HOW IT WORKS
Tough times in the construction industry forced Korec to cut staff in 2008. The company laid off a third of its precision measurement instrument technicians and salespeople, leaving 80 employees. Remaining staff were worried about their future, so Korec decided to review its pension offer. It hired benefit communication specialist Secondsight to raise awareness of the existing non-contributory scheme - with Korec paying 4% of salary - and to tackle the fact that only 22% of staff paid anything in, with an average contribution of just 1.5%. Salary sacrifice was set up to help them put more into their pensions, while the overall package was explained through group presentations and one-to-one meetings.
From February 2009 all 80 employees qualified to add cash through salary sacrifice into their pension, enhancing the amount being paid in. As an incentive, Korec paid 10% of the 12.8% of the employer NI saved through salary sacrifice into individuals' pension schemes. Most importantly, employees have benefited from individual savings advice, where Secondsight pension experts helped everyone review their pension history and set out retirement goals. The exercise encouraged them to see the importance of paying into a pension. Efforts were made to reach everyone, with field-based people in remote parts of Wales or the North East, for example, invited to talk to the pensions advisers on the phone if necessary.
WHAT IT DELIVERS
Korec staff have been reassured that their company has their interests at heart, despite trading through a harsh recession. They have also been educated about the importance of paying into a pension and planning for the future. Many had not heard of salary sacrifice before, but following the individual meetings, a massive 82% of members opted to save through this method, adding a few hundred pounds to their pension pot a year. By July 2009 Korec calculated 88% of members placed greater value on their employee benefits than they had before. A massive 84% of those in the pension are now making a contribution, compared with only 18% before. Over the same period the average contribution rose from 1.5 % to 5.7%.
THE HR VIEW
David Hodkinson, finance director for Korec, says: "After a redundancy period of almost a year, we wanted our remaining staff to feel a sense of security within Korec, so introducing salary sacrifice was a great way to say 'here's some good news for you - an added benefit for being with us'." He feels it was important that staff knew their hard work was being valued "especially in this tough economic climate", and says the efforts made by the company to communicate the pension package better have paid off. "So many more employees at Korec now make a contribution to their pension whereas before it was a worrying minority." The general feedback has been that employees saw the benefit of salary sacrifice and felt more appreciated. "As a management exercise, it hasn't been costly or too complicated to implement as Secondsight has facilitated the whole process," says Hodkinson. "We've had to put aside time to slot in all the meetings, and do some communication work, but for a fantastic return in terms of pension take-up and employees' perception of the company."
THE EMPLOYEE VIEW
David Bennett, a strategic accounts manager at Korec, hadn't heard of salary sacrifice before, but opted in to enhance his pension provision based on advice given at his individual meeting. "Everyone feels vulnerable in their job in the current climate, particularly in sales-based companies like this, so it was good to see Korec taking a lead on introducing something that shows they're committed to us," says Bennett. "In sales you know that if targets aren't being hit it's problematic, so everyone is working extra hard to justify their job. That means anything that shows your efforts are being recognised is appreciated." Most of those working in Korec's technical workshops, selling GPS measurement systems and surveying equipment, tend to be young and male, with other life issues taking priority over pension-planning. "I've got a young family, so finding time to organise a pension is difficult," says Bennett. "The professional help I had from the adviser - including very efficient follow-ups to sort out the paperwork after the meeting - has got things moving."