EMPLOYEE BENEFITS. What benefits are used. Retention and attraction of key talent is therefore crucial to the success of your business.

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1 EMPLOYEE BENEFITS It s a frequently used expression in the media world that your people are your greatest asset. Indeed, in providing a service through your team, your client is buying the promise of continuity and creativity, delivered in an innovative way and at its optimum quality. Attraction, retention and motivation of key talent is therefore crucial to the success of your business. Therefore, the question arises on how we can take control and manage our workforce; attracting the most talented and creative people whilst retaining and developing our team s proficiency to ensure the continuity of service that clients expect is hugely important. Across every industry, the natural inclination could be to throw money at the issue that s why people work, right? However, studies have indicated that there has been a shift in people s expectations on remuneration packages. In addition to monthly take-home pay, they desire a broader, flexible benefits package with a focus on environments, relationships and work-life balance. Also, with significant wage increases and cash benefits not always a viable option, it is important to understand other ways in which a company can attract, motivate and retain the talent required to deliver a service that will exceed clients expectations. Therefore, we have conducted a survey that looks into what companies are currently offering employees in order to understand whether broader benefits are being implemented, whether these packages are likely to change and how they feel their team responds to the benefits on offer to them. Our survey received 125 responses from agencies representing all the major marketing services disciplines, as well as a number of market research businesses, and TV and film production companies. Retention and attraction of key talent is therefore crucial to the success of your business. What benefits are used It is interesting to note in the first instance that, out of those companies that responded, 12% do not offer any additional benefits above the basic salary and holiday entitlements! Considering the apparent growing importance people are placing on benefits packages, as a steer on where to work, it will be interesting to see if this percentage changes over the next year or two. Of the 88% of companies who do offer additional benefits, 67% of these chose to pursue a fixed benefits scheme, rather than a flexible one that allows employees to pick and choose benefits from a menu of options, to suit their lifestyle. Despite these distinctions, the results allowed us to clearly define the top 10 benefits used, which are: TOP 10 most common benefits 1. Creche/childcare vouchers days holiday 3. Mobile phones 4. Life cover (death in service) days holiday 6. Cycle to work scheme 7. Season ticket loans 8. Flexible working hours 9. Performance related bonuses 10. Healthcare plan Kingston Smith W1 Employee benefits survey

2 The most common benefits were largely spread across the entire company, making little distinction between fee earners and support staff. Similarly, 80% of respondents answered that they offered the same benefits to part time staff as they did to their permanent employees. Differentiation of benefits between grades of staff were most obvious when providing healthcare and pension benefits; this distinction was also reflected in the provision of company car allowances and home broadband as benefits that are more suitable, in a practical sense, to principals and board members who are less likely to spend the majority of their time fixed in the office. The survey highlighted that cost was the main concern when implementing benefit schemes, along with on-going maintenance, with 44% of respondents agreeing this was a factor for them. Nevertheless, any expenses relating to implementation need to be reviewed in the context of the cost of recruitment. It has been estimated that the cost to replace a member of staff is over 30, This takes into consideration the cost of lost output, as the replacement employee familiarises themselves with the company, clients, systems and methodology, and the logistical cost of recruitment and their set-up in the agency. When weighing up the advantages and disadvantages of implementing particular benefits, the practical advantage of avoiding recruitment costs, as well as the disruption caused by the departure of any employee, needs to be taken into account. Do you have any set criteria when offering employee benefits? 80% 70% 60% 50% 40% 30% 20% 10% 0% Position within the organisation Length of service Completion of probation period Passing of certain exams/courses Meeting of revenue/ sales/profit targets As an employer, how much do you agree with the following statement? A varied employee benefits scheme is valuable to our business because It increases our profitability It reduces the cost of recruitment It reduces our employees reliance on salary It reduces absence rates Other The concerns regarding the cost of administration go some way to explain the spread of benefits across the various job grades; those in the higher grades received the most administratively heavy benefits, reflecting their position as perceived long term assets within the company. Some 65% of agencies cited that position within an organisation featured as a criteria when offering benefits, supporting the objective of staff retention; for example, these higher benefits are used to keep in place key account handlers, whose departure will have a greater risk to the agency. It increases our productivity It helps improve the motivation of our employees It helps us retain staff It improves our image It attracts the best people to our business Strongly disagree Strongly agree 1 HR Review, February Employee benefits survey 2014 Kingston Smith W1

3 Which of the following benefits do you offer, or plan to offer in the future, to all staff? Salary sacrifice/salary exchange pensions Creche/Childcare vouchers Holiday trading Low CO2 company cars SIP (Share Incentive Plan) SAYE (Save As You Earn) Mobile phones Home broadband 21+ days holiday 25+ days holiday Stakeholder pension scheme Group personal pension scheme Final salary pension scheme Other type of occupational pension scheme Healthcare plan Long term sickness disability cover (PHI) Life cover (death in service) Critical illness cover Travel insurance Flexible working Performance related bonuses Commission related bonuses Company car allowance/leasing Cycle to work scheme Car parking Duvet days Sabbaticals (up to 1 month) Sabbaticals (1 month +) Paid sabbaticals Enhanced maternity benefit Enhanced paternity benefit Enhanced adoption benefit Employee share scheme Private medical insurance (employee) Private medical insurance (employee and family) Personal accident insurance Product discounts Season ticket loans Retail vouchers Health screening Sports/social club membership Employee assistance programme Personal skills training 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Kingston Smith W1 Employee benefits survey

4 Tools for motivation Motivation amongst staff is not only crucial for retention but also for the quality of output and the impact this has on client relationships. When asked which benefits were considered the most significant in raising morale and motivation amongst their employees, the average respondent ranked the following: TOP 10 morale raisers 1. Recognition from management 2. Belonging to a successful team 3. Increased salary 4. Increased rewards/bonuses 5. Training and development 6. Better working environment 7. Independence 8. Option to work from home 9. Greater choice of benefits 10. Help with childcare This mix of emotive and material inducements is reflective of the nature of the media sector. Resting on a stimulative atmosphere where staff are enthused by interesting projects and the opportunities to demonstrate their creative talent and engage with others, it is understandable that monetary incentivisation alone does not always get the creative mind out of bed in the morning. Accordingly, empowerment of staff and a positive working environment are undoubtedly of high significance being praised for a job well done should never be underestimated. There is a flip side to the importance put on such emotive factors in the fact that the loyalty inspired among staff is, in reality, loyalty towards individuals rather than the company. When team dynamics change, or with the loss of a major client relationship resulting in the departure of key staff, this can often have a domino effect that sees groups of staff leave in quick succession. In this respect, it can be argued that employee benefits serve as a safety net staff are more likely to wait-it-out in the face of change if they feel like they are being adequately rewarded for their work. Similarly, it is important to have a comprehensive employment package in place if staff are looking to scope out other places of employment, to ensure that your company has a competitive set of benefits to offset the appeal of a competitor. It is important to have a comprehensive employment package in place if staff are looking to scope out other places of employment. What value do employee benefits have? With 60% of participants agreeing that the value of an employee benefits scheme lies in the improvement of an employer s image, and 58% agreeing that it helps attract the best people and helps retain staff, businesses are clearly in agreement over the value of a structured benefits package. An observation that particularly stands out is the importance for companies to use such benefits packages as part of a strategic policy, with the objective to engage key members of staff and ensure their loyalty. With this in mind, segmentation of employees is pivotal, supporting the variance in benefits across the job grades. For example, for team members who have been identified as being valuable to the future of the business and long term contributors ( super stars ), offering them such incentives as a share in the business will tie them more closely to the objectives and values of the business, whilst drawing ambitions for the growth of the company into their own personal agenda. Meanwhile, nomads, who are the individuals in the business who have a wealth of talent but are more absorbed by individual projects rather than the success of the company as a whole, may be better off being linked with more firm-wide objectives, for example, through a profit-sharing scheme. This will align the nomads independent approach more closely with the success of the business. It is important for companies to use such benefits packages as part of a strategic policy, with the objective to engage key members of staff and ensure their loyalty. 4 Employee benefits survey 2014 Kingston Smith W1

5 Healthcare benefits What healthcare benefits do you currently offer your staff? 100% Some 69% of respondents offer healthcare benefits to their staff, with 91% of these doing so in the form of private medical insurance. Other healthcare benefits, such as optical benefits were less common at 44%, with income protection following at 35%, and 30% offering critical illness insurance. Other benefits included workstation health audits (26%) and gym facilities or membership (28%). Only two agencies that answered had on-site healthcare, a benefit that is more commonly associated with corporate firms. 90% 80% 70% 60% 50% 40% 30% When asked the reason for implementing healthcare benefits, the most popular answer was that it led to having a healthier workforce (69%). This was followed by the employers recognition that it helps contribute to a good work life balance (45%); gym membership in particular has this advantage. Some 18% confirmed that this had come into play because it had been requested by their staff, with 37% noting that it increased their employees loyalty. The key concern around introducing healthcare benefits seems to be the high cost of implementation, with 81% agreeing that this is the main barrier. Meanwhile, 40% answered that there seems to be limited interest in this benefit among employees, whilst 38% indicated that their staff would prefer alternative benefits. 20% 10% 0% What reason do you have for introducing or planning to introduce healthcare benefits? 80% 70% 60% 50% Private medical insurance Flu vaccinations Workstation health audits Critical illness insurance Employee assistance programme On-site healthcare (e.g. doctor, nurse) Gym facilities or membership Optical benefits Health cover Healthcare cash plans Income protection With the cost of health insurance being linked to the profile of employees, principally taking into consideration their age and health history, quotes will vary in line with the demographic structure of your company. In addition, renewal rates should be considered when companies opt to implement such benefits; the administration time and costs related to implementation will resurface on a yearly basis. Our survey shows that healthcare is one of the main benefits where distinctions between job grades are considered. Whilst 67% of businesses offering private medical insurance provided this to all staff, the extension of this benefit to the employee s family jumped by 39% when that employee reached director level and by an additional 15% for CEO level. 40% 30% 20% 10% 0% Good work life balance Healthier workforce Identifies any potential illness early Reduces our sick absence rates Requested by our staff Easy for us to implement Low cost for us to implement Our competitors offer it Increases our employees loyalty Kingston Smith W1 Employee benefits survey

6 Pensions The Government s introduction of autoenrolment regulations has pushed pensions to the forefront of all companies agendas. Aiming to provide employees with a more secure financial standing on retirement, employers are now required to contribute to their staff s pension schemes. 61% of respondents have a company pension scheme in place, of which 20% had already reached their auto-enrolment staging date. With different staging dates linked to the number of employees, our survey sought to find out what the impact has been on those companies that are already involved in this process, and whether they have chosen to go beyond the minimum obligatory contributions. Issues associated with auto enrolment What is the biggest challenge associated with auto-enrolment? Answering employee queries after auto-enrolment Communicating the changes to employees Absorbing the extra costs associated with auto-enrolment Managing auto-enrolment for temporary or transient staff Dealing with employee data Administration Lowest Those who are not already auto-enrolled Highest Administration and the absorption of the extra costs associated with auto-enrolment were cited as the greatest challenges when putting the scheme in place. The most challenging areas that companies tend to face are: - Updating payroll systems - Deciding on a good quality pension provider, as this decision will impact on the options available to the retirement savings of employees - Communication of the requirements and changes to staff - Managing employee records and PAYE arrangements In light of the above challenges, 54% noted that they were considering outsourcing the overall administration for this, with the remaining 46% focusing on offering training to existing staff to deal with the changes. Those who are not auto-enrolled but do offer a pension scheme were asked how much they contribute as an employer. The majority contributed between 1% and 3%. There was little distinction between job grades in employers contributions up to 10%; however, for contributions of 10% and over, 18% of companies awarded this to their director and board member level. This high level of contribution did not flow through to the lower job grades; this is a scenario that is to be expected given that length of service and seniority are key drivers when determining incentives. The results show that companies tend to match their employees contributions like for like. The number of employers contributing more than their employees was negligible. If you offer a pension scheme but are not yet auto-enrolled, what is your employer s contribution? 50% 40% 30% 20% 10% 0% 0% 1-3% 4-5% 6-9% 10% N/A Directors/Board members Senior managers Team leaders General staff 6 Employee benefits survey 2014 Kingston Smith W1

7 Those who have already been auto-enrolled For those companies already auto-enrolled, 74% opted to dive straight in and take the costs immediately by choosing not to phase their contributions. The auto-enrolment system has been set up to make it more onerous for staff to opt out, necessitating their own pro-activity in doing this on an annual basis (thus involving a level of administration). With employers also inhibited from leaning on their staff to opt out, the results show predictable low levels of withdrawal from the scheme. Some 21% of respondents stated that only 1-5% of their staff have opted out, whilst 7% have seen 6-10% of their staff opting out, 2% saw a quarter of their staff opt out and a further 2% saw more than three quarters of their staff opt out. The auto-enrolment system has been set up to make it more onerous for staff to opt out. Flexible working On 30 June 2014 the right for all employees to request flexible working came into effect, following the Government s Consultation on Modern Workplaces. Flexible working allows employees to work in a way that most suits their lifestyle, focusing principally on adaptable start and finish times, and the chance to work from home. Previously, this right had only been connected to those who had caring responsibilities, including parents of young children, disabled children and dependent adults. With flexible working often seen as a popular soft benefit, demonstrated by the 76% who answered that they viewed it as a tool for retention, the results interestingly showed that only 6% of employers had seen an increase in requests for this among their staff since the new regulations came in. As can be seen from the chart, the majority of requests are approved, showing just how on board with flexible working employers are. It should be kept in mind that employees, following the Consultation, have the right to appeal to any rejections and employers need to cite one or more of eight specific business reasons to support any rejection they make. How have you responded to requests for flexible working? 4.3% 10.6% 19.1% 12.8% 53.2% Approved the request in all instances Approved the request in the majority of instances Re-negotiated the terms of their request in the majority of instances Rejected the request in the majority of instances Rejected the request in all instances Flexible working allows employees to work in a way that most suits their lifestyle. It may be reasonable to predict that companies will see an increase in such requests, given the relatively low numbers who have taken up this right since June The small take-up may also be reflective of employees wish to have flexibility but in a more informal manner; for instance, being able to fit their timings around their work loads on an ad hoc basis. With some companies offering soft benefits as duvet days, or days off after industry events, this type of flexibility might be more appealing than having to go through a formal process of fixing new hours beyond the ones standard for the industry. Kingston Smith W1 Employee benefits survey

8 The future Employee benefits are clearly an important area that employers need to get right. Unsurprisingly, 64% answered that they would be reviewing the range of benefits their organisation offers on an annual basis with the key criteria in the review focusing on the company s current profit levels, employee feedback (with many agencies running surveys to gauge their staff s views of their benefits packages), marketplace trends and affordability. With new regulations coming in to place such as auto-enrolment and the changes to flexible benefits, it is promising that these changes do not seem to have diverted businesses attention entirely from considering other forms of benefits. The survey shows that agencies within the media sector are appreciating the importance of monitoring the effectiveness of what they offer and viewing their benefits in the context of their overall strategy for maintaining competitiveness. Nevertheless, competitors vying for talent are right in not viewing benefits packages as the singular carrot to dangle recruitment tactics focusing on reputation and key clients are heavily used for this reason. The creative industry is already in a strong position where it can boast that most of those who work within it have chosen this as a career out of a genuine sense of enthusiasm and passion. It is, therefore, important to keep in mind that any benefits chosen need to be complementary to the positive environment in which they work. The significance of a well rounded benefits package is undoubtedly important for retaining staff but motivation goes beyond this. No employer should underestimate the importance of recognition from leaders, a sense of empowerment and a strong team dynamic - a culture that essentially emanates from the top. If you need some advice on the impact of new regulations on your employment position or on the implementation of a benefits package, our professional HR consultants and employment law advisers can offer you as little or as much support as you require (please visit Alternatively, if you would like more information on auto-enrolment or help with financial planning, please contact our independent financial advisers ( The significance of a well rounded benefits package is undoubtedly important for retaining staff but motivation goes beyond this. Contact us If you would like to discuss any of the matters arising in this survey or how we can we help you, please contact one of the Kingston Smith W1 partners by or on Kingston Smith W1 141 Wardour Street London W1F 0UT T Esther Carder, Partner ecarder@kingstonsmithw1.co.uk Val Cazalet, Partner vcazalet@kingstonsmithw1.co.uk Ian Graham, Partner igraham@kingstonsmithw1.co.uk Richard Heap, Partner rheap@kingstonsmithw1.co.uk Nicola Horton, Principal nhorton@kingstonsmithw1.co.uk Cliff Ireton, Partner cireton@kingstonsmithw1.co.uk Amanda Merron, Partner amerron@kingstonsmithw1.co.uk Peter Smithson, Partner psmithson@kingstonsmithw1.co.uk Graham Tyler, Partner gtyler@kingstonsmithw1.co.uk More information about Kingston Smith W1 and our services can be found at: Kingston Smith W1 is a trading name of Kingston Smith LLP. Any opinions, views or comments contained in this document are intended for those clients and contacts of Kingston Smith W1 and Kingston Smith LLP and associated companies to whom it has been distributed. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material in this newsletter can be accepted by the firm. The investments or services mentioned in this document may not be suitable for all recipients or be appropriate for their personal circumstances. The information in this document is believed to be correct but cannot be guaranteed. Opinions or comments expressed constitute our judgement as of this date and are subject to change without warning. This document is not intended as an offer or solicitation to buy or sell any investment nor is it to be construed as a personal recommendation. Past performance is not necessarily indicative of future performance.