It’s often difficult for employers to determine what they expect from personal development allowances, says Vicki Taylor.
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Paying for an employee to take a bungee jump, learn how to deep sea dive or play the piano might seem like a bizarre thing to do, yet employers are increasingly offering personal development allowances (PDAs) to staff for such purposes.
PDAs come in a range of guises, with employers offering an employee a yearly fund, or matched contributions up to a specified limit to put towards an activity. Some organisations pool a proportion of their learning and development budget, and ask staff to apply for the amount they need, justify what they propose to spend it on, and say how it will benefit them and the business.
If an organisation does not to specify that the money should be spent on something vaguely business related, it needs to be prepared to be unable measure the return on every penny of its investment in employee learning and development.
Duncan Brown, assistant director-general at the Chartered Institute of Personnel and Development (CIPD), says: "There is quite a trend at the moment for measuring the return on training investment. I think there is some good in that, but I also think there is a danger too. Some research has shown that essentially, whatever you do, if it stretches your brain it is good."
Mike Ashton, a senior consultant at Watson Wyatt, agrees: "It is harder to see a direct return where it clearly is not for a business purpose, [for example] learning how to swim. That is not to say that there is no return, because I think there probably is. You are encouraging your employees to do something to broaden their education and development."
The CIPD offers PDAs to its own workforce of around 300 staff. Brown says the organisation’s policy is one that is midway between paying for work-related training and personal interests. "We won’t pay for a gym membership, but anything pretty broadly job-related [we will]. So we would pay for [staff to learn] a language. Things that are brain stretching rather than body taxing. We are not in the extreme where we encourage people to do totally non-work related stuff."
So what then are the merits of a policy that allows staff to spend their PDA on any activity they want? Sue Filmer, principal consultant at Mercer Human Resource Consulting, says she has seen organisations use PDAs as a way of encouraging a thirst for learning. It can also work within a cynical workforce. "There’s not much value in a company just giving the money away unless they are specifically doing it to kick-start a learning culture."
She believes that one alternative to simply paying for staff to take up a non-work related activity is to ask for a contribution. "Some organisations say ‘we will pay 50% upfront and 50% on completion’ or ask for a 50% contribution. Sometimes employers say this has a better success rate [as] it means people appreciate the monetary value more."
The CIPD’s Brown adds that allowing staff to spend their PDA on absolutely anything can be particularly useful in organisations with a creative culture where learning is more difficult to measure.
Liz Nottingham, people team director at advertising agency Grey London, agrees with this theory. Last year, it gave each of its 200 employees £100 to spend on whatever they wanted towards their learning and development. The move was so successful that it intends to repeat the exercise again this year.
"It’s an idea we thought would work particularly well in this particular environment, [which would] build on and feed into our creative ethos. If it was a retail environment, where you have to justify the spend of every penny, then going off and doing a creativity course probably isn’t going to add too much to the bottom line."
Nottingham adds the agency deliberately didn’t impose conditions on how the money should be spent. "Quite frankly, there were no rules. If you came in and said ‘I’ve always fancied doing a dog-grooming course’, you could put the money towards that."
She adds that the PDAs were welcomed and appreciated by employees, many of whom were already plotting what to spend their money on this year. "It was also a fantastic thing to be able to tell a new joiner," Nottingham says.
Adie Skeats, purchase ledger, has worked at the Ringwood Brewery in Hampshire for 14 years. Since the organisation started offering PDAs in 1997, she has spent her £500 yearly budget on a range of activities and feels that she has benefited from the policy. "When the allowance first started my family was young and money was quite tight. The first year I learned to swim. I was 32 years old and had never learned so thought it was my ideal opportunity. I also had saxophone lessons for three years and took an aromatherapy, and body and head massage course," she explains.
This year, Skeats hopes to spend the money on a minibus-driving course so she can take the Rainbow Guide group she runs on trips. The out-of-work activities have increased her confidence. "It also makes you feel that the company cares about you and is worth coming to work for every day."
While the advantages may be nothing but positive for employees, if employers are going to start offering PDAs there are tax issues they need to be aware of. "If [the activity] was totally unrelated to the business then that would be a taxable benefit-in-kind. If it can be shown that the learning is for business purposes then it is a non-taxable benefit," Ashton explains. He also points out that there can be grey areas, for example, if employees in multinational businesses spend the money on language lessons, but are unable to use what they have learned immediately.
He also believes employers should have specific rules on how the allocation of money is organised. "In an ideal world, the employee would get enrolled in something and show a receipt. In other words, employers may want to see that the money has actually been used for the purpose [the employee] said it was going to be used for."
Another key to a successful PDA scheme – whether the spend can be designated for a business-related purpose or not – is clear communication with employees about what the company hopes to achieve. "Just having a policy isn’t necessarily going to work, you need to make sure employees are aware of it," concludes the CIPD’s Brown
Case Study: Body Shop International
Cosmetics firm Body Shop International offers its UK employees up to £100 a year to spend on learning new skills and activities which help them to stay fit and healthy for work. The company calls this ‘Love’ money, which stands for Learning is Of Value to Everyone. The cash can be spent on a range of activities, including evening classes, gym membership, and health and wellbeing courses, such as aromatherapy, physiotherapy and acupuncture.
Employees have to complete their three-month probation period to qualify for the scheme and the money is allocated on a pro-rata basis for part-time staff.
Sue Turner, global HR director, explains: "The Body Shop is committed to helping its employees learn and develop. We offer a competitive salary and benefits package, including up to £100 which can be used for learning or wellbeing activities outside of work. Our goal is to create a meaningful employment experience for each of our employees."
Cade Study: The Ringwood Brewery
The Ringwood Brewery in Hampshire has a PDA policy that allows staff to spend their £500 yearly allowance on almost anything. However, it does impose some restrictions such as only being able to spend up to £250 on gym membership. Office manager, Lin Black, says she hasn’t yet turned down a request, but would if there are any risks involved with activities employees suggested. "Skydiving, where there is a degree of risk to the employee, or motorbike racing are probably the only type of things we wouldn’t be that happy about. If [staff are] injured doing an activity that we had sponsored, not only do we lose them from a work point of view, but I’m not sure what the [legal] implications could be."
She adds that while the activities staff spend their PDA on might not be directly work-related, employees come back to work "more confident and probably more contented because they feel supported by the Brewery".