Benefit from Benefits, published in 03/2009 in Call Centre International

14 Coverstory
In Continental Europe, Compensation and Benefits strategies are contributing
an increasingly vital element to an organisation’s overall people strategy.
At the same time, the function is very underdeveloped in many European
countries if you compare them to the US, Switzerland or the UK. This article
is intended to give a rough overview of the field of compensation and benefits
within Europe and will focus in general on how you can use your pay
structure to attract talent, retain them and to influence their behaviour in a
certain direction.
Benefit
from Benefits
Pay Structures in Europe
Let me start with a breakdown of a general reward package.
Throughout Europe, you will find compensation packages
containing three to four elements. Typically there is a base
payment which is meant to compensate an individual for the
actual work undertaken. In addition, monetary elements exist
such as bonuses which are usually connected to the achievement
of set targets and you would find in many cases non-cash
elements called benefits. For management and executive level
positions you would find executive compensation elements like
profit sharing, stock options and share plans as well. These are
defined below.
Basic salary to attract key talent
Basic salary refers to the annual salary component of the contract
of employment exclusive of any additional allowances, payments
or non-cash benefits. It is the standard salary which an employee
receives for doing a job although it is often used as the basis for
calculating other allowances and benefits. Basic salaries need to
be competitive to first of all attract key talent and secondly to
control your retention rates. Throughout Europe, a wide range of
base salary levels exist for similar positions across all industries.
The highest level of salaries will be found in Central European
countries like Benelux Countries, Switzerland, Austria, Germany,
France, UK and within the Nordics. Salary levels will drop
significantly to the East, West and South of these countries. In
most parts of Europe you will find statutory or collectively agreed
minimum wages. The Nordics and Italy do not operate with minimum
rates, but nevertheless have minimum levels defined within
industry specific collective agreements. Germany has defined
statutory minimum rates in sectors such as construction, postal
sectors and others. Depending on the specific kind of job, the
base salary will be a larger or smaller part of the overall package.
In general you find within fee earning areas, sales positions etc
the amount of bonus paid often dwarfs the actual basic salary.
Bonuses are paid in addition to regular pay. Depending on the
company and level of the role within a hierarchy, a bonus system
would work on a monthly, quarterly or yearly base. A bonus is
not necessarily directly related to an individual‘s performance,
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16 coverstory
» it is often connected to a team or department’s performance. In Union membership
many cases you will find discretionary bonus schemes which are
calculated on various criteria such as internal and external feedback,
target achievement etc. Usually there are no “formulae”
Union membership % of employees
(latest numbers 2006/2007)
behind discretionary schemes and these bonuses are discussed
on an individual basis within the relevant managing team. In
Sweden
many countries like the German speaking parts of Europe and
within most Benelux countries year end, Christmas and holiday
Denmark
bonuses are prevalent.
Norway
54
69
71
Bonus schemes to meet sales targets
In very sales orientated and fee earning environments bonuses
are usually directly connected to an individual’s performance and
are often paid as commission. Commission is mostly calculated
as a certain percentage of the income generated by an individual.
Usually commission is granted uncapped and can easily form the
largest part of the overall income. This specific base to bonus
ratio is often welcomed by sales orientated staff.
The decision to run a commission or discretionary bonus scheme
is often influenced by the culture of an organisation. Intangible
qualities such as service orientation etc. are not usually considered
when calculating an individual’s bonus under a commission
scheme. However, such factors are more likely to be taken into
consideration under a discretionary bonus scheme. Commission
is often contractual while bonuses are often non contractual
parts of an overall package which is highly pertinent from a risk
management point of view.
Typically, the aim of introducing a bonus / commission scheme is
to influence an employee’s behaviour in a certain strategy aligned
direction i.e. sales targets, quality measures and so on and so
forth. To achieve this, bonuses need to be paid regularly especially
Belgium
Italy
Ireland
Belgium
United Kingdom
Slovak Republic
Czech Republic
Germany
Netherlands
Switzerland
Hungary
Spain
Poland
United States
France
8
12
15
14
17
21
20
20
19
24
28
33
32
32
0 20 40 60 80 100
53
Source: OECD Employment Outlook
Meal vouchers are typical
benefits. In Belgium they
are even ‘standard’ as they
are not taxable for employment
tax.
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at lower income levels. Several call centers make the mistake of
paying bonuses on a yearly basis for their call center agents. The
effect of monetary motivation at this income level is not particularly
long term and as such ought to be paid more regularly.
In most countries of Western Europe bonuses and commission
schemes are negotiated with workers councils or trade unions and
may be legally binding (see chart for union membership figures
throughout Europe). Bonuses might be used for retention control
as well. Particularly in financial and professional services you will
find short term and fairly high long term bonus schemes. Most
long term bonus schemes are strongly connected to the length of
service of a particular employee. Leaving an organisation within
a qualifying period can lead to losing this entitlement. In senior
management roles the loss of payments due are often compen-
“Several call centers make the mistake
of paying bonuses on a yearly basis for
their call center agents.”
Salary and Benefits
What to achieve with basic
salary
■
■
■
Motivating candidates to join the
company
Motivating employees to achieve average
results
Manage retention
Needs to be
■
■
Effective
Competitive
What to achieve with
benefits
■
■
■
Motivating employees to achieve exceptional
results
Support strategy aligned actions
Manage retention
Needs to be
■
■
■
■
■
Measurable
Achievable
Motivating
Negotiable
Variable / Flexible
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18 Coverstory
Flex Bens
Flexible benefits plans, known as “Flex”, have developed in reaction to the diversity of
individuals within the modern day workforce and the subsequent diversity of their
lifestyles: a 20 year old single employee will have different requirements to, for example
a 45 year old married employee with children. Having a benefits scheme that is
flexible enough to cater for each of these individuals represents a strong recruitment,
retention and motivation tool for the employer.
Flex is a formal plan whereby staff can opt into certain benefits or take cash when they
are not interested in certain benefits. Flex schemes are often set up as a simple salary
sacrifice regime, therefore providing the added benefit of tax and social security efficiency
for both the employee and employer. In this scenario the employee is often restricted
in the amount of salary they can sacrifice ensuring that they take home at
least, for example, 85% of their pay in cash. Alternatively a “flex fund” is often provided
to an employee that increases with seniority. This provides a set amount of flex
credits to be spent on the flex scheme or indeed exchanged for cash.
There are hundreds of different and innovative benefits that can be seen in the market
from free breakfast to pet insurance. The most popular in the UK being flexible holiday
entitlements with many organisations offering a standard 25 days annual leave with a
flex scheme where employees can opt to buy or indeed sell 5 days talking it up to 30 or
down to 20 with commensurate financial consequences.
Flexible benefit schemes remain one of the most adopted reward strategies within the
UK and there is little sign of it slowing. The demands for benefit professionals with experience
of designing, implementing, communicating and maintaining flexible benefits
schemes has remained extremely high within the UK for the last five to ten years
and is clearly a strategy that is here to stay.
Matt Brooks
←
»
sated for by way of a sign on bonus.
Within most executive or management packages you would find
share schemes, stock options or profit sharing as well. Those elements
are usually long term entitlements which an employee
would lose should the contract be terminated within a specific
time frame. Often you are entitled to those schemes after two
years of service. In France for example, larger organisations which
are unionised will have profit sharing agreements for their management
teams negotiated with their respective trade union.
Employee benefits also known as fringe benefits have various
“cash” and non cash components additional to the ones already
mentioned. Typical benefits will be gym membership or meal
vouchers, corporate cars or car allowances. You will also find pension
schemes, additional insurances like health and life, various
forms of entertainment like company events and very country
specific forms like the German “Vermoegenswirksame Leistungen”.
Clearly these benefits are a wide mix of cash equivalents
such as meal vouchers, pension contribution, car allowance and
non cash components such as company events.
Benefits to increase loyalty
Benefits in general are meant to increase the economic and social
security of employees and obviously increase their loyalty to the
employer. Complex pension schemes combined with equity or
share plans can develop a substantial part of an employee’s wealth.
Typical benefits for more junior employees which aim to prevent
dysfunctional staff turnover are education allowances, staff loans,
free kindergarten etc.
There are other forms of benefits which are more common to
expatriation agreements such as housing (employer-provided
or employer-paid) and schooling allowances. It should be noted
that these types of benefits are becoming rare with expatriation
within Central and Western Europe. They are still standard for
expatriation into Asia, Russia, America and other locations further
afield.
Benefits are highly influenced by culture, social hierarchies
and obviously country specific tax systems. Belgium is a very
good example of the latter. As meal vouchers are not taxable
for employment tax, this is a very efficient way to support your
employees with tax free “cash” in the form of vouchers. I have
never recruited into a Belgium position without meal vouchers
in the contract of employment. You will find similar benefits in
France and Spain. A good example of the social hierarchies is the
German speaking pharmaceutical industry. Candidates typically
mention in their CVs what kind of company car they currently
have and negotiating the car will make-up a serious part of an
offer negotiation.
More and more organisations within Europe introduce benefit
exchange programmes which will allow employees to exchange
one benefit for another or even to reduce their base pay to
increase their employer’s pension contribution for example. In
most Western European countries, benefits are to be negotiated
with workers councils or trade unions and can easily be legally
binding. Employers within the UK for example enjoy much more
flexibility and have the option of implementing “benefit holidays”
whereby specific benefits can be stopped for a definite period of
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“The challenge for the Call Center
industry is that most Call Centers do not
have a Compensation and Benefits center
of expertise.”
time as a cost-cutting method in the current economic climate.
To sum it up, the combination of all these elements will enable you
to offer attractive income packages which can be a competitive
advantage to attract key talent.
Especially long term elements might have a strong positive influence
on your retention rates. Bonus and commission schemes will
motivate employees behaviour in a certain direction. Depending
on the particular country employers can use several tax effects
and legal advantages like non contractual components to efficiently
build those packages. Not to forget that some elements
can be structured in a “cash flow neutral” way.
In a wide range of “developed” industry sectors you will find plenty
of benchmarking data available from specialised compensation
& benefit consultancies. This will allow you to benchmark your
pay packages against your relevant peers and other competing
industries and organisations. The challenge for the Call Centre
industry is that most Call Centres do not have a Compensation
and Benefits centre of expertise and furthermore do not contribute
to relevant salary surveys. The lack of data available and the
way in which it is collected makes it very difficult to compare
packages.
Furthermore the industry is still competing for key talent against
well established sectors and key talent within the industry often
aim to switch into in-house roles. Very few organisations within
the industry have successfully implemented attractive reward
& recognition schemes which are aligned with the company’s
strategy and their employees’ needs.
Michael Illert
←
aUThORS
Matt Brooks joined Frazer Jones in October 2004 to manage
its Compensation & Benefit division. Before joing the
company he previously worked within PWC‘s Global Mobility
Services for 6 years.
Michael Illert joined Frazer Jones in July 2008 to manage
the international divison. Before joining he was Head of People
Development and HR at a Telemarketing company and afterwards
moved to an HR consultancy.
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