You could say the employee benefit equivalent of the Holy Grail is the employer client yet to provide any benefits, but who is keen to offer something to staff. But such clients are almost as elusive a find.
The challenge is in finding and approaching those clients, ordering must-have and could-have employee benefits options and getting the right strategy for selling, from the adviser’s point of view and for the client in terms of their offering to staff.
Given the fact that all employers, bar those with less than four employees need to have in place at the very least a stakeholder pension option for staff, finding a company offering nothing at all means looking for an employer happy to break the law.
But when you consider the thousands of employers with ’empty box’ stakeholders, offering no pension contributions at all – until 2012 at least, and no group PMI or risk benefits, then it is clear there are still companies out there who could be open to the employee benefits message.
When it comes to getting out there and finding virgin employee benefit clients, corporate advisers will always consider if it is truly worth their while. Obviously if a prospective client invites the adviser in, there is an open door there and potential for business, but cold-calling will prove more challenging.
“It depends on what sector of the market you are targeting but most employers approached will have something in place,” says Jim Aitken, marketing director at SBJ Benefit Consultants, “With some exceptions such as new companies starting up, those employers with nothing in place may have decided not to offer any benefits and as such, many corporate advisers will not find it worthwhile approaching them.”
There are a variety of marketing strategies employed for those actively seeking new clients, Aitken advises, such as direct mail, telemarketing and seminars.
“Others develop professional connections so they get introductions or attend exhibitions and externally organised seminars,” he says.
Fraser Smart, director at Buck Consultants outlines broadly two situations worth pursuing, where benefits may not be in place: new business start-ups and small to medium sized businesses where benefits are just not part of the original deal.
“For the latter everything is done by cash, the business has grown and it has got to a point where it needs or wants to put more of a structure in place and becomes more mainstream as an organisation for that growth to continue.”
Just such a scenario presented itself to Brett Smith, practice manager, corporate clients at Towry Law Financial Services. The client was a media company which was set up three years ago, but had subsequently grown to employ 60 staff. There were no real benefits at start up, a stakeholder pension and a little medical cover, but nothing else formally in place.
“But they paid their staff higher annual increases and higher bonuses,” Smith explains, “That is fine to get people to join you initially but after a period of time you find your bottom line cost is quite high and as you become a more mature and stable business you want to have a more balanced benefits programme. That way some of the provision is basic salary, some of it is bonus, some of it is performance related perhaps and some of it is post salary pension and life assurance benefits.”
The challenge to the adviser in this scenario Smith says was to consider the budget the company had in place and then work out a process by which it could introduce benefits staggered over a period of time, to balance out the remuneration and benefits package for existing staff and new staff.
Deciding a priority order of benefits depends very much on what the employer’s legal obligations are, what the employer and employees’ attitude to benefits actually is and what they put most value on.
“There is a pecking order for benefits but it needs to be seen from the employer and employee side and sometimes those orders will be different. This is in part down to environment, the sectors they work in and what they value as being a more worthwhile benefit,” says Smith, “As an adviser you have to understand it from both sides and then work out with the employer which is going to be the right order to introduce benefits, because ultimately they are funding it.”
The obvious starting point is for the employer to survey or ask the staff what they want, on the basis that there is no point putting benefits in and finding staff don’t appreciate it.
“The employer would be wasting their money and there might be something the employees would have appreciated more,” says Smith.
Most employers already have some idea of what they want to provide and what they want to spend. What they need is advice on how to best spend that budget. Assuming that budget doesn’t represent an unlimited spend, for Smart the priority order for benefits is group life for some protection provision and then some pension contributions.
“Then in terms of affordability it is healthcare and wider protection benefits. At least on the medical side we all have the safety net of the NHS and income protection can be hideously expensive so generally that is the last thing to be sold,” he says.
But emphasising again the importance of assessing the size and age of the company Smart says there are other benefits such as key man cover, which may be of more value.
“For smaller businesses where there are one or two entrepreneurs where if they disappear there is no business left, key man could be advisable,” he says. “It also depends on the stage in its evolution a business has got to. It is very difficult for a lot of people who have bought their businesses up from very small to medium sized to realise they might be mortal or ill so there is a lot of corporate denial out there.”
“Benefit strategy is still in its infancy. There are not that many companies out there with a codified strategy, ie one that is written down, clear, concise, coherent and logical,” says Jon Bryant, regional director at JLT Benefits Solutions, “Too many companies have a hotch-potch of benefits, none at all or no consideration of the pluses and minuses of a benefit strategy work.”
He says companies looking to implement business strategies need to focus on the wider business issues in the market place.
“All we are seeing from clients and potential clients at the moment are cost control measures and concerns, both on adviser fees and the benefits themselves. They are looking for more benefit bang for their buck,” says Bryant.
“Strategically then the client needs to think about benchmarking and auditing what they have got, even if it is nothing. Are they aligned with competitors in their area, not necessarily industry wide but competition for staff generally in their geographic location? There is a lot of competition for support staff so the adviser can work with the client to get a strategy together to align the business needs with the rewards and benefit needs of those employees.”
Any strategy for employee benefit newcomers has to be on a three to five year plan, looking at where the business will go forward and the benefits the employer needs to offer to support that growth, consolidation or development, says Bryant.
But is it possible there could even be a situation where the corporate adviser would advise the client not to offer employee benefits? Possibly, in these financially straitened times, says Bryant.
“I have a client which has taken a couple of very big hits,” says Bryant, “So he is saying it is all very well having an excellent benefits package but if the business goes under that does no-one any good.
“It is about appreciating that there are some clients in survival mode at the moment and they want to know what is the best they can do, from a tax and benefit perspective to improve the cost basis of the business.
“There has been too much grabbing of as much commission as possible from some consultants. They should be understanding the business needs, looking long term and positioning the client to do one thing this year and next year perhaps something else, instead of trying to grab everything possible up front and risk not having a client in business next year because they are paying too much in fees or on commissions to their adviser.” he says.
Bryant cites the example of a small business with not much by way of competition in its locale.
“From a purely financial perspective you have to ask why they want to offer lots of benefits when they don’t really need to. There is a moral and ethical argument for doing so and a retention one, but not necessarily a pressing financial reason for doing so,” he says, “Companies need a wider perspective.”
But fortunately for advisers doing the hard yards in recruiting employee benefits virgins to the cause, the overwhelming likelihood is that a ‘no benefits’ solution will not be the outcome.
The employment market may be tough out there, but there is still an untouched demand for decent talent attraction strategies.
Expert view:International opportunities
Brett Smith corporate client practice manager, Towry Law
A promising target for advising and selling benefits is international start-ups – those companies from abroad setting up offices in the UK.
Here the challenge for the adviser is understanding the peculiar attitudes and requirements of the international management.
Brett Smith, corporate client practice manager at Towry Law, cites the case of a Swedish client setting up an office employing five staff in the UK.
“These staff were very highly paid and the parent agreed they would put in group life assurance and income and medical protection but not a pension contribution. They would just do a statutory stakeholder scheme because they had a good state pension in Sweden. And anything on top of that was done privately.”
Smith says the key role of the corporate adviser is to give the overseas management a flavour of what to expect in the UK in terms of employee demands and therefore what they should be considering as an employer.
“If you have an understanding of the country they come from you can put that into perspective for them when they are doing their forecasting and budgets they can factor it into the equation early on.”
It may be managers are reluctant to provide benefits in the UK which would not be available to staff in the head office abroad. But if they are employing within the UK they too have to consider the implications of offering worse terms packages to potential employees.
Communication is key to getting the right balance accepted.
“If the employer still says they don’t want to provide benefits, then you advise they do the statutory minimum, pay the salary and tell the staff they need to provide their own benefits privately. But then you can work with the employer to communicate that in a positive way,” says Smith