Despite the costs, Misys’ finance chief, Jim malone, sees benefits harmony as a way to help younger staff get a more rounded package, says Clare Bettelley
Misys suffered a £400,000 hit to its income statement in 2006/7 as a result of overhauling its employee benefits package. But the cost was half the financial hit the software and services FTSE 250 company had budgeted for.
Moreover, Misys chief financial officer, Jim Malone, believes that the advantages of adopting a more innovative approach to employee benefits far outweighs the implementation costs.
“It is always difficult to quantify cost savings when part of the change is to upgrade the benefits for more junior staff. But over five years there will probably be a pay back in terms of better benefits provision and a much simpler organisation.”
He adds: “All staff have the opportunity to be treated equally.”
Just five years ago, Misys comprised five legal entities, seven payroll systems and around four different pension contribution structures. Thus, it comes as little surprise that the company was keen to overhaul its employee benefits package and has spent the last five years doing so.
Misys has grown in the UK primarily through acquisition, with the most transformative being the banking software specialist, ACT Group, which Misys bought in 1995.
Andrew Brown, group pensions manager, says: “There was a big harmonisation job to do, which we never bit the bullet over, partly because the number of new arrivals outnumbered existing employees. Consequently, there was a lot of confusion, particularly about benefits.”
But it was not until 2003 that Misys tackled the confusion. It was then that the company introduced total reward statements in line with its decision to place financial value on benefits and not just pay, bonus and share schemes.
Brown says: “In 2002 and 2003 we did a lot of benchmarking. We’ve never aimed to be market-leading in our benefits, we just wanted to ensure they weren’t a disincentive to join us.”
The new benefits package was designed for all Misys UK staff, including its executives. It includes medical insurance, life assurance, long-term sick pay, a defined contribution pension scheme and an employee assistance programme.
Misys has introduced four matching pension contribution levels. The minimum contribution is 3%, with staff then able to contribute as much as they like. Misys matches pensions contributions up to 6%, 8%, 10% or 12%, depending on staff seniority.
Brown says: “Historically, we’ve had 35 different contribution levels. We won’t offer any more than four levels and, in an ideal world, we would reduce this number further.”
Misys offered a new contract, which included the new benefits package, to all 700 of its existing staff. Around half accepted the switch, with a number still in discussions about the possibility of doing so. Brown says there are now between 150 and 200 staff still on the old contract.
The launch of the new contract came as Misys unveiled a group-wide strategic change, which introduced a shift in product emphasis and an overhaul of the company’s entire infrastructure.
Brown says: “We did not offer staff a financial incentive to move. We explicitly said that we were making the changes to simplify the management of the benefits programme.
“The organisation is going through a significant period of change, so from an HR perspective, we didn’t want to be seen to force new terms and contracts on staff.”
Thus, the company also decided not to impose a deadline for staff considering the change. Brown says: “We did offer to backdate the new contract to 1 June for staff who switched to the new terms by 30 September 2007 but there was no overall deadline for the switch, or a financial incentive to do so.”
He adds: “We’re not worried if some employees are on better terms.” By better terms, Brown is referring to enhanced redundancy benefits that many of the old contracts contained. On their details, he says: “There could well be as many redundancy terms out there as there are staff.”
There were other elements of the old contract the company was reluctant to change, regardless of the estimated £50,000 cost to retain them. “There are around 100 people with spouse’s pensions, dating back to the 1970s and 1980s – we felt uncomfortable about removing death benefits from people. We’ve ring-fenced these benefits to allow staff to keep them.”
Another contentious issue was fuel cards. “Staff are emotionally wedded to them but the tax efficiency has gone.” Staff must forego the increased car allowance to retain their fuel cards.
Once the benefits were set, Misys introduced online total reward statements, which helped reduce their cost.
Paper statements cost the company £12,000 a year, for printing, uploading and checking the information. It costs it just £6,000 a year to host an online service, irrespective of the number of employees on it.
“It’s a carbon positive statement, too,” says Brown.
Amazingly, Misys’ four-strong reward team, including Brown, managed the benefits structure overhaul, internally. The company is now in the process of launching a HR system with one of its partners, SAP, which will allow real-time total reward statements. It is expected to be completed by mid-2009.
It is also busy setting budgets for 2008/9. Brown says the improvements to Misys’ rewards package have led to an increase in open meetings and discussions between HR and the finance teams and a more disciplined approach to budget management.
“Once budgets are set, there is significant pressure to hit these fairly closely. In the past, they have been quite flexible and rolling,” he adds.
†
†
Jim Malone Chief financial officer, Misys†
• Malone was appointed as Misys’ chief financial officer 19 June 2007.†
• He joined from The TriZetto Group, a Nasdaq-listed, healthcare software company, where he had been chief financial officer since 2004. His starting base salary was $500,000 per annum, with the opportunity to earn up to 150% of salary of which up to 50% will be deferred into Misys shares for two years, subject to continued employment.†
• Malone has also worked in finance roles at IMS Health, the New York Stock Exchange-listed healthcare and pharmaceutical information provider, and Cognizant.†
• Prior to this, he worked for Dun and Bradstreet, Reuben Donnelley, and Siemens AG after qualifying as a chartered accountant at Price Waterhouse – now PricewaterhouseCoopers.
†
†
Misys core benefits†
• Bonus†
• Share scheme†
• Private medical insurance†
• Life assurance†
• Long-term sick pay†
• Defined contribution pension†
• Employee assistance programme†
†
†
Company overview†
Misys is a FTSE 250-listed company which provides application software and services to the banking, treasury and capital markets and healthcare sectors.
Its UK subsidiaries include Misys International Banking Systems, Misys Services, Misys International Banking Systems, Summit Systems International, IDOM Consulting, Misys International Banking Systems (Risk), Kindle Banking Systems, Summit Asia, Misys IQ and Kapiti.
The group reported a 9% year-on-year increase in revenue for the three months to 29 February 2008, its third quarter, to £114m. In terms of divisions, Banking revenue increased 25% year-on-year to £35m and Treasury & Capital Markets revenue increased 13% to £31m while Healthcare industry work declined 3% to £48m.
Misys headquarters and the group Banking division are London-based. Treasury & Capital Markets and Healthcare are US-based, in New York and North Carolina respectively.
Back to ‘Employee Benefits Report For Financial Directors – June 2008’