Staff Benefit Packages
In the ever more compeitive world in which SME's trade, the recruitment, motivation and retention of good staff is a core element in the succesful management of most businesses. Getting the correct remuneration package, including the provision of pensions, life insurance, health care, and other benefits, is fundamental in all businesses who want to recruit and retain the best staff.
Depending on the type of business, and the type of staff required, careful planning is required if you are to make the most of your budget. The motivation, retention, and the package of benefits required will differ markedly if the company is a city-based financial services company, an internet start up business or a manufacturing business with a large workforce.
Good staff are key to successful businesses. Attracting and retaining them with the correct benefits package is therefore vital.
N. E. S. T. - Ten Things You Need To Know
1. From 2012 all employers will have to enrol all employees automatically into a pension scheme. There will be few, if any exceptions.
2. The employer will have to pay in at least 3% of "qualifying earnings", with the employee contributing at least 4% and 1% coming from the Government in tax relief. Qualifying earnings are broadly those between £5,000 and £33,500 a year (increased with earnings inflation from 2006/07) and include overtime, bonuses etc.
3. One way of doing this will be through a new type of pension called NEST (National Employment Savings Trust). These will be simple pensions organised (but not administered) by the Government.
4. Alternatively, employers can be exempt from offering NEST accounts if they offer alternative pension provision that is deemed at least as good as NEST accounts. This should mean that good existing pension arrangements can keep going.
5. Employers will need to consider whether their pension schemes qualify. For example, if overtime and bonuses make up a high proportion of earnings, they may find that their pension contribution is below the minimum for some staff. Possible alternative earnings definitions are being discussed between the Government and the pensions industry.
6. Another area employers may need to look at is 'waiting periods' - the length of time an employee has to work for before being eligible to join the pension scheme. There is, effectively, no waiting period for NEST accounts.
7. Employers should be aware that more staff will join the pension arrangements if they are automatically enrolled than if they have to apply to join. This could increase costs.
8. Although NEST accounts will be simple and possibly very low-cost, they are unlikely to offer as wide investment choice as other pensions, may not have as high quality communications, and are unlikely to be suitable for higher earners.
9. Keeping an existing pension arrangement will maintain the ability to cater for the needs of all staff, while also showing that the employer is interested in providing high quality pension for staff - this will particularly be the case if contributions are higher than the minimum.
10. Employers should be aware of the changes now, although the legislation has not yet been completely finalised. There is no reason to delay pension provision for staff, because NEST acounts are coming, and delay could severely reduce their eventual pensions.
