Mutual benefits

It‘s official: online search engine Google is officially the best place to work on earth, as voted by US readers of Fortune magazine. Outstripping other well known contenders such as Cisco Systems at number 11 and Microsoft at a dismal 50, Google sets the standard for Silicon Valley and beyond. The online search engine tops the polls with free gourmet meals three times a day, swimming facilities, spa and free doctors onsite for all of its 12,000-strong workforce.

Founders Larry Page and Sergey Brin have embraced a number of imaginative and fun staff perks that have fostered an innovative culture, but they also expect a high degree of productivity in return. The company has launched a number of new services in the UK this year alone ranging from Google Checkout, an online payments system, to Google Mini, a business intranet search engine similar to its web product which can search up to 100,000 documents.

What Google‘s creators realised from an early stage was that rewarding staff and making their work life more fun has a positive effect on their output. Staff perks that would, to many business owners, seem like sanctioned skiving can in fact prove extremely lucrative. Take Google‘s ’20% time‘ initiative, for example, where engineers can spend up to 20% of work time on independent projects. Two of its recent groundbreaking products – Google News and Google Mail – both had their inception as part of the scheme.

While Google undoubtedly has deeper pockets than most companies and can afford to be relaxed in its approach to creativity, there are a number of ways that smaller businesses can reward employees without breaking the bank.
Common tax-free perks in the UK include season ticket loans, worth up to £5,000 per person to cover the cost of public transport; and independent financial information, worth up to £150 per employee. Businesses can similarly reward a strong annual group performance with the traditional Christmas blowout and save on their tax bill in the process. Up to £150 per head can be claimed for this group event.

Return on investment
Employee benefits schemes may inject some much-needed fun into an organisation, but there is also a sound business case for introducing a rewards structure. There is a growing recognition that a generous benefits scheme can give companies the edge over competitors in the recruitment market. Google, for example, now gets a staggering 1,300 résumés a day. “A cash bonus for exemplary work is a headline figure that can attract talented people,” says the Chartered Institute of Personnel Development‘s (CIPD) rewards advisor Charles Cotton.

Occupational pension schemes can prove equally attractive for prospective employees. Staff can obtain income tax relief at their highest marginal rate and employers are able to offset their own contributions against corporation tax. To encourage employees to contribute to an occupational pension scheme, some employers match what their employees pay in. Others link their contribution levels to length of service as a way of rewarding employee loyalty.

An extra bonus is salary sacrifice pension schemes, where the employee‘s contribution is taken from the gross salary, thereby reducing the employee‘s tax and national insurance burden. An employee earning just over the marginal tax threshold at £35,000 and contributing 5% to a salary sacrifice pension, for example, will have their taxable salary reduced to £33,250 and be eligible for the lower tax rate.

Childcare vouchers are also becoming increasingly popular as a salary sacrifice scheme. Employers can pay up to £50 a week in vouchers and be exempt from paying any national insurance contributions (NICs) on that sum, while employees do not have to pay any NICs or income tax on the vouchers provided.

Small companies that are keen to attract and retain staff could consider introducing flexible and remote working opportunities. This could be particularly attractive to older workers or those with children who may be willing to accept a lower salary in return for a better work/life balance and has the advantage of being relatively cheap to set up.

According to independent advice bureau Acas, types of flexible working can vary immensely and can include, but are not restricted to, part-time work; job-sharing or working from home; term-time working, whereby an employee on a permanent contract takes paid or unpaid leave during school holidays; or working on staggered hours, where employees have different start and finish times.

Under UK law, parents and other employees with caring responsibility for children aged under six or who have disabled children under 18 have the right to request a flexible working arrangement, provided they have accrued at least six months‘ service. This is only the right to request flexible working – not to be given it – but employers must be able to prove they have a sound reason for not granting a request, such as it being too costly or too onerous on other employees.

Employers keen to ensure the health of their employees – and get some ’green‘ points – might consider a bicycle-loan scheme, whereby employees get a bike and all the accompanying kit at half price and pay for it in instalments over 18 months. The company buys the bike for the employee, together with lights, locks, helmet, clothing and panniers and then deducts the cost from that person‘s wages over an agreed time period.

The advantage is that the employee does not pay national insurance on the repayments and if the employer is registered for VAT this is deducted from the cost, which means that the bike ends up costing the member of staff as little as half of the showroom cost. In addition, employers can also provide tax-free meals and drinks to those who cycle to work.

Obstacle course
But while many organisations recognise the reasons for introducing a benefits scheme, some complain of the complexity and time burden involved. According to a recent CIPD survey, only 35% of all UK firms currently offer a written, structured benefits scheme that is aligned with stated business objectives. “That response could reflect the degree of difficulty some companies experience in implementing a rewards strategy,” suggests the CIPD‘s Cotton.

Smaller businesses, in particular those without a dedicated human resources division, might consider staff benefits as an impracticable luxury. But a number of specialist benefit providers have emerged in response to the growing benefits culture. These outfits typically set up, run and administer employee schemes, including regular usage reporting and updates to benefits on offer. Companies include Projectlink Motivation, P&MM Consulting and Xafinity Consulting, all of which help businesses maximise the value of employee benefits for both staff and employer.

There are also potential political implications of introducing a rewards scheme. “Benefits are an emotive issue and can create a culture of expectation of reward among employees,” says the CIPD‘s Cotton. He also points out that some organisations face a degree of resistance to the introduction of benefits schemes from middle and upper managers, who perceive a resulting increase in their workload. “Some managers are happy to blame the HR department for their own lack of communication about the needs of the business,” he says.

If introducing a structured benefits scheme really does sound too much like hard work then there are other less onerous ways to reward staff. “An organisation may decide that employees are better motivated by cash incentives that are linked to staff performance, such as a group or individual achievement,” says Cotton.

Whatever the motivation, rewards schemes can be beneficial for both employees and the business. Google didn‘t get to be one of the world‘s most successful companies without its highly motivated staff and neither will any growing business.