The London Business School 'Human Capital Club' is hosting their next 'Human Capital Forum' on the 11th of July from 19:00 to 21:00 focussing on the 'Alignment of Reward with Business Strategy'.
Moderating the event will be:
John Campbell, Director Rewards & Recognition, Citigroup Global Consumer Group EMEA and Former CIPD Vice President, International
Duncan Brown, PricewaterhouseCoopers, Former Assistant Director General CIPD, Author of 'Strategic Reward: Making it Happen' and LBS Alumnus
Key agenda items will be:
- Common problems Organisation's are having with Reward Strategy and Change
- Key areas successful companies are addressing to align Reward with Corporate Strategy
- Case studies of successful companies in the UK and Europe
- Key differences between successful and unsuccessful businesses
The Club gathers senior HR thought leaders at the London Business School every quarter to discuss specific topics of interest to the HR community and ask specific Academics, Practitioners and Consultants to host the event as moderators/thought leaders/case studies. We end each session with drinks and canapés and write-up the results of the discussion as a thought piece.
Please email me at GirishMenezes@hotmail.com for the registration form to sign up for the event. There is a £20 charge to cover expenses including drinks and canapés.
Thursday 3 May 2007
How much do you spend on Employee Benefits?
At a recent conference I attended at the Ritz, organised by B2E Solutions, ten heads of Compensation & Benefits from some of the largest UK organisations admitted that they did not know how much money they spend on Benefits Administration. In fact, we frequently we meet FTSE 250 companies who do not even know how many employees they have on a given day, let alone what the financial spend on these employees are.
Given that up to 50% of your cost base is likely to be your employee salary costs and over 10% of salary is tied up in benefits, it is becoming increasingly obvious that historic methods of administering the financial aspects of Employee Reward are not going to be acceptable moving forward. Fortunately, it is possible to integrate all of these seperate employee costs using fairly accepted best practice and easily available technology solutions.
In an organisation we visited last month a plethora of departments were responsible for benefits delivery. HR Shared Services managed the Payroll and Contracts of Management and Clerical staff, whereas Blue Collar workers were managed by local offices. Finance handled Pension contributions, Risk processed Life and Medical insurance and Procurement dealt with cars. Voluntary benefits were offered by an external organisation off their generic website. In such a situation, it would be a time-consuming and expensive project to understand take-up, preferences and cost analysis of particular benefits to the workforce and unsurprising how little HR knows about the Employee spend.
There is quite clearly a need to integrate all these disparate elements together, but where will you find the business case for such a project?
Know your Costs
A solution that can integrate all of the individual components of the Employee financial package for the purpose of Management Accounting is itself a hygiene factor today. It must be a prerequisite that HR should be able to capture and track Employee Costs by group and type in as near to real time as possible. At this stage the key factor in the decision process is the analysis of where all the various pieces of data resides and how easy it would be to interface or integrate the various processes to enable one-view of the Employee financial package. You could make various decisions about maintaining separate databases and software for the various parts of the package, or bringing them together within a single software application.
Demographic Profiling
Once a single view of the Employee financial profile has been created, it is then possible to profile your costs and the value it provides across the organisation. It is possible to benchmark take-up rates against other similar organisations and come to conclusions regarding the viability of certain benefits or a realisation that perhaps greater communication is required for others. Older workers for example have been found to prefer discounted shopping coupons for example. Understanding this value being created or destroyed for various parts of your organisation helps you create the appropriate emphasis during the recruitment cycle, as well as during Annual Enrolment.
Target Communication
Analysis of your benefit programme can aid in both the marketing of current benefits to appropriate segments of the organisation as well as help gauge the efficacy of new benefits that you may decide to introduce to the organisation. This is especially true in complex multi-company organisations with disparate interests across employee groups. For this reason, none of the voluntary benefit firms in the UK are actually turning in a profit. This is due to the emerging realisation that putting together a laundry list of badly marketed discounted offers on a non-company website is not sufficiently interesting enough to drive employee engagement and purchase. It is the well managed and marketed internal benefit programmes that achieve the compensation goals that we desire. In the earlier example, skewing communication about retail vouchers toward older employees could help ensure that they extract maximum value out of the benefits that you have negotiated for them. In another example, a major building company realised that marketing childcare vouchers in employee's homes as opposed to site-based communication enabled them to encourage take-up in 50% of the estimated eligible population.
Control/reduce benefit costs
Data mining of your benefit programme coupled with employee feedback can help evaluate the cost to benefit ratio of your various benefit programmes. This can ensure that you aren't spending excessively on certain products, where it isn't required or appreciated. Over £2Bn is spent every year on benefits in the UK and it is estimated that a fair proportion is wasted. In a major Financial Services company, individual employees could choose which members of their family they could cover with PMI and dental insurance but hadn't actually negotiated a per family member rate with the providers.
Conclusion
Given the large amounts of money currently being spent on Compensation & Benefits and the importance of Human Capital, it is only right that we turn our magnifying glasses on to the appropriateness of the benefit spend. It will however require some strategic thinking, an investment in technology and a change in processes before it is possible to actually be able to move toward the ideal of having a transparent benefit programme and the ability to slice and dice it into an intelligent reward programme.
If you would like to learn more about how to take control of your Compensation & Benefits spend email me at GirishMenezes@hotmail.com
Given that up to 50% of your cost base is likely to be your employee salary costs and over 10% of salary is tied up in benefits, it is becoming increasingly obvious that historic methods of administering the financial aspects of Employee Reward are not going to be acceptable moving forward. Fortunately, it is possible to integrate all of these seperate employee costs using fairly accepted best practice and easily available technology solutions.
In an organisation we visited last month a plethora of departments were responsible for benefits delivery. HR Shared Services managed the Payroll and Contracts of Management and Clerical staff, whereas Blue Collar workers were managed by local offices. Finance handled Pension contributions, Risk processed Life and Medical insurance and Procurement dealt with cars. Voluntary benefits were offered by an external organisation off their generic website. In such a situation, it would be a time-consuming and expensive project to understand take-up, preferences and cost analysis of particular benefits to the workforce and unsurprising how little HR knows about the Employee spend.
There is quite clearly a need to integrate all these disparate elements together, but where will you find the business case for such a project?
Know your Costs
A solution that can integrate all of the individual components of the Employee financial package for the purpose of Management Accounting is itself a hygiene factor today. It must be a prerequisite that HR should be able to capture and track Employee Costs by group and type in as near to real time as possible. At this stage the key factor in the decision process is the analysis of where all the various pieces of data resides and how easy it would be to interface or integrate the various processes to enable one-view of the Employee financial package. You could make various decisions about maintaining separate databases and software for the various parts of the package, or bringing them together within a single software application.
Demographic Profiling
Once a single view of the Employee financial profile has been created, it is then possible to profile your costs and the value it provides across the organisation. It is possible to benchmark take-up rates against other similar organisations and come to conclusions regarding the viability of certain benefits or a realisation that perhaps greater communication is required for others. Older workers for example have been found to prefer discounted shopping coupons for example. Understanding this value being created or destroyed for various parts of your organisation helps you create the appropriate emphasis during the recruitment cycle, as well as during Annual Enrolment.
Target Communication
Analysis of your benefit programme can aid in both the marketing of current benefits to appropriate segments of the organisation as well as help gauge the efficacy of new benefits that you may decide to introduce to the organisation. This is especially true in complex multi-company organisations with disparate interests across employee groups. For this reason, none of the voluntary benefit firms in the UK are actually turning in a profit. This is due to the emerging realisation that putting together a laundry list of badly marketed discounted offers on a non-company website is not sufficiently interesting enough to drive employee engagement and purchase. It is the well managed and marketed internal benefit programmes that achieve the compensation goals that we desire. In the earlier example, skewing communication about retail vouchers toward older employees could help ensure that they extract maximum value out of the benefits that you have negotiated for them. In another example, a major building company realised that marketing childcare vouchers in employee's homes as opposed to site-based communication enabled them to encourage take-up in 50% of the estimated eligible population.
Control/reduce benefit costs
Data mining of your benefit programme coupled with employee feedback can help evaluate the cost to benefit ratio of your various benefit programmes. This can ensure that you aren't spending excessively on certain products, where it isn't required or appreciated. Over £2Bn is spent every year on benefits in the UK and it is estimated that a fair proportion is wasted. In a major Financial Services company, individual employees could choose which members of their family they could cover with PMI and dental insurance but hadn't actually negotiated a per family member rate with the providers.
Conclusion
Given the large amounts of money currently being spent on Compensation & Benefits and the importance of Human Capital, it is only right that we turn our magnifying glasses on to the appropriateness of the benefit spend. It will however require some strategic thinking, an investment in technology and a change in processes before it is possible to actually be able to move toward the ideal of having a transparent benefit programme and the ability to slice and dice it into an intelligent reward programme.
If you would like to learn more about how to take control of your Compensation & Benefits spend email me at GirishMenezes@hotmail.com
Subscribe to:
Posts (Atom)