Case study: PMI provides express delivery of care
Steve Henshaw, a general manager at DHL Supply Chain, says private medical insurance (PMI) is one of his most valued employee benefits provided by the organisation.
Henshaw, who works at the organisation’s Bedford warehouse on behalf of Sainsbury’s, is responsible for dispatching clothing to the retailer’s supermarkets.
Henshaw used the family cover included with his PMI, provided by Axa PPP Healthcare, when his son needed a kidney operation. “PMI allowed us to get it done quicker, and the biggest benefit was that the service was more personal,” he says.
“It allowed us to get to work quicker and was less stressful.”
As a long-serving employee,who joined Tibbet and Britton in 1989 before it was acquired in 2004 by Exel (which became DHL Supply Chain in 2005), Henshaw still belongs to a defined benefit (DB) pension scheme, now closed to new joiners.
Logistics specialist DHL Supply Chain needed to streamline its reward offering to support its expansion plans, says Nicola Sullivan
David Whitfield is on a mission to create a workforce that is fit for expansion. As head of compensation and benefits, UK, Ireland and Nordics at DHL Supply Chain, this involves streamlining the employee benefits for its 35,000-strong workforce to make them more cost-efficient and sustainable, while retaining the package’s competitiveness.
This will be key in helping the organisation to win further new business. DHL Supply Chain won additional contracts worth about €190 million (£153.5 million) in the first quarter of this year, with strong gains in the consumer and retail sectors, and a quarter of new business won in the technology sector.
This helped the organisation’s parent company, global logistics giant Deutsche Post DHL, report profit from operating activities of €691 million (£558 million) on revenue of €13.4 billion (£10.8 billion) for the quarter.
Whitfield has been working hard on his mission since being promoted to his current post in October 2010. His key project is the implementation of a new grading system to help determine employees’ pay and bonuses, private medical insurance (PMI) and annual leave entitlement.
Whitfield says the previous lack of grades resulted in inconsistent remuneration levels between employees. “There was misalignment on the bonus percentages and different bonuses for different parts of the business,” he says. “That was a really big one for us.”
Whitfield led the project, which was completed in January, without any support from external advisers, and has achieved an employee grievance rate of less than 2%. “Of course, we never reduced people’s base salaries, but the benefits certainly changed,” he says. “Some people went up, some went down, but most stayed the same. I had to align the benefits from one grading system to another and tried to make it as seamless as possible.”
Whitfield has also taken steps to tackle DHL Supply Chain’s fleet policy. Rocketing fuel prices, together with the tax relief available on fuel-efficient company cars, which attract lower levels of benefit-in-kind tax, meant a new approach was required.
A review of its fleet also revealed that the organisation was offering employees cash allowances above the market average, so Whitfield introduced a new policy that brought more employees back into company cars. “Quite unbelievably, business-need people had a choice between cash and car,” he says. “For what is a tool of the trade, I thought employees should not be getting a cash allowance, they should be getting a company car.”
As a result, Whitfield has replaced the cash allowance with a choice of five company cars with emissions of 129g/km of CO2 or less for the organisation’s 1,200 business drivers.
Whitfield describes the task as laborious because of the organisation’s previous fleet policy, which was geared towards moving employees away from company cars to make the fleet easier to manage.
The change back to company cars has enabled DHL Supply Chain to offer employees better cars, such as a BMW 1 series or Volkswagen Golf, than they had before. More importantly, the move is projected to generate savings of £4 million between 2010 and 2014.
Cash or car
Meanwhile, the organisation’s 500 status-perk drivers retain the choice of either cash allowance or company car, although the cash allowance has been reduced.
The new fleet policy was phased in between March 2010 and January 2012. “We always do that in our business,” says Whitfield. “We give people plenty of time and notice when we have to change things. A company car is a big deal to people and some employees would have had to change their financial arrangements.”
Auto-enrolment is DHL Supply Chain’s next challenge. The organisation currently offers employees a trust-based defined contribution (DC) pension plan, but faces a tougher job than many in complying with the new regime because of the need to ensure its pension arrangements suit the customers its employees are contracted to work for. This is particularly important if the customer firm is picking up the additional cost of auto-enrolment.
DHL Supply Chain is due to enrol employees from the first staging date in October. Mark Kendall, vice-president, compensation and benefits, Europe, Middle East and Africa, says: “If we have an open-book relationship with Sainsbury’s or Iceland, then basically whatever we do with pensions, we will pass on the cost to them. If they are doing something different for auto-enrolment, then of course we could be interested to know why it would be different.
“All I can say is that with auto-enrolment, we need to find a happy medium, a compromise that reflects our ability to pay and is something our customers would be comfortable for us to do.”
Communicating auto-enrolment to staff will also present challenges for DHL Supply Chain because of its varied workforce. Kendall says: “What is appropriate for a senior person in a head-office environment may not be the route we want to take for a blue-collar person working on a site.”
Centralisation of HR
The icing on DHL Supply Chain’s benefits cake will be the centralisation of HR across the business, so it runs as a shared service function. This will involve integrating HR employees across one centralised function located next to the company’s Milton Keynes head office, and will see the organisation make significant savings on administering and communicating benefits.
Whitfield says: “This will be our big focus at the end of next year. Hopefully we will have all the new systems in place by then. It will be a vast improvement in terms of service.”
Whitfield hopes the organisation’s strengthened HR function will make it easier to deal with the large numbers of employees that are brought into the business through acquisitions, which is a welcome relief in view of the organisation’s future growth plans.
It will also help Whitfield manage the third parties that provide DHL Supply Chain’s benefits, including Axa PPP Healthcare for PMI and Grass Roots for childcare vouchers. He says: “They need to be on board with what we are doing. We need to communicate really well to make sure they can manage that.”
Having streamlined the organisation’s benefits, future communications will no doubt be a walk in the park for Whitfield.
DHL†Supply Chain at a glance
DHL Supply Chain is a division of global logistics and communications giant Deutsche Post DHL. It sits alongside three other divisions: Express, Global Forwarding Freight, and Global Mail.
DHL Supply Chain is the result of Deutsche Post World Net’s acquisition of British logistics firm Exel in 2005.
Operating from the UK, DHL Supply Chain provides services relating to the delivery and transportation of goods and services for large organisations across a range of industry sectors, including retail, technology, automotive and energy.
The company supports customers with the management and planning of deliveries, warehousing, distribution and transport. It also develops procurement processes for customers.
With main offices in Daventry, Milton Keynes and Bracknell, it employs a predominantly male workforce of 35,000.
Career history: David Whitfield
David Whitfield, head of compensation and benefits, UK, Ireland and Nordics at DHL Supply Chain, has been with the organisation for five years. He was promoted to his current position in 2010, having started out as a reward analyst.
Whitfield joined the organisation from Royal Mail, where he began on the company’s graduate training scheme, quickly progressing to the role of recognition manager which saw him design and launch a recognition scheme with a budget of £1 million.
Whitfield considers one of his biggest achievements at DHL Supply Chain to be developing its new grading structure. He views bonuses, pay and private medical insurance (PMI) to be among the organisation’s most competitive benefits.
“The really important [benefit] is the bonus,” he says. “We pay above market bonus because we are looking to drive through a performance culture in our business.”
Whitfield considers the second most important benefit to be the organisation’s private medical coverage, which he describes as “extremely generous in the market”.
He adds: “I think we are quite a caring organisation and go that extra mile to help people if they need us.”
The benefits at DHL Supply Chain
- Trust-based defined contribution (DC) scheme with job grade-based contribution levels.
- Salary sacrifice arrangements offered to senior staff.
- Two legacy defined benefit (DB) schemes, now closed to new joiners.
- Private medical insurance (PMI) offered to about 8,000 employees, with family cover added for certain job grades.
- Cash plan available as voluntary benefit.
- Childcare vouchers available as voluntary benefit.
- Ad-hoc flexible working.
- Company cars for business-need drivers.
- Choice of cash allowance or car offered to status-perk drivers.
- 25 days for all employees (excluding public holidays).
- Life assurance (four-times salary) offered to all employees.
- Income protection for executives.
- Life cover (for staff not in the pension scheme).
- Sick pay, which increases with length of service. Staff with more than five years’ service entitled to 26 weeks on full pay, followed by 26 weeks on half pay.
- Personal accident cover for all employees.
Variable pay and bonuses
- Bonuses available to about 8,000 employees, based on job grade.
- Incentive stock options for senior executives (by invitation only).
- Retail discounts.
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