Employee benefits in the charity sector
Peter Crush, October 23, 2009
Charities can no longer rely on commitment to a cause to attract and retain staff. Their perks have to be competitive too. Research by Best Companies for HR magazine shows how they compare with the private sector.
In 2004 disability charity Leonard Cheshire caused a sensation when it boldly announced a revamped employee benefits offering that promised to give staff 'a deal set to rival the packages in the private sector'. Comprising high interest savings accounts, reduced-priced childcare vouchers, and money-off theatre tickets, car rental, holidays and insurance, to name but a few, it was as much designed to encourage people put off working for charities as it was to reward existing employees, said HR director Clare Smith. She also hoped more charities would follow its lead and start to update their benefits image.
Explicit in her statement was that charities are businesses too, and to attract the very best talent, they can no longer rely on commitment to a cause alone. In the same year 30% of charities said they did indeed plan to amend their benefit packages (more than any other sector), with 65% of them, according to the CIPD, promising to redesign their entire reward strategies to recruit and retain high-performing staff. But five years on, has Smith's call for charities to offer private-sector-standard benefits really caught on?
The good news is that limited, industry-wide data suggests it has. Croner Reward's recent Charity Rewards Survey (which polled 348 charities, covering more than 44,000 workers) finds 14% now offer the distinctly private sector-sounding performance-related pay - most (71%) apply to all staff typically rewarding 3.6% of salary; 70% now offer life insurance; 25% offer private health insurance to management grades and above (with 18% offering it to other staff); and 15% of charities pay some form of allowance for working at home. These figures were all up on surveys of previous years.
To gain a better understanding though, HR magazine asked Best Companies to find its top 25 ranked charities of 2009 and see which of them offered the 33 different benefits it measures. For comparison, we also asked Best Companies to see how the 2009 list differed from what the top 25 offered in 2007.
Before looking at the 2007-2009 data, analysis of the 2009 list reveals the majority of this year's top charities continue to offer the sort of hours-related benefits charities have traditionally been well known for - such as flexible working, job sharing, compressed hours, sabbaticals and flexitime - and there is parity with the private sector in other benefits. Of the top 25 ranked charities 40% offer career breaks, says Best Companies, much the same as that offered by private business.
In other areas, charities eclipse the private sector. According to Ceridian, just 10% of private firms offer flexible benefits, compared with 24% of the 2009 charities list. The same percentage of top charities offered gym/subsidised health benefits. This compares with the 16% of companies that offer it in the private sector, according to Watson Wyatt. HR/Best Companies' findings show 64% of 2009-ranked charities offer a wellness programme, far more than the 57% of private sector firms that provide it. Watson Wyatt also finds the typical rate of companies offering life assurance is 38%. Among charities it is 48% in 2009.
According to Lai-Har Cheung, employment practice manager, workforce development, National Council for Voluntary Organisations (NCVO), these results are strong indicators charities are starting to get serious about their benefits offerings. "Charities are no different from the private and public sectors - they still need to manage an effective and efficient organisation that delivers to their mission and goals. In order to do this, they compete to attract, recruit and retain the skills and talent they need. They often recruit people who are motivated by their cause, but increasingly they can only retain these staff by being a good place to work."
The traditionally high penetration of flexible working/working hours-related benefits reflects the fact two-thirds of charity workers are women and nearly half (46%) work part-time. Increasingly, though, more charity workers are degree-educated men, and commentators believe this is why charities have been forced to change.
But it is not all rosy. Comparing the benefits offered in 2009 with those in 2007 reveals charities have been feeling the pinch. Of the 33 benefits ranked, 13 were more numerous in 2007 than in 2009. This year only nine benefits are offered by more charities than in 2007. So is this a sign that charities are starting to scale back, just as they have succeeded in widening their offering?
Mark Griffiths, reward and HR information officer at The National Trust, thinks not. "It's a question of offering what's relevant," he says. "Some charities didn't have great benefits and they've been moving them up to become more acceptable. This is still happening, but they're looking at what works for them." Griffiths joined the National Trust three years ago having previously worked in rewards at Barclays and Arthur Andersen. He says a private-sector background has influenced what was already a good base level of benefits. "We already offered three months' full pay as sickness benefit from as soon as people joined. This was almost too generous. What we've done is tweak here and there to iron out irregularities - such as having enhanced paternity pay, but not enhanced maternity pay. What I have noticed from the private sector though is just how advantageous benefits are when part of a pension. I've tried to bring this in here - so I introduced death in service of 12 x salary if part of a pension, and for those that did not chose a pension, 1 x salary."
Griffiths adds: "You can enhance benefits without impacting financial performance. It's all about being smarter without adding cost and appearing to be more generous." He has partnered with Bupa enabling National Trust staff to get 25% off private health cover and Royal & Sun Alliance to give 10% off home and motor insurance.
A money saving investment
Social inclusion charity P3 is the charity that offers the most benefits - 25 of the 33 measured by Best Companies. According to its director of services, Mark Simms, who is also responsible for HR, the charity works to a ratio of paying up to 80% of its income on staff costs, so benefits provision can keep being added up to this threshold. "Our vision is to rival any private-sector company, and this means paying and rewarding staff as much as we can afford, rather than as little as we can get away with," he says. He adds: "We see it as an investment that saves us money. We now have 260 staff, but turnover was less than 5%. The year before it was 12%. By spending more on benefits we're spending less in recruitment advertising, induction and training."
Griffiths is not in favour of introducing flexible benefits. This in contrast to Guide Dogs for the Blind (see p41) and is also at odds with HR/Best Companies data showing a doubling of charities offering flexible benefits (from 12% to 24% in the past two years). "When I was at Arthur Andersen, we had flexible benefits; at Barclays we did not," he says. "Each has its plus points but I'd rather our ad-hoc benefits are so good there is no demand for flexible benefits."
It could be argued some charities, especially The National Trust, are more blessed than others. The Trust is able to make use of its estates to give staff free entry into any Trust property as well as 20% discounts in all Trust shops and preferential rates for its network of 335 holiday cottages. But Griffiths says he cannot stand still. "We want good talent, and for people to see us and think we can offer good benefits. The cottages discount was already 30% for off-peak periods. I've raised it to 50%."
Although the 2009 table shows charities are scaling back, it is notable it is in areas such as hours-related benefits and flexible working, rather than in tangible benefits. Benefits on the rise include profit-related pay, flexible benefits and healthcare for dependants - all things that need investment.
But overall healthcare is still an area that needs improvement. Just under a third of non-profit organisations provide some kind of health insurance for some categories of staff, compared with 77% of private-sector companies. Is there a reason charities still lag behind here? Michael Hodgetts is CEO of the Charities Buying Group, which acts as a bulk-buyer for charities to gain rates of up to 30% off for its 2,500 charity members. He says: "Healthcare is among the hardest of the benefits for charities to buy. Suppliers seem less willing to talk to the sector even though it is an enormous area of untapped potential." But, he adds: "Charities must also take some blame as they have not always thought this was a service they could buy."
Nicola Cooney, head of rewards at Centrepoint, says hardly any suppliers offer her charity discounts and the only way staff can get discounted PMI is by buying it themselves. They then get a reduction for being charity workers. Help is at hand, though. At the time of interview Hodgetts said he is about to finalise contracts with soon-to-be-announced suppliers to establish a private healthcare buying group package that should offer charities a healthcare discount of about 10%.
Times may be tight for charities, but more and more are realising their benefits need bringing into the 21st century. This is a good thing, as the war for talent will only intensify further.
TOP 25 CHARITIES 2009
Best Companies analysed its top 25 charities to work for against a list of 33 separate benefits. The average number of benefits offered was 12, although two charities (Prospects for People with Learning Disabilities and Tyneside Cyrenians) offered just three. The charity offering the most was social inclusion charity, P3, with 25. Trafford Housing Trust and World Vision were the next most generous, with 21 and 20 respectively of the 33 benefits. The most popular benefit was reduced hours (by 21 of the 25 charities), followed by job-sharing and home-working (each offered by 17). Next most popular was flexitime and childcare vouchers - given by 16 of the 25. But only one (IGD) offered healthcare for spouses and only two (Trafford Housing Trust and P3) offered healthcare for dependants. But absolute numbers do not tell the full story. Global Action Plan, the charity which offered only seven of the benefits was one of only four to include profit-related pay and one of only nine to offer performance-related pay.
Nicola Cooney, head of rewards at homeless charity Centrepoint, shares the view that charities have (and are) upping the ante, and are learning from the private sector. "We're just about to add discounted PMI and an enhanced pensions scheme because we have to stay competitive," she says. Cooney says she simply has to meet current expectations. "We want to hire people from the commercial sector, so we have to be mindful of the expectations of people from that sector. We cannot operate our business without all positions being filled by high potential people."
An innovation Centrepoint recently introduced is the distinctly private-sector performance-related pay. Only nine of the top 25 charities list offer it, and outside the list this benefit is rarer still. "It was a deliberate move to foster a culture of high performance," says Cooney. "Based on the results of appraisals and hitting targets we award a percentage of salary as either a one-off payment, or an amount that gets consolidated into their normal pay level. It can add up to 5% more on staff's basic pay, and each year about 70% of our staff will receive some form of performance bonus."
Although it sounds expensive, Centrepoint's decision to adopt performance-related pay was to control costs (it opted out of Government-set public sector pay rounds). Cooney also says a new staff discounts scheme only costs her "a bit of photocopying and administration time".
GUIDE DOGS FOR THE BLIND
Last month, Guide Dogs for the Blind launched the first phase of a year-long project to overhaul its staff benefits, with the introduction of a voluntary benefits scheme called 'My Discounts and Cashbacks' - a range of vouchers/discounts from high-street retailers. The programme is part of a wider project looking at its pay and grading structure and comes after staff surveys in 2006 and 2008 revealed the workforce felt there was room for improvement. "We had a very traditional charity benefits offering," says Sarah McKenna, its head of HR services. "What was loud and clear was that while staff said they felt incredibly loyal, they thought their benefits were less good."
The results of the surveys persuaded the charity to undertake a feasibility study into running a total rewards flexible benefits scheme, and this will come on stream next September, through provider Benefex.
"We felt it was important staff could see the value of their benefits, and this options allows this," says McKenna, who also adds the change will be cost-neutral. "We will arrive at a spend-per-head figure on benefits we feel are appropriate. We are mindful we need to give our employees the best deal and we recognise there is competition in the market. We also feel we'll get better ROI, because currently everyone gets PHI, but not everyone uses it. The new scheme enables staff to choose what they need, like dentistry cover. It will cultivate more of a wellbeing culture.
"We don't think anyone has ever left because they didn't think our benefits were up to scratch," she adds, "but we do know they contribute to job satisfaction and it will help with recruitment."
TANYA HILL, UK REWARD ADVISER, HUMAN RESOURCES, OXFAM GB
Q: How has Oxfam's range of staff benefits changed over the past few years?
A: The main changes have been introducing salary-sacrifice schemes such as bicycle purchase and childcare vouchers. Changes were also made to our defined-benefit pension scheme, which closed to new members in 2003. This included linking the increase in pensionable pay to RPI. We are about to introduce pension salary sacrifice.
Q: How important is it to be competitive with, say, the private sector?
A: We don't aim to offer expensive private-sector benefits such as company cars or private health insurance. Benefits are designed to help employees work more effectively - for example, childcare vouchers and maternity pay.
Q: How do you know if you are competitive in what you offer?
A: We take into account the cost of benefits versus usage as well as staff negotiation when adding or removing benefits. We also consider whether they are offered as standard in other charities.
Q: Will charities ever have the scope to truly compete with the private sector?
A: Charities are accountable for how they spend their funds. But there is an increasing demand for skilled staff in specialist areas. Therefore, the total compensation package, including the non-financial and tangible rewards, needs to be competitive.
Q: Are there any benefits you currently offer that are cost-neutral because you are a charity?
A: Some of our benefits are cost-neutral, such as corporate discounts agreed with local shops and gyms, for example.
Q: Are staff motivated to join you purely by the benefits on offer?
A: Our generous maternity pay and defined-benefit pension scheme may be contributing factors for employees remaining with the organisation. But most staff don't ask about benefits when joining Oxfam.