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Benefits Rewarding Former Colleagues: Gone, but not forgotten

Should businesses be offering benefits to staff who no longer work for them? Peter Crush reveals how an increasing number of HRDs are treating ex-staff just as well as existing ones.


Corporate incompetence is the term generally used to describe businesses that find themselves facing the sort of contractual pickles that see them having to continue to pay former staff (ones they are normally trying to get rid of) wages, bonuses and a whole host of other benefits long after they have stopped contributing anything to the company. A public case in point was the six suspended social care workers involved in the 'Baby P' scandal at Haringey Council. They were still on full pay (£24,000 a month), despite being suspended - a situation that children's secretary Ed Balls was at the time reported to have described as "rewarding failure".

But some companies are deliberately spending money on offering a whole range of benefits to former (rather than retired) colleagues, and it's a move that should, say those behind it, be copied by more HR directors. Among companies offering this are McDonald's, British Airways - which offers flight discounts to former staff linked to their length of service - and De Beers, whose ex-employees benefit from generous discounts on jewellery.

So why spend money on providing benefits for staff who have decided to leave - especially if the budget for existing staff looks likely to be getting tighter? Shouldn't effort, and resources, go towards the people you do have?

These questions have already been voiced by pensions campaigners - where AWD Chase de Vere Consulting for one recently branded it 'ridiculous' that companies are spending more on the pensions of staff that left decades ago than they are on their existing people. Is allowing former staff to also share additional benefits, normally those only available to current staff, a step too far?

David Fairhurst, senior VP/chief people officer, McDonald's Restaurants Northern Europe, thinks not. For the past year, Fairhurst has offered an addition to the fast-food chain's My Lounge employee intranet - an alumni section for past employees to stay in touch, keep up to date with company news and, crucially, to get access to a suite of benefits, including a discounted mobile phone contract with O2.

"McDonald's is a stepping stone for many of our colleagues," he says. "We've long accepted this, but our view is why not try to maintain a relationship with these people, so they continue to have an ambassadorial role. Former staff who can continue to feel warmly about us tell their friends. To date we have 44,000 alumni staff. It's good for the brand and it is a good way of attracting new recruits; a quarter of our people come through word of mouth."

According to Fairhurst, expecting staff to perform an ambassadorial role means he needs to "create some form of mutual value for them, too" - hence opening up staff benefits to former employees. "We have about 1,800 benefits, mostly discounts off theme parks, travel or everyday essentials," he says. "While not all of them are yet available to former staff, many are, and more will come this year, including benefits that are a direct cost to us (rather than coupons or vouchers paid for by the redeeming retailer)."

The alumni mechanism is not a new idea - colleges and universities have long used them, not just for students, but also for staff. For example, The University of Northampton's Association for Former Staff, run by alumni officer Mitch Smith, offers its members a range of benefits that would have been familiar to them during their employment. Similar is the Suss-Ex Club, an association for former staff of the University of Sussex. Here, benefits include being able to make use of the university's sports facilities, enjoying library borrowing rights, use of its language centre, eating at its subsidised catering facilities, being able to attend lectures, and having membership of the Student Union.

Once the preserve of the educational establishment, the alumni mechanism is now being adopted by companies, which are building 'corporate alumnis'. IBM and KPMG both have their own alumni and offer a range of benefits they can chose from.

One corporate alumni is law firm Linklaters' service, which went live in October 2006. "This was when we set up a dedicated website offering the full range of benefits and services we offer," says Zoe Hobbs, alumni manager. On the website - which can also be viewed by existing staff - former colleagues can read about other ex-Linklaters staff, but also find out about any benefits they can access. "We added benefits in 2008 as a result of feedback from alumni about what we could provide them,"she says. "The most popular is our Best Supporting Act cards already given to existing staff and now extended to former staff. They give people entry into galleries, money off cinema tickets and the like."

According to Hobbs, 60% of ex- Linklater staff are now part of its alumni - it has just over 3,400 - and the site gets more than 2,000 hits a month. "We want to maintain connections with former staff," says Hobbs. "We are aware people could return to us or recommend Linklaters to their friends as a good place to work, but that's very hard to measure. It's really about maintaining goodwill."

Not only does the company provide former staff with cost-neutral voluntary benefits, it also lets ex-employees keep their subsidised memberships of gyms and sports clubs, and enables them to participate in volunteering opportunities paid for by the law firm.

However, despite the growth of alumni schemes, pockets of resistance still exist. "Allowing staff to keep their benefits after they leave an organisation is not something we would recommend," says Caroline Jordan, head of voluntary benefits at benefits broker the Personal Group.

According to Fairhurst, part of the rationale of extending benefits to former staff is to eventually benefit from some of them coming back to the organisation - and bringing with them enhanced skills to more managerial roles. So far, this theory has yet to be proved, and Jordan questions the premise entirely. "Why should an employee work for a competitor and still enjoy the perks of their past employer? If they still enjoy the benefits of their former employer, why would they choose to go back?"

But one organisation believes it has proven the value of rewarding former staff. It is accountancy firm PricewaterhouseCoopers. It has more than 45,000 alumni. A PwC spokesperson told HR magazine: "We know this is a great source of re-recruitment. We find alumni act as advocates for PwC's graduate programme with their own children and relations. Research conducted on the programmes a couple of years back suggested the cost of recruiting a returnee is as much as 50% less, with the advantage that they are familiar with the organisation, the culture, etc immediately when they join."

Martha How, head of reward consulting at Hewitt Associates, says while she has heard of former employees keeping their private medical insurance for up to three to six months, as well as some keeping their voluntary benefits, the bottom line is that "budgets are tight at the moment, so employers can't afford to waste money on staff who have already left". She adds that it would also demoralise existing staff if they knew money was being spent on former, as well as current, staff. "Often staff still receive medical and life benefits as part of their pension package. But if a broader benefits portfolio was extended to all employees who have left, current staff might feel disenchanted."

But, according to Fairhurst, there is another reason current employees should feel pleased their employer is reaching out to former staff. "It's a lot easier for me to purchase benefits packages from suppliers when you can add another 44,000 to the population," he says. "Providers are interested in volume, and an alumni group gives suppliers the numbers they need. Through this, existing employees benefit because they enjoy the bulk-buying discounts we can negotiate. In essence, benefit spend goes further for existing staff because of money saved through increased headcount by adding former staff to the list."

Put like this, providers are more than happy to do business with firms, says Mark Carman, director at provider Motivano. "Lifestyle benefits, such as discounts, remind staff they were with a good employer. I think it's a goodwill gesture and, as a provider, we have no problems with this." But even Carman says employers need to proceed with caution: "I still don't think employers would want to extend healthcare cash plans and dental insurance to ex-staff."

So will extending benefits to former employees really pay off? The jury is still out, and HRDs will need to convince both staff and the rest of the board that splashing cash on people who are no longer with them is expedient. But as long as there are trailblazers like McDonald's, the idea will be there for debating, and it could even provide some tangible payback.

What some alumni get:
Former University of Gloucester staff receive:
- 25% off tax return form service Tax Fix
- 10% off vitamins supplier Healthy Direct when they spend more than
- £75 off CIPD membership fee if an MBA studying for a CIPD course
- 25% discount on web design/marketing services from JustinMarch.com
- Corporate rate of £55 per night in Express by Holiday Inn hotels
- 10% discount on flowers bought through Arena Flowers
- 10% discount on Prestat Chocolates
- 5% off Venture Hotels rate plus a free room upgrade
- 10% off accommodation at Cottages4you
- 5% discount on airport car-parking with FlyPark
- 10% discount on mobile phone insurance from TalkCover
- Two-for-the-price-of-one meal deals at 1,000 restaurants through the
Gourmet Society

Sarah Mace, who is responsible for benefits at the university, says these have largely "evolved this way", and because they are voluntary come at little or no direct cost to the organisation.

Former PricewaterhouseCoopers alumni staff receive:

- Discounted PwC reports and professional manuals (staff often move into roles where this information is still relevant)

- An online shopping discount service (for a small nominal fee), including extensive shopping offers for the theatre, electrical equipment and holidays

- PwC paid-for networking events in London and the regions

- A magazine keeping staff updated about each other and other offers.