RSS feedsIt’s never been a better time to be an accountant. The financial services sector is finally coming out of the economic doldrums, and with new reporting standards and legislation on the way, it really is an employees’ market. But for some candidates, money alone doesn’t always talk.
The offer of a better work/life balance and more flexibility does, and these are becoming increasingly important in the financial recruitment market as companies wise up the value of employee benefits.
Over the past few years, business has begun to respond to the changing demands of the labour market. Professionals in the UK, while still working the longest hours in the EU at 44 per week, want to fit their employment around their lives. They no longer want to live to work, they want to work to live, and are drawn to companies offering more enlightened employment.
‘People are no longer just jumping into jobs for a base salary as they are realising that in the medium-to-long term it could be a false economy,’ says Charles Cotton, the Chartered Institute of Personnel and Development’s adviser on reward.
‘They want packages that reflect their individual circumstances, so an accountant going into a company may not be getting the best financial reward, but better career development opportunities or the ability to work more flexibly,’ he says.
Choice and flexibility, Cotton says, are becoming the determining factors behind employment decisions. The offer of lifestyle or monetary benefits are big draws for today’s professionals.
Parents, for example, are opting for companies offering home working or flexi-time, as well as private medical insurance, pension contributions or critical illness cover. Workers living in rural areas are more likely to favour a company car or subsidised travel.
Keith Dugdale, director of recruitment at KPMG, says that the promise of a better work/life balance is worth thousands of pounds to some. ‘Reducing working hours can have much more value than another £10k on an employee’s salary,’ he says.
Workers are also willing to move around to secure the right deal. Staff turnover rates across the financial services sector are traditionally high – thought to be up to 20% to 25% – but individual companies in this competitive market keep their figures close to their chest.
Ernst & Young was the only company in the Accountancy Age 2005 Top 50 willing to reveal its turnover rate – a whopping 37%. It’s likely many others are worse. For mid-tier firms, it is not uncommon for over a third of newly qualified accountants to leave within a year of joining. Worsening the situation for firms is the competition for qualified and well-skilled accountants.
The larger companies privately acknowledge that they failed to recruit or train enough graduates during the leaner years of 2000 and 2001, particularly now IFRS work is increasing.
Now the economic climate is picking up, around 82% of the Top 50 expect to raise staff numbers in the coming year to match this year’s 6% growth in fee income, but they will have to go that extra mile to attract the crème de la crème or their growth could be constrained.
Across industry, businesses are increasingly turning to rewards and benefits packages to recruit and retain staff. According to the CIPD, around 50% of businesses it surveyed this year now offer benefits or rewards in addition to base salary. One fifth of respondents intended to improve their existing benefits in 2005, adding new policies rather than phasing any out.
A separate survey from benefits providers Jardine Lloyd Thompson, which polled small and medium-sized firms, found that nearly half used benefits schemes to keep up with market rates and another 37% used them purely to attract and retain staff.
Vicky Summers, employee benefits consultant at PKF, says that with more companies concerned about recruitment and retention, the interest in employee benefits schemes has increased significantly. ‘More companies are undertaking benchmarking exercises and looking at what their competitors are offering.’
For Big Four firm KPMG, its benefits package has become critical to it remaining in the ‘top quartile’. Dugdale says: ‘We can’t compete with the big investment banks in terms of salary. But we can in terms of work/life balance so it’s very important to us.’
But like anything in life, the quality and variety of benefits vary enormously. The CIPD found that in the top 10 employee benefits were still rudimentary incentives such as sick pay or 25 days paid leave.
On-site parking, private healthcare, a party at Christmas or tea and coffee were also listed and are very much fixed, standard benefits, although they are valuable nonetheless. The gold standards of employee benefits are flexible packages and, in a tight recruitment market, more companies are turning to these to keep hold or attract new staff.
A recent survey by human resources firm Hewitt Associates found that, in nearly half of all the companies it had surveyed, their chief executive officers were now involved in setting up flexible benefits schemes. An indication of their importance is that half also reported the close involvement of the finance director.
Flexible benefits packages provide added extras to staff and most allow them to pick and choose between the type of benefits package they want. Some, for example, allow staff to buy extra holidays or provide high street discounts, childcare vouchers or a company car allowance.
‘In some cases, an annual bonus of £3,000 can be used to buy added benefits rather than just taking the cash,’ says Cotton.
These pick-and-choose options also allow business to provide more flexibility.
‘Five or 10 years ago it was all or nothing,’ says Summers. ‘Flexible benefits schemes offered everything and took tens of thousands of pounds to implement, meaning that only the larger companies offered them. Now with step packages and a very computer literate audience, you can tailor it more to individuals.’
By targeting their schemes, companies can also save on national insurance, income tax and VAT through efficient payment structures to staff.
Firms are also saving cash by using IT-based schemes to allow staff to tailor their own reward and benefits packages.
Such ‘total reward statements’ add up the potential financial value of benefits and also allow staff, once a year, to choose and top up packages. This could mean extra pension contributions or even high street retail vouchers or free car insurance. It could also be flexi-time arrangements or homeworking.
As Dugdale explains, flexible benefits packages now form a core part of most employment negotiations for the Big Four firms. ‘We don’t have a take it or leave it approach anymore. We get to the offer stage and then start negotiations and engage with staff on their benefits.’
This year alone, the demands for benefits have already begun to change, mirroring the types of concerns or lifestyle choices people are taking. The CIPD’s Cotton says pensions have moved higher up the list, given the recent publicity about the viability of state pensions, along with childcare vouchers. ‘Eighteen months ago, our pension contribution package was hardly mentioned. Now it’s a big issue and we promote it and value it,’ adds Dugdale.
But while companies are investing thousands in their benefits schemes, in some cases they may not be getting the return on investment they had hoped.
Companies are, it appears, rather good at setting up schemes, but less active when it comes to communicating them to staff or monitoring their success. ‘Many organisations build business cases for benefits packages and then neglect to put them within their aims and objectives,’ says Cotton.
The Jardine Lloyd Thompson survey found that over half of respondents did not even know how much they were spending on their benefits as a percentage of their overall wage bill, so were unable to convey to staff the true financial worth of their packages. In fact, most companies appear to depend on their retention figures for evidence as to whether their flexible benefits or standard benefits are having the desired effect.
The CIPD, however, urges companies to take a micro and macro view of monitoring their benefits. Cotton admits it can be difficult to pinpoint the positive impact of new schemes, but when companies introduce new initiatives they ‘must have the appropriate bundle of policies and procedures to go with them’.
But, as Dugdale says, a modern employer needs a modern package. ‘I think its vital in the marketplace to have a flexible benefits package. Whether they provide an immediate return is hard to quantify. If they didn’t, I think we would still be doing it.’
Perfecting the package
It takes about 12 months to set up a benefits scheme, according to the Chartered Institute of Personnel and Development. Most are computerised, including the stop-based scheme offered by PKF, which is currently working on introducing its own internal benefits package for staff.
There are three styles of benefits: standard, which include pensions and holiday entitlement; flexible, which cover a multitude of offers; and voluntary benefits, often used in partnership with the latter and involve third-party providers offering services such as health care schemes.
Standard benefits can also include employee share plans, and despite fears over the impact of IFRS, companies are still offering them with up to 40% of those surveyed by the CIPD still providing such schemes.
Significantly, 39% of companies still offer final salary pensions, despite the trend to switch to defined contribution to save cash. Only 23% provide stakeholder pensions with significant employer contributions.
The type of benefits that appear in existing flexible schemes include bicycles, cars, dental insurance, discounted services, financial planning, give-as-you-earn charitable contributions, home phone packages, pensions, life, assurance and concierge benefits.
RSM Robson Rhodes, ranked number 11 in the Accountancy Age Top 50, offers its staff private health care insurance. Permanent staff also benefit from personal accident and business travel insurance providing dependents with three times the annual salary.
There is also a death in service benefit scheme. Employees also have access to a 24-hour helpline for support and counselling and a pension scheme in which the company will also make contributions.
It also offers childcare vouchers and the opportunity to buy extra holidays and a formal buddy scheme for workers and mentors for new starters.
