer scheme, introduced in September 2013, to be a great benefit, although he has not taken advantage of it.
“I already have that facility and I have an iPhone,” he says. “If I hadn’t, that would have been my next option.”
- A defined benefit scheme, open to new entrants. Employees contribute 11.9% of pensionable pay and the organisation contributes 17.85%.
- Life assurance is available at four-times salary as part of the pension.
- A trust-based defined contribution scheme is available for staff who have drawn down their DB pension but continue to work for the organisation.
- Employee-paid health cash plan.
- Private medical insurance for about 50 senior directors and managers.
- Employee assistance programme.
- Travel discounts on all East Coast Mainline trains.
- Employee discounts scheme.
- Computer and smartphone scheme.
- Bikes for work.
- Discounts at local gyms.
- Childcare vouchers.
- Company car allowance, mainly for legacy staff from previous franchises.
- Policies around career breaks, flexible working, parental leave and extended leave.
- Long-service awards.
- Recognition programme.
- A workplace savings scheme, provided by the Transport Credit Union, which pays about 4% interest.