(HR Policy Committee 9 November 2015)

Transcription

1 Somerset County Council HR Policy Committee 9 November 2015 Paper C Item No. 7 Staff Benefit and Salary Sacrifice Scheme Cabinet Member: Cllr Anna Groskop, Cabinet Member for HR & Transformation Lead Officer: Hugh Griffith Strategic Manager Organisational Development Author: Hugh Griffith Contact Details: DHGriffith@somerset.gov.uk / Report Sign off Summary: Recommendations: Reasons for Recommendations: Links to Priorities and Impact on Service Plans: Financial, Legal and HR Implications: Seen by: Name Date Legal H Clarke 26/10/2015 Corporate Finance S Morton 27/10/2015 Human Resources C Squire 26/10/2015 Senior Manager R Williams 28/10/2015 Cabinet Member A Groskop 28/10/2015 Monitoring Officer J Gale 03/11/2015 This report outlines the proposed Staff Benefit and Salary Sacrifice Scheme. HR Policy Committee agrees to: support the establishment of an employee benefit scheme as described below endorse a proposed member key decision being taken to award both the framework agreement and call off contract To help the council achieve future savings in its payroll costs through the measures detailed below and attract potential income through providing services to other public sector bodies. Our People Strategy outlined the need for engaged and enthusiastic staff, the need to attract the best people and the need to retain the people we have. Across all areas of the council attracting, retaining and rewarding our staff is a priority and in today s employment market being able to offer wider benefits to deliver a full benefit package is essential. Such schemes offer councils the opportunity to save money through reducing the pay bill as well as benefiting employees. Service areas will be able to attract good staff and retain them and will be able to make budget savings as a result of reduced spending on pay, pension contributions and National Insurance. Financial Long term financial benefit is achieved through short term financial investment. This scheme works on the basis of invest to save. There is the potential for financial investment into vehicle leases and other salary sacrifice offers but other means of funding are being sought. Until this matter is agreed high cost items will not be offered to staff. The scheme will operate using invest to save principles with initial and on-going costs met by savings made by the scheme. Legal none. The procurement complies with Public Contract Regulations C - 1

2 HR whilst any benefits are not additions to terms and conditions there will be a need to agree and produce specific policy around salary sacrifice options and the maximum allowable leave permitted under leave purchase. Equalities Implications: Risk Assessment: Scrutiny comments / recommendation (if any): Benefits are open to all employees and as in the current salary sacrifice offers available, the rules of maximum sacrifice amounts will apply. To be conducted regarding green car leasing scheme. Should an employee leave prior to completing payment on a salary sacrifice item such as a car or bike, then there is a possible risk to the authority for any difference between the outstanding lease and the residual value. To mitigate this risk any such leases will carry protection insurance for the council or similar. Until such is in place salary sacrifice for such items will not be offered. Not Applicable 1. Background 1.1. For a number of years, private sector organisations have sought to provide their employees with total reward packages designed to enhance their employment package, to retain employees and to attract new talent into their organisation. Tax efficient benefits for staff are often linked with NI efficient solutions for the employer and it is this opportunity for benefit schemes to be cost neutral that has, more recently, attracted the public sector employer to such schemes. In recent years a number of local authorities have turned to total reward schemes (eg. Nottingham City Council, Worcestershire County Council, Surrey County Council), as a means to provide further benefits to an employee group that has found itself without significant pay award and decreasing value in its salary Somerset County Council has a number of benefits available to staff, such as cycle purchase schemes, childcare vouchers, unpaid leave etc, but none are particularly joined-up in an overall benefit package. Discounts schemes for SCC Staff with local traders have been experimented with but by and large have not been successful because they have not been promoted, packaged and delivered effectively. Such schemes are not difficult to manage but are time consuming and the norm today is to have managed schemes, alleviating the internal admin and management issues Common schemes include benefits such as: employee discounts cycle-to-work schemes (cycle purchase)* childcare vouchers* annual leave purchase schemes* flexible working schemes* mobile phone purchase schemes* Technology purchase schemes* professional learning and development schemes* car parking discount schemes* car leasing schemes* health plans and health screening C - 2

3 employee assistance schemes reward and recognition schemes *denotes salary sacrifice scheme What is common to many of these schemes is that they are, where possible, funded by salary sacrifice (from the employee s gross salary), giving the further benefit of reductions in tax and NI paid by the employee as well as the benefit purchased from the sacrificed salary. Some benefits (such as car leasing may have an impact on P11D benefit in kind rules) One of the most common salary sacrifice options taken up by employees in other organisations is annual leave purchase. Based on contract, salary and so forth, an employee may choose to buy back an extra number of days in annual leave by sacrificing a regular amount of their monthly salary. The benefit to the employee, when compared to standard leave without pay, is that they get to spread the cost over the whole year. The benefit to the council would be a reduction in its overall Employer NI contribution for that employee and if there is no urgent need to cover that employee s work, reduced salary costs. 2. Options Considered 2.1. Procurement have considered a number of options for accessing a managed scheme including government approved frameworks such as ESPO and other frameworks available through other local authorities. Due to the need to have as wide a choice as possible and to be assured of complete transparency, it was decided to go to a full procurement process to attract as many options as possible This procurement process has been underway for some weeks and a favoured bidder has now been identified. With HR Policy Committee support we will ask the member with responsibility for HR and OD, Councillor Groskop, to sign a key decision on 16 th November 2015, to award a framework agreement and call off contract for the scheme. 3. Consultations undertaken 3.1. In recent discussions with other councils of a similar size and nature to Somerset County Council, the value of saving in employer s NI contributions has been quite significant. In Nottingham City Council, with some 6,000 employees, their holidayplus salary sacrifice annual leave purchase scheme has generated over 1.7 million in salary/ni savings over the last three years. In 2014 Nottingham generated over 730,000 of savings from the scheme as well as providing a range of employee benefits and enhancing the total reward package to staff. They report increased employee engagement (as surveyed), reduced sickness absence rates (reduction of 15% in three years) and a membership of the schemes in excess of 65% of staff, which continues to grow Surrey County Council, with 34,000 employees including 400 schools, switched from their in-house scheme to an external managed scheme in 2013 and expanded the offer to employees. In 2014 the Employer NI saving alone, was over 450,000 not including the saving to salary costs. Staff spent 3.9 million C - 3

4 via the benefits schemes, saving them 1 million. The scheme grew by over 100% in its first year and continues to do so in The recent staff survey showed that only a proportion of the council s staff are satisfied with the overall benefits package (39%) andmany would like to see wider options being available (65%). 4. Implications 4.1. SCC are currently mid procurement on a full OJEU tender process for an appropriate provider of such a scheme as will fulfil the needs of the council. On the feedback given by other authorities and from discussion with providers of managed schemes, it is likely that such a scheme would recoup its costs and make savings for the council within the first year. The estimated savings in year 1 are difficult to estimate without knowing the rate of engagement in the scheme. Conservative estimates of a 3% take up would suggest savings of between 100,000 and 150,000. Ten per cent would be nearer 400,000. In its first year, Nottingham s scheme saved close to 350,000 and doubled in the following year, trebling in year 3. The business case for this scheme suggests that savings of over 200,000 in the first year are very possible with further saving growing over time as the scheme gathers support and momentum and as wider salary sacrifice benefits become available to staff There will be a need to support the scheme with some form of administration and scheme development / promotion role. Although managed schemes are effectively managed by the supplier, the promotion and development of the scheme amongst our own staff is very much a council matter and in order to make the scheme a success, where staff are active in salary sacrifice, an internal scheme promoter/administrator will be essential; someone who can constantly promote the scheme and its benefits and manage the process of bringing on line the different elements. The experience of other councils has been the more the scheme is promoted the more savings are made. This role will also work with commercial and procurement in the external promotion and marketing of this scheme. Currently three other authorities are keen to be involved in this scheme. To accommodate external entry to the scheme it is planned that a framework agreement will be formed and SCC and others will call off from this framework. Active promotion of this scheme to the external market of local authorities will generate further income In the current climate of difficult recruitment in some areas of the council, a scheme such as this, when presented and marketed effectively and professionally can only support the recruitment process. In some areas it is difficult for the council to match commercial salaries and those salaries being driven up by supply and demand issues, such as we are facing in Children s Services. Schemes such as this can only support the perception of total package and enhance the attraction of Somerset County Council as an employer Immediate implications include: C - 4

5 SWOne HR Admin and Payroll, whilst supportive of the idea, have suggested that there will be a need for a Request for Service to deliver any change needed to SAP payroll and that will be ongoing admin costs on their part to manage the payroll deductions. This will require some discussion between Commercial & Procurement and the SWOne Business Office. Existing schemes with Edenred (for childcare vouchers) and others (for cycle to work) already exist and given the relatively simple methodology used to set up payments from salary (CSV files), further expansion of what currently exists would not seem too onerous. It is inevitable that some employees will benefit more than others in that they will be able to sacrifice greater amounts of their salary as the HMRC rules require that under salary sacrifice the final level of taxable pay cannot fall below minimum wage. Lower paid staff are closer to this level of pay and may not be able to sacrifice much or any salary towards particular offers under the scheme. However, they will remain able to take advantage of all non-salary-sacrifice benefits. Set up, launch and on-going management and marketing costs will be funded from the savings made by the scheme. Further advice and guidance will be needed on the tax implications of certain benefits (such as car leasing and technology) as these have a benefit in kind implication and on the implication to the council for funding such. Where such schemes require more internal agreement they will not be offered to staff immediately. We will require the provider to make all implications on tax, NI and pension clear to all staff before they enter into a salary sacrifice scheme and encourage staff to take independent advice if they wish to. The Government has announced changes to the rules on Childcare Vouchers from the Autumn of This will see the end of salary sacrifice for vouchers with only existing schemes remaining. These schemes may then come to an end in the future. A presentation to the Union Joint Negotiating Forum (JNF) was held on October 21st for information and all unions present were very positive and supportive of the scheme. The scheme does not involve any changes to Ts and Cs of employment. The scheme launch date is likely best to be 1st April 2016 in line with financial year and tax year. Author : Hugh Griffith, Strategic Manager Organisational Development dhgriffith@somerset.gov.uk. C - 5