THE BUSINESS OF EDUCATION - International Indian

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[ MONEyWISE ] Employee Benefits and their Impact on our Financial Plans “Recruitment runs hand in hand with retention – after all why spend a great deal of money recruiting the best of the best only to lose them to your competitor inside a couple of years. Hence the growth in the Employee Benefits Industry and the growth in the product ranges on offer.” [ By BOB PARKER ] No longer should the expatriate worker have to rely on his own good sense and financial acumen to achieve his financial goals if they have a forward thinking employer! In the West, for many years now, the extra ‘employee benefits’ are as much a part of the ‘take home’ as the salary itself. I can distinctly remember my first company car – a bright yellow four door job with a 1.3 litre engine – but it didn’t matter that I looked like I was driving a canary - at only 24 years of age I had a brand new car! The fact that I looked like all travelling salesmen, didn’t deter my enthusiasm one bit! Throughout the 70s and 80s as I gained various promotions and company moves, I was spurred on with the promises of bigger and better cars – the salary was secondary!! Eventually I aspired to the company boardroom and the ultimate prize of a top of the range Jaguar XJ – mid life but still highly motivated by the company car benefit. Employee benefits are today a very sophisticated industry and like all things in working life we have moved on from simply giving a company motor car to dreaming up highly sophisticated packages designed to assist in recruiting, retaining and motivating the best people in the marketplace. Recruitment runs hand in hand with retention – after all why spend a great deal of money recruiting the best of the best only to lose them to your competitor inside a couple of years. Hence the growth in the Employee Benefits Industry and the growth in the product ranges on offer: Golden Hello’s, Stock Options, Share Purchase schemes, Group Medical, Group Retirement Plans, Group Life, Group Critical Illness, Motor Cars, Barter Deals, Luncheon Vouchers, Voluntary Deals, the list goes on and on. Cars probably still top the list of visible goodies – at a company meeting you really would rather be driving up next to your colleagues in a Mercedes Coupe rather than a Honda Civic. Fleet management allows employers to offer company cars to employees in different forms thus being able to incentivise and reward through choice. If employees choose not to go with a traditional company car there is always the option to give staff this perk as a cash allowance which they can then use to lease, purchase or hire a vehicle. Employers need to choose the most appropriate solution for drivers, whether that is an employee car ownership scheme or traditional company car, or a combination of schemes to meet various needs. It is a decision that is complicated by maintenance management, as well as health issues such as corporate manslaughter and fleet risk. Issues around health and safety are usually associated with the cash allowance scheme because here the employee has the freedom to choose his or her own vehicle, and their choice may not necessarily be a correct fit for the job in hand – do you want your top salesman driving a high profile flash sports car for instance? Cars are a very emotive issue and many staff have left companies simply to get a better car! Although health insurance isn’t as motivational as a company car, the day is soon coming when all expatriates will need some form of health insurance. The institutions competing for this business will often hack their rates to get the deal but companies who choose their Group Health scheme on rates alone at their peril. Many employees leave companies because their family is not covered adequately on the company scheme. You can have the best management in the world – managing and motivating your staff, but if and when the 76 THE INTERNATIONAL INDIAN
[ MONEyWISE ] staff member gets home, all that happens, is continuous grief over little Johnnies poor medical assistance in a foreign company, all because the company scheme doesn’t cover pre existing conditions or doesn’t provide cover in the best hospitals and your staff retention is immediately under threat. However medical and cars aside, what about the actual money rewards? Clearly salary must be positioned right and must meet the competition in the marketplace, however a salary on its own does not motivate key staff to stay with a company or to increase performance. In the GCC expatriate market there are mandatory gratuity schemes in place as an end of service bonus based on salary and years served. In many countries these gratuities as they are based on basic salary lead to the management of companies splitting salaries into a range of remuneration to deliberately keep the gratuity payments down, so a $10,000 salary may be shown in the countries labour departments as only $4,000 salary and the rest is made up in housing and education allowances plus guaranteed bonus. This misguided approach to gratuity payments is not conducive to staff retention. More and more companies are now looking to manage their gratuity payments with formal retirement schemes provided either by international insurance companies like Zurich and Friends Provident or bespoke systems put together by professional employee benefit companies. One of the largest companies in the Gulf, Emirates Airline, has for many years run its own retirement scheme via an Employee Benefit Trust with the management of the employees assets contracted out to world class fund managers like Fidelity and Merrill Lynch. The Hotel industry for one is finding staff retention a great challenge – Jumeirah International, for instance, has recently introduced a Group Retirement plan, and one assumes a key driver would have been to assist in retention. However when it comes to retention there is no better way than locking people into employee share schemes, which are becoming more popular as staff retention becomes a major issue. There are a number of different ways to create share savings such as share save plan or share incentive plan managed in an employee benefit trust held in one of the world’s offshore financial centers such as Jersey. Similar arrangements can be made through executive share option plans for very senior employees. Some companies include the added perk of personal debt management, which can help to reduce employees’ stress levels and so indirectly contribute to improved performance. Many believe that financial education is going to become more common in the workplace as organisations want their staff to get to grips with making their own investment decisions. Research conducted in the US by Dr E Thomas Garman, president of the Personal Finance Employee Education Foundation, demonstrates the positive impact of financial education on employee productivity levels. Dr Thomas asked a C number of financial advisory companies what were their attitudes of employees to offering M financial education in the workplace? Y Their answers were as follows (% in brackets) CM 1. It increases appreciation of the value of benefits 83% MY 2. It increases retirement plan take-up and/ CY or plan contributions 50% CMY 3. It should be essential in all workplaces 39% 4. It will help employees resolve a retirement K savings crisis 32% 5. It increases share scheme take up 21% 6. It is not the employer’s responsibility 17% Dr Thomas then asked the employees what proportion of respondents think employers should give staff access to financial education and financial advice? 1. Yes, to both financial education and financial advice 54% 2. Yes, to only financial education 35% 3. No, to both financial education and financial advice 7% 4. Yes, to only financial advice 4% While the overall organisation’s quality of management is the key driver of motivation, employers can use employee benefits as a major weapon in staff retention. Bob Parker is a seasoned UK qualified Independent Financial Adviser. He formed Holborn Assets in 1999, which is now a pre-eminent financial advisory service with over 35 qualified advisers and staff. Email: robert@holbornassets.com PERSONAL INSURANCE ? CLICK, PAY AND GET IT DELIVERED MOTOR, HOME OR TRAVEL YOU CAN NOW BUY THESE INSURANCES ONLINE AND GET THE DOCUMENTS COURIERED TO YOU FREE OF COST www.gargashinsurance.com CORPORATE INSURANCE ? YOU NEED THE BEST AVAILABLE PROFESSIONAL ADVICE ON YOUR INSURANCE EXPOSURE AND LIABILITIES TO UNDERSTAND AND AVOID FINE PRINTS, WARRANTIES AND EXCLUSIONS YOU NEED PROFESSIONAL INSURANCE ADVICE HOLDER OF THE PRESTIGIOUS “CHARTERED INSURANCE BROKERS” TITLE FROM CHARTERED INSURANCE INSTITUTE, LONDON FOR THE BEST AVAILABLE ADVICE SPEAK, LOGIN OR WRITE TO Delivering Excellence www.gargashinsurance.com DUBAI-SHARJAH-ABU DHABI 04-3379800 – 06-5754848 02-6717100
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15th Year! THE INTERNATIONAL The Re
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[ EDITORIAL ] Calling Indian Hindus
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• 3G Phone / HSDPA 7.2 Mbps • 6
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[ THE INDIA COLUMN ] Futility of In
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[ INVESTMENTS ] significant change.
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[ DIWALI ] Sayantara Purandare is u
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[ GUPTARA GARAMAGARAM ] Diwali and
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[ BUSINESS OF MUSIC ] The Rhythm of
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[ BUSINESS OF MUSIC ] classical art
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Page 71 and 72: [ BOLLyWOOD PROFILE ] I understand
Page 73 and 74: [ FAMILy ] looking at things. David
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