Mattioli Woods Issue 1 MANAGING EMPLOYEE BENEFITS

Mattioli Woods Issue 1 MANAGING EMPLOYEE BENEFITS In this issue: THE WORLD OF Alan Fergusson Employee Benefits EMPLOYEE BENEFITS Director Welcome to the first edition of Mattioli Woods new These are flexible approaches to offering benefits to EMPLOYEE BENEFITS quarterly newsletter for business owners, managers, employees, but are not full flex. The key is how you By Alan Fergusson, human resource and finance professionals. Our present different options to your employees. Employee Benefits Director intention is to keep you up-to-date with employee reward and benefit news helping you to recruit, retain There are innovative ways of doing this, and and motivate your employees. Please email us with communication of those benefits is imperative in any feedback or suggestions to improve the newsletter getting the message across. As important is ensuring and your comments on any of the stories in our launch the benefits offered meet the needs of the majority edition. [email protected] of employees. There is little point in introducing an extensive and often expensive menu of options, if Auto-enrolment, auto-enrolment, auto-enrolment - employee support is low. Research into employee MERGERS AND ACQUISITIONS one would think there is nothing else happening in the appetite for a benefit is vital. world of employee benefits! By Jim Tennent, Part of the barrier to introduce flex for some employers Director One thing is for sure, auto-enrolment will have a has been the availability of affordable technology, hand in shaping employee benefits in the future, but coupled with the restriction of insurers willing to look at whether an employer perceives this as a positive or a terms. Both these areas have softened in the past few negative statement will very much depend on employer years. attitudes, employee perceptions, and potentially parent Many flex platforms can now offer not only an auto- company influences. enrolment management solution, but also the ability Take an employer who currently contributes nothing to run a flexible benefits scheme as well as providing to staff pensions, and elects to cut back in other areas ‘total reward statements’ to employees. Total reward NEW PENSION LEGISLATION to fund pension payments. This may be perceived statements are often the starting point on the journey By Paul Rai, as a negative reaction to auto-enrolment, but did to flex. These provide a detailed breakdown to the Employee Benefits Consultant the employee value or understand the benefit now employee of their remuneration package. foregone and replaced by pension contributions, or These can be tailored to an employer’s requirements does the employee see the pension as the positive? and can include almost anything with a value attaching Conversely, an employer may believe their employees to it, even items such as holidays. Statements can need additional benefits on top of an existing menu of be provided in hard copy or electronically and can act options. But is this really a positive if an employee does as both a retention tool and attraction tool for new not value or understand the existing choices? employees. Whilst discrimination legislation has meant that an In conjunction with a flexible approach to staff provision, ONE SIZE DOES NOT FIT ALL employer has needed to ‘objectively justify’ certain employers may wish to provide additional services By James Bolton, benefit package structures, larger employers have, to employees going through illness, bereavement, or Director Employee Benefits (South) for many years, looked to segment their workforces, retirement. Senior management may require more avoiding the ‘one-size-fits-all’ approach to benefits. specialist pension consultancy, seeking additional As benefits in general become more flexible, this flexibility within their retirement arrangements that approach can work also for smaller employers. What may be served by a self-invested personal pension or motivates one employee may not motivate another. So, small self-administered scheme. if an employer has a core level of benefits, a flexible The same management, who may be time poor in terms benefit approach might provide flexibility, employee of seeking advice may benefit from ‘executive financial satisfaction, and some economies of costs. AUTO-ENROLMENT counselling’. This can encompass various areas, such By Andy Maslen, What do we actually mean by flexible benefits (flex)? as establishing the short, medium and long-term goals Senior EmployeeWEALTH Benefits MANAGEMENTConsultant Flex& EMPLOYEE is often in BENEFITS the eye of the beholder, and many for the individual shortfall on anticipated income in employers often offer a hybrid flex arrangement, taking retirement, and other areas such as investment risk on board the principles of flexibility, without offering a and taxation. full flexible package. There is a cohort of benefits including staff provision, It could be that an employer offers the option to forfeit wealth management services, and executive pension salary or bonus for additional pension contributions, planning that can collectively ensure an employer childcare vouchers, or bike-to-work schemes, which as is able to deal with all the needs that a group of PRIVATE MEDICAL INSURANCE well as offering taxation reliefs also provides reductions employees may have. in both employer and employee national insurance By Ed Watling, When it comes to employee benefits, auto-enrolment is contributions. Or an employer offers a medical scheme Healthcare Business just the prelude… the main act is still to come! Development Manager to employees, but gives the option to include family. We are one of the UK’s leading providers of wealth management and employee benefits services. We employ over 400 staff throughout our Leicester, London, Aberdeen, Glasgow and Newmarket offices and hold over £4 billion of assets under advice and administration. By building long-term relationships, our aim is to provide trusted advice, high service standards and personalised delivery. Mattioli Woods - Managing Employee Benefits MERGERS AND ACQUISITIONS HOW ROBUST IS YOUR DUE Jim Tennent DILIGENCE? Director We are all aware that following a robust due diligence Regular audits programme is an absolutely critical part of any deal-making Employee benefit due diligence, however, should not be the sole process in the mergers and acquisitions (M&A) arena. Indeed, it preserve of the M&A arena. It makes complete business sense would be a foolhardy group of investors who proceed with deals for all companies to regularly conduct a full audit of their existing without analysing every single aspect of the management buy-in, employee benefit programme. buy-out, merger or acquisition that they are about to complete. But, just how robust is the due diligence programme that they Employee benefit due diligence seeks to identify the potential are following? risks, liabilities and cost savings that exist within a company’s employee benefit programme, including pension provision, death The overriding perception of purchasers and vendors alike has benefit cover, health insurance, HR data processing and validation, always been, and still is, that when considering an employee IT systems and time management capabilities. benefit programme, the biggest and perhaps the only risk they could potentially expose themselves to is that associated with a This audit is particularly effective prior to the sale of any business. Paul Rai defined benefit (DB) scheme. However, experience has shown Not only will the audit ensure there are no potential risks or Employee Benefits that such superficial analysis of an employee benefits programme liabilities which the buyer could use as a means of reducing price Consultant invariably leads to greater risks and significant additional but perhaps more importantly will identify potential cost savings unforeseen liabilities. which could significantly increase exit value. With the implementation of auto-enrolment in October 2012, is the national curriculum. With money worries being a major cause The potential for higher risks and greater costs is not just CASE STUDY the provision of a pension shifting from the government to the of stress, leading to employee absence, it seems sensible for restricted to DB schemes; defined contribution schemes and We were asked by a Private Equity House to carry out an employee responsibility of the individual and the private sector? From employers to offer financial education to their workforce. ancillary benefits all have their potential pitfalls too. Despite benefit audit on one of their portfolio companies which was next April, savers will be able to use their pension money as they So what next for an employer who is interested in putting a this, they are often given low priority and minimal scrutiny, or being sold. We identified a cost saving on their employee benefit see fit, from the age of 55. Whilst we are happy to spend time financial education programme in place? The important step is overlooked completely. programme of circa £75k. The business was sold 14 months later finding cheaper car insurance or the best deal on our utilities to identify what your employees want and need. It is little value to for a price/earnings multiple of 5.5x therefore increasing exit value bills, do we have the confidence to search for the best solutions CASE STUDY anyone to put in place workshops and seminars when the topics by approximately £412k. for our retirement? Take the following example, where such a narrow-based review are of little value. Promoting employee benefits is a good step and of the existing employee benefit structure resulted in significant The Mattioli Woods perspective The proposed structure from 6 April 2015 is arguably one of the should not be ignored, however there may be other more personal biggest changes to pensions in the UK in that every individual over areas that employees would value ahead of these, the major additional costs for the acquirer. The Mattioli Woods Group has gained extensive experience age-55 will be able to draw on whatever funds they want from changes in pension being an area impacting on the vast majority.

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