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The brave new world of benefits

John Stepek is the son of a retired second generation family business owner. He lives and works in London as a financial journalist.

In this day and age it is difficult for companies to retain staff long-term, especially the under 35s, and employee benefits can be an added incentive. It appears, however, that it is not only the benefits that encourage long-term service with a company

What does the average employee expect from his or her employer? A competitive salary? Generous holidays? A company car, depending on the position? Maybe even a pension scheme – though perhaps on less attractive terms than could once have been expected.

But how many employees could expect a trip to South America? That's what Angela Brown, a waitress at Bettys Café Tea Rooms in Harrogate won as part of a scheme to encourage employees to help out at the firm's ethical trading division.

The tea room is owned by Yorkshire family business Bettys and Taylors. Angela has worked for the company for 19 years serving customers with brands such as Taylors' Yorkshire Tea and Feel Good coffee. When she won the trip last November she was amazed. "When I found out I screamed the place down – I'm surprised that we're still standing here on Parliament Street! I'd never won anything in my life and then I win a trip like that!"

Bettys Café Tea Rooms was started in 1919 by Swiss baker Frederick Belmont. Taylors of Harrogate was founded by tea and coffee merchant Charles Taylor in 1886. The two companies joined forces in the 1962. The family business is still owned by descendants of Belmont.

The firm has a strong reputation for social responsibility. Half of the profits from its Feel Good coffee brand go to growers in South America to fund community projects. Staff in Yorkshire help to pack coffee in their free time to save on costs that are fed directly back to the growers, and it was participating in this that won Angela her trip to Nicaragua.

"They put all our names in a coffee pot. And mine was the lucky name that came out." She went out for a week to visit farmers in the Matagalpa Mountains where the coffee is grown organically, accompanying Mike Riley, the coffee buyer, as he negotiated with growers and visited producers to ensure the company's exacting standards on working conditions were being maintained.

It made a big difference to the way Angela thinks about her work. "I enjoyed the trip immensely. And it made me realise that when I serve up a cup of coffee to a table it's not just a cup of coffee. There are the buyers and the translators, there are the people who dry the coffee, it has to be milled, fermented and roasted. It also gave me a better understanding of what a coffee buyer does.

"I certainly feel more involved with the company but then I've always felt involved. They want 110% loyalty but they give you that kindness in return. I was given the chance to go somewhere I'd never have normally dreamt of going."

As well as unusual incentives and awards like the trip to Nicaragua, the company also offers a profit-share bonus, paid quarterly to all staff, which has been running for over 20 years. Throw in maternity benefits that are ahead of statutory requirements, and regular social events, and there's a lot more to working at Bettys and Taylors than just a monthly wage.

Retaining staff
This creative approach to benefits can reap rewards for employers as well as staff. Labour turnover is a costly business, with expenses arising from payroll and personnel administration for the leaver, and recruitment, training and handover costs incurred when replacing the employee. According to the Chartered Institute for Personnel Development (CIPD) in 2002 staff turnover cost businesses an average £3,462 per leaver, with more than two thirds of businesses saying that staff turnover had a negative impact on their business performance.

And once employees leave, they're difficult to replace. The majority of employers experienced difficulty in recruiting staff, with the average vacancy taking more than nine weeks to fill, with management and skilled positions taking even longer.

So it's best not to let staff go in the first place. But they are becoming harder to retain, particularly younger staff. Fifty-one percent of employers agreed that it had become more difficult to hold onto the under 35s in the last five years.

This means that retention is a top priority for most firms when it comes to working out employee benefits packages. Nearly half made changes to their pay and benefits structure as a result of high labour turnover, and more than three quarters of employers who did so believed that it made them more effective in retaining skilled employees, or recruiting new staff.

The perfect package
So what kind of things does a company need to consider when thinking about putting together a benefits package? Charles Cotton, reward adviser for the Chartered Institute of Personnel Development says: "It depends on the aims of the organisation. A company has to work out what kind of environment it is and what its employees value. Younger employees might be more interested in extra holidays and increased leisure time. A company with an older workforce might find they are more interested in pension and healthcare packages. Or a sales team might be more motivated by the type of company car available."

Not everyone has to receive the same benefits. Some companies offer benefit 'menus', where employees get to choose from a range of options up to the full value of their package.

One popular perk is flexitime. Cotton says, "There are a lot of good points about flexitime – it's a benefit that employees particularly enjoy and it can allow the company to open for longer, depending on the hours worked. But there are costs as well. What happens if everyone decides they want to work from 8 until 4? And what about when they want to change shift patterns? Companies should always explore these ideas and work out the problems that could arise before committing to change."

Other employee benefits can be favourable from a tax point of view. In the UK employer-provided childcare vouchers are free from National Insurance (NI) contributions on the behalf of both the employer and employee. This means that the costs of running the scheme can be offset by the NI savings – and of course, it makes it easier for valuable members of staff to return to work after starting families.

Means and motive
But one thing that seems obvious is that it doesn't matter how many benefits you offer staff – the key thing is the motivation behind them.

Shoe repairers and key cutters Timpson came sixth in this year's Sunday Times list of the top 100 companies to work for. The company was started in 1865 by the great grandfather of current chairman, John Timpson. The firm was taken over in the 1970s, but Timpson lead a management buy-out in 1983 to bring the company, which now has over 300 branches throughout the UK, back under family control.

The firm offers a wide range of employee benefits including a final salary pension scheme – a perk that's hard to find these days; a hardship fund; extremely generous staff discounts of up to 90%; holiday homes in Blackpool, Spain and Bournemouth; and everyone gets their birthday off work.

This generosity certainly pays dividends for the company. Timpson has recently handed out four long service awards for staff who have been with the firm for more than 45 years, and says that many staff have brought their own family members into the company. He says: "If the families that work for us think our business is good enough for their children then we must be doing something right."

However, as he points out: "Benefits play an important but not the most vital part. The most important part is to make sure you have got the right people. The other most important thing is that the people we have are supported, helped and rewarded by their business. So we give all our managers a completely free hand to praise their people as they think is needed."

It's this culture of making employees feel valued and part of a bigger team that can give even smaller family businesses an advantage over non-family owned firms that may be better resourced, but whose attempts to create a corporate culture through mission statements and artificially engendered values sometimes go wide of the mark.

Angela of Bettys and Taylors agrees. While she greatly enjoyed her South American adventure, she puts her 19 years of service down to the culture of respect for employees. "One of the main reasons I've been here so long I think is because it's a family business and the chairman knows my name. You're not just a number, you are a person. I hope it never changes – I think if it did I'd be out the door!"

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