Employees barter for better benefits

Opening up negotiations to some elements of the perks package can help employers to clinch key staff, but its impact on the rest of the workforce should not be overlooked and overall flexibility can benefit all, says Victoria Furness

Case study: Mourant

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Famous for a stiff upper lip and ability to form a queue, the British are not generally well known for their haggling skills. Yet there is some evidence that new recruits are putting aside their British reserve and fighting hard to secure the right package for them.

Duncan Brown, assistant director-general at the Chartered Institute of Personnel and Development, says: “Traditionally, benefits have not been the main area of focus during the recruitment process, except in senior posts. But this has shifted a lot over the last few years as a result of the pensions crisis and people’s growing awareness of how much benefits are worth.”

Larger organisations tend to have set reward structures in place describing what benefits employees at different grades can receive. But from time to time, it is not uncommon for exceptions to be made in order to net a highly talented individual or someone who is a specialist in their field. Even in heavily-unionised industries with fixed pay rates, such as teaching, the government uses golden hellos to encourage trainee teachers into subject areas where there is a skills shortage, such as maths and science.

To be able to offer incentives – whether this is a higher salary, additional benefits or variable working conditions – employers need an element of flexibility in the reward package. Jacqueline Otten, principal at Towers Perrin, says: “I encourage my clients not to go with different packages, but we are seeing more use of flexible benefits [schemes] and cases where an employer might put more into the flex pot for a candidate.”

Benefits can be a cost-effective way of boosting an employee’s overall reward package where salary is non-negotiable. Deborah Rees, director of employee benefits firm, Innecto Reward Consulting, agrees: “Nodding one more person into the pension scheme requires relatively little outlay in comparison to the cost of putting up someone’s salary or bonus.”

The benefits package might also be brought into recruitment discussions if “it is particularly competitive, or a company decides not to be in the upper quartile for pay”, says Jo Jobson, head of HR at Ceridian, an HR and payroll provider.

Rees points out that some potential recruits want changes to their terms and conditions rather than extra benefits. “In the past, employees had a waiting period until they could claim their benefits, particularly for pensions, but some employees are trying to negotiate their benefits starting straightaway,” she claims.

Some employers, however, leave little room to manoeuvre on the benefits package. Kwik-Fit Financial Services, for example, weights its flexible benefits scheme towards length of service rather than seniority, so has little opportunity to adapt its benefits package to suit new recruits.

HR director, Keren Edwards, admits this can make recruiting senior employees difficult, but points out that 99% of managers tend to come from within the organisation. “Also, senior managers do receive more core benefits, such as death-in-service and a different pension plan,” she explains.

The types of benefits negotiated at the recruitment stage can vary across companies, but it is possible to identify some common trends. Jonathan Austin, managing director of Best Companies, the company which creates the 100 Best Companies to Work for lists for the Sunday Times, says: “I think more people will barter hard for time-off, whether it is holiday or flexible working.”

Despite its falling popularity with employers, the company car is still identified as an employee benefit which comes up frequently in negotiation discussions with potential staff, particularly for sales jobs. Paul Wilson, regional managing director for recruitment company, Michael Page Human Resources, says: “People can get very tied to the car they receive and, in some cases, the car can be the deal killer.

“Another benefit that some people negotiate is training. We have seen deals fall apart because a candidate does not mention early enough that he or she wants [certain training] and the organisation refuses to pay out because it is too expensive.”

In order to avoid such a scenario, recruiters need to know how to negotiate with candidates. Martin Shervington, managing director of communications specialist John Seymour Associates, says: “You have to work out what is important to the other person. You need to have the package you are offering on the table and know your bottom line. Otherwise, you might find that you give more than you originally intended.”

Certainly, negotiations should stop if an employer feels that the discussions are focusing too much on the package, or if they do not have the resources to fund extra benefits or a salary increase.

Employers should also be aware that if they put a candidate on a higher salary or reward package, it could create problems within the workforce. Simon Kerr-Davis, senior employment solicitor at law firm Cripps Harries Hall, explains: “Certainly, there would be some legal implications under the Equal Pay Act if employees are doing work of equal value but are not receiving an equal amount of pay. Equal pay does refer to salary, but a lot of benefits also tie into this, such as bonuses.”

Conversely, where employers can use the benefits arena to discriminate positively is in the area of flexible working. Parents with children under the age of six years or disabled children under the age of 18 years can request flexible working, as can carers of adults from April 2007, under incoming legislation. “This puts some groups in a better position and there is no legal reason for organisations to offer it to other employees,” notes Kerr-Davis.

Most industry experts agree that flexible benefits schemes offer a way of avoiding equal pay or potentially divisive issues. “Flex makes negotiation easier as it gives employees choice and control, while at the same time, making it subject to the overall spend that the employer has,” agrees Kerr-Davis.

Philips Electronics implemented a flexible benefits programme in the UK to boost recruitment. Nina Platt, HR manager for UK reward, says: “We do not negotiate benefits entitlement with new employees, but they can access the full range of benefits available through flex.”

In an employee’s market, where more candidates appear to be losing their British inhibitions and are not afraid to negotiate, organisations should carefully consider how they can introduce flexibility into their benefits package.

“Employers not offering or looking at flex [should] see what [they] can do in this area, even if [it means] adding a raft of voluntary benefits or flexible holiday allowances,” suggests Innecto Reward Consulting’s Rees. Such an offering could make the difference between whether a candidate chooses to work for you or a competitor.

Legal issues

In some instances negotiation is out of the question, for example, the Transfer of Undertakings (Protection of Employment) (Tupe) regulations, stipulate that employees’ terms and conditions must be transferred over to their new organisation.

Simon Kerr-Davis, senior employment solicitor at law firm Cripps Harries Hall, points out: “Any attempt to change these is void, even if an employee agrees to it.”

However, since 6 April 2006, organisations have been able to make an exception to this rule where there is an “economic, technical or organisational reason entailing changes in the workforce”.

However, Kerr-Davis admits that it is hard to determine how this will work in practice. “It is difficult to see how this will apply to workers’ terms and conditions. The same definition is cited in dismissal under Tupe transfer, and case law has found that the only thing that [meets the definition in this case] is genuine redundancy,” he says.

Case study: Mourant

Mourant, a provider of legal and professional services, has a flexible benefits scheme for employees in the UK and the Channel Islands.

Rather than using its benefits package in negotiations for new recruits, the company is trying to standardise its benefits entitlements. Jacqui Audrain, senior HR manager, says: “Flexible benefits reflect our values in allowing choice and [allowing] each individual to shape reward according to their needs, not to some predetermined formula.”

However, this is not to deny the influence that a good benefits package can have. “On occasions, we have found the benefits package has made that final decision for some employees, perhaps over another job offering a higher salary.”