BARNSLEY METROPOLITAN BOROUGH COUNCIL This matter is a Key Decision within the Council s definition and has been included in the relevant Forward Plan Report of the Director Human Resources, Performance and Communications PROVISION OF ADDITIONAL EMPLOYEE BENEFITS COMPUTER, TECHNOLOGY & MOBILE PHONE SALARY SACRIFICE SCHEME 1. Purpose of Report 1.1 The purpose of this report is to seek approval to offer employees the opportunity to obtain computers, home technology and mobile phones at a significantly discounted cost and pay for it through a salary sacrifice arrangement. The schemes will operate at no overall cost to the Council. 1.2 The range of benefits will be made available to all Council employees including those employed in locally managed community and voluntary controlled schools. 2. Recommendations 2.1 That approval is given to offer the following employee benefits during 2015/16:- Computer and Technology Salary Sacrifice Scheme Mobile Phones Salary Sacrifice Scheme 2.2 That the Director of Human Resources, Performance and Communications be authorised to select scheme providers and enter into contractual arrangements, within a pre-approved procurement framework. 3. Introduction 3.1 The council needs to be an employer of choice to motivate, recruit and retain a high performing workforce. Research continues to show that employees seek more from their work than basic salary alone and the council must ensure that its offer to employees continues to be beneficial. 3.2 Employee salary sacrifice schemes are becoming increasingly important as a quick, simple and cost effective way to help recruit, retain and motivate employees by demonstrating that they are valued.
3.3 The Council has a number of existing benefits that employees can take advantage of:- Local Government Pension Scheme access to one of the largest public sector pension schemes in the UK. Leave An annual leave entitlement up to a maximum of 35 days and there are also other forms of leave that employees can access such as special leave and disability impairment leave. Flexible Working Arrangements Employees can take advantage of a good range of work life balance policies which provide a variety of working options to suit most employees lifestyles including flexi-time, job share, compressed hours, staggered hours, home working and term time working. Maternity, Adoption and Shared Parental Leave/Pay Up to 52 weeks leave, and pay for a specified period depending on length of service and personal choice. Training and Development The Council is committed to the training and development of its employees so that they have the necessary skills, knowledge and behaviours to do their job effectively. Where possible, the Council will also support training opportunities so that its employees have the chance to develop their chosen career. Free Eye Tests Help towards eye care if the job involves working at a computer monitor for long periods of time. Discounted Gym Membership Employees have the opportunity to access discounted rates at Barnsley Premier Leisure and DW Fitness. Health Care Cash Plans Employees have the opportunity to take advantage of corporate rates for Health Care Cash Plans with Westfield Health Scheme or Health Shield Friendly Society. Car Parking salary sacrifice scheme to pay for workplace parking. Employee Discount Scheme Leisure and retail discounts. Cycle to Work salary sacrifice scheme to purchase a cycle. Child Care Vouchers Employees with children can choose to buy child care vouchers through salary sacrifice. The vouchers can be used to pay for most types of child care including nurseries, child minders, before and after school clubs and holiday schemes. CSSC Sports and Leisure Employees are eligible to join this organisation aimed at public sector employees and obtain discounted prices on a range of sports and leisure activities as well as corporate membership of English Heritage. 3.4 The employee discount scheme (Wider Wallet), cycle to work and the current childcare voucher scheme were all procured via the Eastern Shires Purchasing Organisation (EPSO) framework agreement in April 2015 for a two year period (Cab.25.3.2015/8.4). 3.5 Cabinet also gave approval to explore additional employee benefits including technology and annual leave through salary sacrifice. 3.6 The council operated a Home Computer Initiative between 2004-2006 but withdrew the benefit following a change in the tax regulations. The schemes have now been redesigned to ensure full compliance with current HMRC guidelines. 2
3.7 A short questionnaire focused on current and future provision of employee benefits was undertaken by the workforce in August/September 2014. Despite a disappointing 1.5% response rate, the survey did provide useful information as to the likely popularity of proposed new benefits. Potential new benefit % responses quite likely or very likely to use (121 total responses) Computers and technology 61.2 Mobile phones 59.7 4. Consideration of Alternative Approaches 4.1 The council could opt not to provide this additional employee benefit. Employees would not have the opportunity to obtain discounted technology and mobile phones, which were indicated as popular options in an employee survey (see paragraph 3.9). The council would lose the opportunity to offer a potentially popular, zero-cost benefit, which could help recruit, motivate and retain the workforce. 4.2 The council could undertake a tendering exercise to procure an alternative provider rather than utilising the ESPO or other similar framework. This would ensure the widest choice of suppliers as the council would not be restricted to choosing from a pre-approved list. However, initial research indicates that suppliers operate in a similar way as determined by HMRC regulations and offer a wide range of product choice. A tendering exercise, therefore is considered unlikely to deliver a significantly better range of equipment or level of service. A tendering exercise would also be time consuming and costly and isn t recommended as it would duplicate work that has already been undertaken by others as part of the framework agreement outlined at paragraph 5.1. 4.3 The council could use an alternative procurement framework to select a provider. Warrington Council and Northumberland County Council operate frameworks similar to ESPO, which the Council could join, were this to offer an alternative choice of suppliers. This option could be of benefit to the council should no suitable provider be identified under the ESPO framework. 5. Proposal and Justification Eastern Shires Purchasing Organisation (ESPO) Framework Agreement 5.1 It is proposed to utilise the ESPO framework agreement to procure additional employee benefits. The ESPO framework agreement offers all public sector establishments throughout the UK a simple and effective route to selecting and implementing a variety of employee staff benefits. 5.2 The framework is essentially a select list of suppliers, all with a proven track record of delivering employee benefit services from which local authorities may purchase services quickly and simply. The suppliers listed have already been assessed through a tendering process offering value for money as well as quality, experience and technical and professional ability. 5.3 The framework has been advertised and established in full compliance with procurement legislation. Using the framework allows exemption from further 3
advertising, supplier assessment or adherence to lengthy EU procurement procedures. There is no charge by ESPO for utilising the framework, therefore there are no procurement costs to the Council 5.4 ESPO have developed a new Employee Benefits framework which now includes more providers and is a more comprehensive offering. The new framework commenced on 21 February 2015 and will be in place for two years, with an option to extend for a further two years thereafter. 5.5 Whilst ESPO will not be involved in the day-to-day management of the suppliers and the services they provide, they will however closely monitor the progress and performance of the arrangements throughout the entire duration of the framework. 5.6 The scope of the ESPO Contract 319 now includes a number of lots that employers can choose to implement. These include an employee discount scheme, child care vouchers, cycle to work scheme, holiday purchase, mobile phone & IT salary sacrifice, qualifications and workplace training salary sacrifice, workplace parking, travel to work salary sacrifice, and healthcare & wellbeing. 5.7 The addition of new lots provides the flexibility to provide additional benefits for the workforce without the need to undertake lengthy procurement exercises. Computer and Home Technology 5.8 A computer and home technology benefit scheme is a benefit-in-kind programme which provides employees with opportunity to acquire information technology and associated equipment. 5.10 Schemes typically offer a wide range of products including desktop and lapotop computers and tablet devices. Some schemes include Smart televisions and household white goods such as fridges, washing machines and similar. 5.11 The benefits to the council of a computer and home technology employee benefit are: Improved IT skills and literacy within the workforce and their families Cost saving on employer National Insurance contributions Provides a beneficial scheme for employees at a difficult economic time Potentially improves employee motivation, loyalty and retention Complements council strategies for digital inclusion and economic regeneration 5.12 The benefits for employees are: Large savings on brand new technology equipment Monthly payments taken directly from salary affordable and convenient No deposit and credit checks required National Insurance savings and potential income tax reduction 5.13 There are a range of providers within the ESPO framework, some supply the equipment directly, others provide customer relationship management and obtain the equipment from third party suppliers. Most providers offer a similar range of products and operate a similar service from a customer perspective. 5.14 The schemes operate by salary sacrifice which means that the council provides the equipment to the employee for an agreed period (usually 12, 24 or 36 months). The 4
employee then sacrifices part of their salary each month over the agreement period to cover the cost of the equipment. Because the salary deduction is made from gross salary (i.e. before tax and National Insurance), the employee will save on NI contributions for the period of the agreement. If a 36 month agreement is offered, employees will also make some income tax savings. 5.15 At the end of the agreement, the employer can offer the option to transfer ownership of the equipment to the employee for a Fair Market Value. For tax purposes, this is classed as a Benefit in Kind, on which income tax must be paid. If the employee chooses to return the equipment to the supplier no tax is owed but the employee does not own the equipment and the supplier may charge a fee for collection and recycling of the equipment. Where an employee chooses not to retain the equipment at the end of the agreement, the supplier will arrange for collection and recycling of the equipment. The vast majority of participating employees choose to retain the equipment, particularly as there is a charge to them to return the equipment. 5.16 The salary sacrifice deductions do not include any interest payments and so provide employees with a convenient method of spreading the cost. By comparison, a leading high street retailer would apply 24.9% interest on a payment by instalments basis. Likewise, buying equipment outright on a credit card would incur interest charges. Ultimately, it is for the individual employee to decide their own preferred method of obtaining computer technology equipment. 5.17 Schemes are easy to set up and flexible to the employer s requirements. The employer can decide which products to offer, maximum order values, and which employees are eligible to participate. For example, the council could decide to restrict the benefit to employees with a minimum length of service or exclude employees who are placed on notice of redundancy, disciplinary or other sanction. This is different to cycle to work schemes where HMRC regulations dictate that all employees must be allowed to access the scheme. 5.18 In addition, employees aged under 18 and those earning the minimum wage are not eligible to participate because of tax regulations. 5.19 Schemes are fully managed and would be offered via an online web portal. 5.20 There would be no cost to the council to introduce this benefit. 5.21 Employers utilising the scheme also have a dedicated account manager who supports the employer throughout the lifecycle of the scheme and provides full marketing and communications support and materials as required. 5.22 The new ESPO Framework agreement contains a number of pre-approved providers which means that the Council does not have to advertise the contract through a procurement tendering exercise. Mobile Phones 5.23 Employees can also obtain the latest mobile phones through salary sacrifice arrangements and repay the cost through salary deductions. 5
5.24 Options available vary according to individual provider and may include handset only, handset plus airtime/tariff or SIM only. Where multiple options are available, it is for the employer to determine which options(s) to provide. This should be part of the final arrangements for customising and implementing the scheme (please see paragraph 5.37) 5.25 The benefits to the council of a mobile phone employee benefit are: Cost saving on employer National Insurance contributions Provides a beneficial scheme for employees at a difficult economic time Potentially improves employee motivation, loyalty and retention Employer can tailor range of phones 5.26 The benefits for employees are: Freedom to choose from an extensive range of available phones Monthly payments taken directly from salary affordable and convenient Make savings on high-street prices due to tax and NI savings 5.27 The schemes operate by salary sacrifice which means that the council provides the equipment to the employee for an agreed period (usually 24 months). The employee then sacrifices part of their salary each month over the agreement period to cover the cost of the equipment. Because the salary deduction is made from gross salary (i.e. before tax and National Insurance), the employee will save on NI contributions for the period of the agreement. 5.28 Different tax regulations apply to mobile phones compared to computer technology products and therefore employees will make savings on income tax for the period of the salary sacrifice. 5.29 HMRC guidance has been issued around situations where employers provide a mobile phone for work purposes. It is now possible for employers to provide an additional mobile phone for personal use under salary sacrifice arrangements without incurring tax. However, it must be made clear in any associated policies that the cost of any business calls made on the personal phone cannot be reclaimed through expenses. 5.30 At the end of the agreement, some providers offer the option for the employer to transfer ownership of the mobile phone to the employee for a Fair Market Value. For tax purposes, this is classified as a Benefit in Kind, on which income tax must be paid. Other schemes require the return of the equipment to the supplier therefore no tax is owed but the employee does not own the equipment. 5.31 As for computer technology schemes, the employer can decide which products to offer (where available), which employees are eligible to participate, and determine maximum order values (or order value as a maximum percentage of salary). 5.32 Employees aged under 18 and those earning the minimum wage are not eligible to participate because of tax regulations. 5.33 Schemes are fully managed and would be offered via an online web portal. 5.34 There would be no cost to the council to introduce this benefit. 6
5.35 Employers utilising the scheme also have a dedicated account manager who supports the employer throughout the lifecycle of the scheme and provides full marketing and communications support and materials as required. 5.36 The new ESPO Framework agreement contains a number of pre-approved providers which means that the Council does not have to advertise the contract through a procurement tendering exercise. Selection of Scheme Provider 5.37 It is proposed that provider(s) be selected that are already pre-approved under an existing public sector procurement framework. Please see paragraphs 5.1 5.7 5.38 Officers from Human Resources have undertaken initial research into the providers that are approved under ESPO Framework 319 and their respective service offers. 5.39 In general, it is considered that the schemes all offer a similar range of products, all can be tailored to meet the needs of the organisation and provide a full account management service and comprehensive communications and marketing support. Importantly, none of the schemes will incur any overall cost to the council and will require minimal use of resources other than officer time. 5.40 It is therefore proposed that Cabinet approves the implementation of schemes for Home Computer Technology and Mobile Phones based on the benefits and risks detailed in this report. (Please see paragraphs 5.11,5.12, 5.25, 5.26 and section 13) 5.41 Officers from the Human Resources Pay and Reward team will undertake more detailed research on scheme providers and will form a working group with internal colleagues in Financial Services Payroll, who will be involved in the administration of payroll deductions following scheme implementation Information Services, who will provide advice around IT products on offer 5.42 It is proposed that the working group will make recommendations to the Director of Human Resources, Performance and Communications, who will select provider(s) and enter into contractual arrangements, within a pre-approved procurement framework. 5.43 It is prosed that scheme(s) are operational so that employees can obtain products before Christmas 2015 which should help to improve take-up of the benefits. 5.44 It is proposed to run the scheme(s) once per financial year in order to reduce administrative burden and to deliver a focused communications campaign. 6 Implications for local people /service users 6.1 The project will provide eligible council employees with heavily discounted home computer equipment. When employees receive their new equipment they become digitally enabled. 6.2 Should employees already posses a computer, then they may pass on any existing equipment they own to family or friends. This means that more and more people 7
within Barnsley are gaining access to home computing equipment. 6.3 It is hoped that this will also increase the number of people who then use broadband and are able to gain the benefits that digital inclusion can offer. Evidence shows that those children with broadband access perform better at school than those without, and that adults with broadband access also benefit in a number of ways - from obtaining lower cost on line goods and services, to keeping in touch with friends and relatives using email and video conferencing. 7 Financial Implications 7.1 The Director of Finance, Assets and Information Services has been consulted. 7.2 The council is responsible for paying the supplier for the total value of equipment ordered at the outset. All costs will be recovered from employees by salary deduction in monthly instalments. 7.3 The Council will make minor savings in relation to reduced employer national insurance contributions which will be spread across all business units over the period in which the monthly instalments are repaid to the Council. 7.4 The table below shows the different financial implications based on predicted percentage take-up of the scheme out of a total 7000 eligible employees (including schools) with an average spend of 800 per order. 5% take-up 10% take-up 15% take-up 20% take-up Invoice Value 280,000 560,000 840,000 1,120,000 NI savings 23,184 46,363 69,552 92,736 7.5 The scheme presents a minor cash flow management issue in relation to the difference between the initial purchase of equipment by the Council and the repayment through the monthly instalments. This will be managed and contained within the Councils overall cash flow position. 7.6 Officer time spent on implementing and administrating the new employee benefit package will be contained within existing establishments. 7.7 There is no impact on the Authority s Medium Term Financial Strategy arising from the proposals outlined in this report as any minor savings in employer NI contributions are only one off during the period of the scheme. 7.8 Financial implications are detailed at Appendix A and represent the impact of a 15% take up per the table above with repayments over a 12 month period. 8 Employee Implications 8.1 With salary sacrifice schemes, if an employee leaves before the end of the loan period the amount that is owed to the Authority is calculated and arrangements will be made for this to be deducted from the employee s final salary payment. 8.2 The Local Government Pension Scheme regulations indicate that the computer technology and mobile phone salary sacrifice schemes do not affect the Local Government Pension Scheme contributions paid by the employee. 8
8.3 However, Teachers Pension Scheme members are affected by the salary sacrifice so that pensions are based on the reduced salary after salary sacrifice. 8.4 During periods of maternity leave, shared parental leave, adoption leave or sickness absence employees will continue to have use of the computer and/or mobile phone equipment. Monthly payments will continue unless the employee enters a period of unpaid leave or SMP/SSP situation. In this situation, the salary reduction payments will be suspended by the number of missed monthly reductions to pay. Upon return to paid employment, the employee s obligation to allow the reduction to monthly gross pay will resume, continuing until all monthly deductions have been made. 8.5 Employees who are absent from work for any other reason, where normal salary continues to be paid, will continue to have salary reductions as per the hire agreement. 8.6 By entering a salary sacrifice agreement, an employee agrees to give up part of their salary in return for use of the equipment. As basic pay is reduced, eligibility for state benefits for example, Working Tax Credits or Child Tax Credits may be affected, and also sick pay and maternity pay etc. A salary check will be undertaken before an agreement is authorised to ensure that any deductions do not take an employee below the National Minimum Wage. Employees will be advised to take independent advice if they are in any doubt about their personal financial situations. 8.7 It is the employee s responsibility to arrange appropriate insurance and ensure the security of the equipment. In the rare case of the equipment being stolen, the employee would need to replace the equipment to continue taking advantage of the tax exemption for the remainder of the lease agreement. 9 Communications Implications 9.1 There will be a launch of the employee benefits schemes undertaken by the providers in conjunction with Human Resources. This will be promoted through Straight Talk, the intranet and on the Recruitment website. 10 Consultations (a) Financial Implications Financial Services have been consulted on this report and the financial implications are detailed at Appendix A (b) Employee Implications These are detailed in Section 8. (c) (d) (e) Legal Implications Legal Services will review the contract terms prior to any agreements being signed. Policy Implications Proposals for employees to Bring Your Own Device and connect their own IT equipment to the Council s network are not currently being progressed. Health and Safety Considerations No implications. 9
(f) Implications for Other Services Consultations have also taken place with the Council s Information Services who will provide advice and assistance in the selection of scheme provider. Consultations have taken place with Financial Services around the payroll administration of the scheme, a service representative will assist in the selection of scheme provider. 11 Tackling Health Inequalities 11.1 No implications. 12 Climate Change and Sustainable Energy Act 2006 12.1 Where an employee chooses not to retain the equipment at the end of the agreement, the supplier will arrange for collection and recycling of the equipment. 13 Risk Management Issues, Including Health and Safety 13.1 There is a risk associated with any salary sacrifice arrangement that equipment may become damaged or lost. The responsibility to maintain adequate insurance rests with the employee under the scheme and payments will still need to be made under the respective agreement. 13.2 There are also risks around employees leaving that have to be managed accordingly. If an employee leaves before the end of the loan period the amount that is owed to the Authority is calculated and arrangements will be made for this to be deducted from the employee s final salary payment. 14 Promoting Equality, Diversity and Social Inclusion 14.1 Employees earning the minimum wage are prevented by legislation from participating in these schemes. This is beyond the control of the council and is considered unlikely to cause any major equality issues as the council pays the living wage, which is a greater hourly rate than the national minimum wage. 14.2 It is considered that there are no other direct equality impacts arising from these proposals. However, analysis of the equality profile of applicants for the revised employee benefit packages will be undertaken, once the scheme has closed, to assess whether this differs from overall equality profile of the workforce. Findings of this monitoring will inform future reviews of this policy. 15 Glossary ESPO EU HMRC NI SMP SSP Eastern Shires Purchasing Organisation European Union Her Majesty s Revenue and Customs National Insurance Statutory Maternity Pay Statutory Sick Pay 16 List of Appendices 10
Appendix A - Financial Implications 17 Background Papers Contained in working files in Human Resources and are available for inspection. Officer Contact: Alison Brown Telephone: 773369 Date: 31 July 2015 Service Director HR and Business Support 11