Tim Kemp contributes to UK Construction
In July 2008, Tim Kemp, Director at Warren Partners, discussed the varying worth of benefits to different employees, for his regular column in UK Construction:
The importance of a benefits package to an employee generally depends on the stage they are at in both their life and career. To young professionals at the start of their careers, benefits do not typically mean a great deal, and they tend to be more concerned with security of salary and the amount of money coming in to the bank every month.
Once employees reach their 30s and 40s and begin to think more long-term about mortgages and families, however, incentives and bonuses become increasingly important. At this stage in their careers, executives also tend to start thinking more about flexibility of work, and freeing up time to spend with their families.
We are currently seeing more and more interest in share options and equity, as executives become more savvy about their worth. Several companies in the construction sector have taken this demand into consideration and now adopt a corporate approach to employee benefits, tracking share prices and rewarding staff according to the shares' performance.
Many smaller firms are also beginning to offer equity as a way of retaining loyal talent. If the company eventually goes on to float, the employee can then cash in their shares, meaning that even those at lower levels within the business can find themselves benefiting quite significantly from their reward package.
Company pensions are becoming less and less important and, over recent years, we have witnessed a growing trend for employees to demand greater independence over their financial set-up. Most are no longer happy for their employer to have control over their pension scheme and investments, and want a flexible package that they can carry with them from one employer to the next.
Long gone are the days of company cars playing a large part in benefits packages. Due to the tax penalties and lack of flexibility associated with company cars, the majority of executive level candidates now tend to prefer to take an allowance.
Taking a vehicle from the company pool may mean ending up with a three-year old car that hasn't been particularly well looked after, when you would prefer to be driving a brand new one. By taking a car allowance as part of a reward package, an executive is afforded the option of selecting their own car or downsizing against the model offered and using the monetary difference for other things.
However, this does not mean to say that executives can simply go out and spend £500 on an old banger in order to increase their disposal income. Within senior level contracts of employment, there may well be a clause stating that an executive's car must meet a certain standard, in order to project an image in line with that of the company.
Classed as a benefit in kind, taking a company car can also mean paying excessive levels of tax. So unless you are travelling thousands of miles every month for work, a car allowance will also make more sense from a tax perspective.
Ultimately, the most innovative employers are those that recognise that a 'one size fits all' approach to benefits simply doesn't work.
July 2008
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