Punch Taverns has cut its reward spend by more than £1 million in the past year, but staff have not had a worse deal.
Profits at the leisure firm, which employs about 18,000 staff, were hit by falling consumer spending as the recession kicked in last year. It is also a highly-leveraged company and was affected by the turmoil in the debt market. Anthony York, head of reward, said: “This time last year it became clear our original plans for 2008/09 were going to be impacted by the credit crunch and the trading environment would be worse than expected.
“From a reward perspective, we had a short-term challenge to reduce cost immediately, but to put ourselves in the best position for the financial year 2009/10.”
One major change was around pensions spend. For the first time, Punch recruited a specialist pensions manager tasked with challenging how it administered its largest pension schemes. “We amalgamated the contracts for administration, actuarial and investment advice for our biggest schemes, giving the provider the impetus to give us a discount to provide all three services,” said York. “So we invested in [the pension manager’s] salary, but he managed to save about £790,000 out of our pensions arrangements.”
PMI moved to healthcare trust
Punch’s second big move was to switch private medical insurance offered to 1,000 managers from an insured arrangement to a healthcare trust, bringing savings of £170,000 so far. “We are taking on a little more risk with a trust, but overall, in an average year, we will run to expectation [of claims],” said York.
Also, when it became clear the firm’s bonus scheme for non-pub-based staff would not pay out, it introduced new bonus schemes based on re-forecast profit figures.
“It was obvious from the middle of the financial year we were not going to hit budget, but we used the bonus plans to try to influence staff behaviour and maximise profits in the year,” said York.
Further savings were made by not running a pay review. “[Overall] we managed to save £1m – over a quarter of my non-staff-facing budget – without impacting on staff at all, while significantly increasing the efficiency of the reward function,” said York.