E.On focuses energy on unifying benefits package

E.On’s benefits team have been solving the puzzle of drawing together a cohesive perks package for a disparate workforce, says Sarah Coles

No one visits the employee benefits team at energy firm E.On without being given a benefits cube: a seemingly simple block bearing details of the benefits on offer, which breaks apart and is then a devil of a job to fit back together. It is not only a handy marketing device, showing employees how the benefits can fit into their lives, but it is also a fitting metaphor for a benefits team that has spent the past three years bringing together a mind-boggling array of benefits, terms and conditions into one cohesive whole.

E.On’s previously disparate package was a consequence of history. In the UK, the company was formed from so many businesses that it had built up more than 150 sets of terms and conditions, including 80 different holiday arrangements and three pension plans – career average and final salary arrangements that are closed to new staff, and an open defined contribution (DC) plan.

Ant Donaldson, senior specialist, employee benefits, says: “Three years ago, although there were good benefits on offer, it was bits and pieces all over the place. There was no strategy and no one specifically overseeing benefits.”
Donaldson was brought in to change all that. The miscellany of terms and conditions would be enough of a headache for any benefits professional, but the challenges did not stop there. The group now has a diverse array of industry functions, ranging from selling gas and electricity to customers, to building and generating power in power stations.

Variety of businesses

The diversity of E.On’s workforce reflects the variety of its businesses. Two-thirds of its employees are male, and 59% of staff are aged over 35. But these figures hide a multitude of variations. For example, there is a typically older, male engineering workforce with average tenures of over 10 years on the power generation side, and a predominantly female, younger workforce with shorter average tenures in its call centres. Across the workforce there are wide range of job roles, from those that sell power supply door to door to those that design nuclear power stations.

The company’s benefits package must offer something for each of these groups, addressing their different needs and concerns. “A key theme of the benefits strategy is diversity to reflect the different aspects of the workforce,” says Donaldson. “A couple of years ago, for example, we realised we were not offering enough to young single people, so this year we added Virgin experience days, discounted gym membership and a retail discount card [to flex].”

To tackle the challenge of creating a cohesive package for such a diverse workforce, the company introduced a flexible benefits scheme. The scheme, introduced by Donaldson three years ago, helps to overcome differences in terms. For example, some of the benefits are funded for some staff, such as private medical insurance (PMI), which is wholly or partially funded for approximately 8,500 employees.

Through the scheme, employees can trade down on existing benefits, such as holiday, or flex up on others, such as PMI (where staff receive it). They can also take up tax-efficient benefits offered via salary sacrifice.

Since the flex scheme was introduced, Donaldson has worked to draw other benefits into it, bringing increasing cohesion to the package. This has involved bringing E.On’s flexible benefits and voluntary benefits plans together on the same platform.

Pensions salary sacrifice

Last year, it also brought pensions salary sacrifice (which is available on all three main pension schemes) into flex for all members, who make up 70% of the workforce. “The aim was to bring things together, to introduce pensions to flex as a route to encourage people to join and increase the contribution level,” says Donaldson.

The company sought to capitalise on its more unified package at the beginning of this year by introducing total reward statements. “It helps to cement the value of benefits,” says Donaldson. “We have had very positive feedback on things like the pension. Employees say they had no idea how much the company was putting into some of these schemes for them. Now they can see it all together and realise the value they are getting through benefits.”

Donaldson opted for electronic statements rather than sending out paper versions. He says: “It means we can update it monthly with things like overtime, so there is an excuse to go onto the [flexible benefits] My Choice website, where they can see discounts and offers and seasonal promotions.”

This benefits portal is already proving a success, with more than 250,000 hits a year.

The success of E.On’s benefits package can also be measured by the high levels of employee engagement with the package. “We have just been through a flex enrolment period and we know 9,500 people went on the website out of a total of 16,500 who were eligible, and one in three actively changed their choices,” says Donaldson. “That is an increasing trend year on year.”

Three-quarters of staff have made some sort of choice through one of the schemes in the past three years. This level of success is particularly impressive given the challenges the team faces with communication, due to the nature of its businesses and employees’ diverse locations. For example, staff may be working in power plants, from home or in call centres, where they have little chance to use the internet at work. “For about half the workforce, we cannot just send out an email and consider the job done,” says Donaldson.

Electronic communications

The company has introduced a number of solutions to overcome this problem. Staff can access all electronic communications from home and there are a number of phone-based methods. Employees can also enrol into the flexible benefits scheme by telephone.

Georgina Gallagher, employee benefits specialist, says: “For field people, we do a radio show they can dial into from their phone with the latest news. Most people have mobile phone or pen tablets, so we send SMS [text messages] they can access using those.”

The company also uses paper communications, including newsletters from local business units and a home mailing system tailored to each age group within its workforce, focusing on the benefits most relevant to their life stage. It also holds benefits roadshows and fairs.

However, one of its most powerful communication channels is through individuals. “We use case studies that staff can relate to, which is better than hearing a corporate message from middle managers, and we have a network of benefits champions who set up briefings,” says Gallagher.

It is a tough challenge, but perhaps the toughest task of all was the economic background against which this was carried out. Last year, the UK retail side of the business returned to profitability for the first time in three years, partly as a result of cost-cutting and reducing headcount. Other parts of the business have stayed profitable throughout.

The downturn put pressure on costs within benefits, too. For example, E.On’s share incentive plan (Sip) used to offer a match of one-for-one shares up to the full £125 an employee can invest each month. In April, this was changed so only the other previous option of two-for-one matching is available on the first £25 an employee contributes a month. Donaldson says: “Last year we asked: why do we offer a Sip? It is to encourage people to have a stake in the medium-term success of the company. However, we discovered the people taking advantage of the Sip were often already in the final salary [pension] scheme. They already have a stake in the success of the company, so we decided to focus our spend on another demographic.”

Elsewhere, cost-cutting has been done carefully, so as not to affect the benefits themselves. “Salary sacrifice changed the nature of the debate on cost-cutting,” says Donaldson. “We introduced it for pensions and it generated £1.5 million a year in savings.”

Key issues

Such savings mean E.On can continue to invest in benefits. This is vital to support recruitment and retention, which is a key issue. The company is investing more in UK power generation projects than it made last year, and in the nuclear sector, for example, it needs to attract and retain highly sought-after specialists. This means it must keep its reward package competitive and appealing.

” The differences between us and our competitors are primarily around flex and voluntary benefits, so we are continually looking for opportunities to develop these things,” says Donaldson. “For example, we are looking at season ticket loans and if we can do anything to bring the Sip into flex.”

The company aims to be upper quartile in the industry when it comes to benefits, which calls for constant reviewing of its package. It all needs to be balanced with cost, which is a challenge. But, by now, E.On’s benefits team knows how to take on a difficult challenge and win.

E.ON†AT†A†GLANCE

E.On’s UK business started life 20 years ago as a generator – Powergen – when the energy industry was privatised. In the late 1990s, the company made its first acquisition, buying East Midlands Electricity and establishing a place in the retail energy market.

It was then bought by German energy company E.On in 2002. In October the same year it bought TXU, when that company’s US parent put its European arm up for sale, and trebled its customer base.

In 2003, it bought Midlands Electricity Network, and during the following three years gradually rebranded all its organisations as E.On.

The group now performs a diverse array of industry functions, ranging from selling gas and electricity to customers, to building and generating power in power stations.

E.On employs about 88,000 staff across more than 30 countries worldwide.

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CAREER†HISTORIES

Ant Donaldson has spent 14 years with the business, first with TXU, then Powergen after the business was acquired. He started his career as a chartered accountant, which he believes is a useful background for a career in benefits.

Donaldson founded E.On’s benefits team three years ago, when he managed the introduction of a flexible benefits scheme. “It chimed with my personal values of leading teams, getting the best out of people, and I always had an interest in reward and benefits,” he says. “I get a buzz out of getting people to make choices that change their life for the better, so there is great job satisfaction.”

Georgina Gallagher, employee benefits specialist, works on communications and engagement for the team. She joined Powergen after graduating 10 years go, initially working as an account manager in the company’s retail business. She then went to India to spend six months working in the company’s call centres (which have since been moved to the UK), and on her return she joined the E.On benefits team.

Sharon Ward, project co-ordinator, has worked for E.On for six years, initially as a secretary and personal assistant, before joining the benefits team two and a half years ago.

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Case study: PMI has proved invaluable

Sharon Mee, executive service delivery manager, has worked for E.On for 10 years.

She is a member of the company’s defined benefit pension scheme and also takes up discounted gym membership. But she most values the private medical insurance available via E.On’s flexible benefits plan.

“I was previously paying £140 a month for cover for my husband and I heard the company scheme was £80, so I assumed that was the amount it would cost us each, and I did not join,” she says. “Then I was talking to Sharon [Ward] in the benefits team, who explained that was the total cost, so I joined through flex in April 2008.”

The PMI scheme has since helped Mee while being treated for cancer.

“I had had a lump on my knee for a number of years. I went to my GP and had an X-ray where I discovered it was a tumour.

“I was referred to a specialist unit in Birmingham through my health insurance, which deals with this type of cancer, and had treatment. I had had this tumour for four years, so it was a pre-existing condition, but the insurance still covered it through the company scheme. I go back every three months and have an X-ray once a year and that is all covered too.

“My husband also had major knee surgery through the scheme, so it has been incredibly valuable to us.”

WHAT ARE THE BENEFITS?

Pension

• Two legacy DB schemes, closed to new members, and an open DC scheme for new staff. E.On contributes on a two-forone basis