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 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.
Depedending 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 and retention, and the package of benefits required will differ markedly if the 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 the key to successful businesses. Attracting and retaining them with the correct benefits package is therefore vital.
Personal Accounts - Ten Things You Need To Know
1. From 2012 all employers will have to enrol all employees automatically into a pension scheme, unless the employee opts out or is under 22 or earning under £5,000 a year.
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 Personal Accounts. These will be simple pensions organised (but not administered) by the Government.
4. Alternatively, employers can be exempt from offering Personal Accounts if they offer alternative pension provision that is deemed at least as good as Personal 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 no waiting period for Personal Accounts,. And the maximum is likely to be 3 months for other pensions. However, if there is a waiting period the minimum contribution rate may be higher.
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 Personal 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 will have a cap on contributions of £3,600 (increased with earnings from 2005) which means that they 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, but they have no immediate impact on decisions, especially because the legislation has not yet been finalised. There is no reason to delay pension provision for staff, because Personal Accounts are coming along, and doing so could severely reduce the eventual pensions.
