Employees plump for perks

Engineering companies are realising that big pay packets are no longer enough to attract and retain high-quality employees. They need to offer moreimaginative perks, says Debi O’Donovan

Earlier this year British Steel made the news with its `five star’ graduate package. By offering a range of benefits on top of the £22,500 salary – one-to-one mentoring with a company director, a sponsored place on Warwick University’s MBA programme, an international assignment and an interest-free loan – the package aimed to counter the flow of graduates away from engineering in to management consultancy, law, banking and finance.

Not that industrial companies are unattractive financially – the average graduate salary in the industrial sector is £18,000 compared with the blue-chip company average of £16,600 a year. However, this still lags behind the £25,000 average for banking and £21,000 in the legal sector.

According to figures from Cambridge University, only 8% of its graduates joined an industrial company, while just 185 opted to work for a manufacturing company. This compares with 14% who entered management consultancy and the 19% who became bankers, insurers, lawyers, and accountants.

But graduates are not just interested in the bottom line. The British Steel package is a good example of the kind of deal graduates are looking for from an employer. Training and professional opportunities are what makes one employer more desirable than another.

And it is not just graduates that engineering companies want to keep happy – retaining and developing skills is equally important. This is borne out in the 1999 CBI Employment Trends survey where it is reported that 48% of UK employers train staff beyond the current requirements of their job.

The same survey reveals that manufacturing firms commonly use skill-related pay as an incentive for acquiring new skills. The aim is either to enable multi-skilling, or to assist in recruiting and retaining engineers.

Ford is advanced in this area, having run an employee development assistant programme for around 10 years. All Ford employees get £200 a year to spend on training of their choice. This is in addition to job-related training. They are encouraged to spend at least £100 on intellectual development courses, such as learning a language. Otherwise anything goes – from snowboarding to cookery classes.

With the EU Parental Leave directive expected to be implemented in the coming months, another hot benefits topic is family-friendly policies and work-life balance. The CBI survey identified this as an area where construction and manufacturing firms lag behind other employers, providing a below-average menu of family-friendly options such as flexible leave, maternity/paternity leave, childcare and care for the elderly.

If the Parental Leave Directive is handled with forethought and presented as a positive benefit, employers in these sectors could improve the `feelgood factor’.

A more tangible benefit under the spotlight is profit-related pay. Until April, profit-related pay schemes will still qualify for tax relief if approved by the Inland Revenue. Unapproved schemes do not qualify for tax relief. Terry Lane, deputy general secretary of the Engineers and Managers Association, says: `The collapse of profit-related pay is what everyone is concerned with at the moment.’

However, the CBI survey found that this is still the most popular form of employee-participation scheme in the UK. And as there has been a rise in the number of companies with unapproved profit-related schemes it is clear profit-related pay is not yet on its deathbed.

Some experts are predicting that sharesave schemes will receive a boost from the end of approved profit-related schemes. Sharesave allows employees to benefit from the company’s success by saving regularly for a fixed length of time to buy shares in their company at a pre-set price.

BT, British Gas and BP are some of the big names that offer staff the chance to buy share options. Even smaller firms, such as specialist engineering automotive company Xtrac, have found this an extremely popular benefit among employees. Xtrac achieved a 91% take up on its first sharesave offer.

Engineering firms wanting to keep up with the latest in benefits packages are going for what are known as `flexible benefits’. With this approach, instead of having a set package, employees are given a menu of benefits to choose from. Staff can trade down on their model of company car in favour of more leave per year, for example.

Feeling the effects of the end of the concept of a job-for-life, railway systems manufacturer Adtranz took this route two years ago. `Job seekers are more discerning,’ says Adtranz human resources director Mike Moran. `In this context, flexible benefits are essential.’

In its scheme, called Adtranz Flex, all staff can juggle leave, private car leasing, childcare vouchers, dental insurance, critical illness insurance, income replacement cover and healthcare cash plans.

Taking a different and even more innovative track, engineering consultant Scientific Generics has looked much further than its benefits package in an effort to recruit the best. Engineers get the opportunity to set up their own company if they develop new technology while working on a Scientific Generics project. This is said to be generating a great deal of interest from potential job candidates.

But sometimes innovative schemes are just not enough and cold hard bonuses are the only option. Earlier this year over-capacity staff at Rover’s Birmingham plant were encouraged to stay with the company and move to its Oxford operation. This was done with a £8,000 relocation package.

The aim was to tempt trained and experienced staff away from accepting the redundancy packages on offer. A Rover spokesman says: `Rover would have spent more on recruitment than it did on the relocaction package.’

The future for benefits – in all sectors in the UK – is one of change. As Dennis Homer of Rolls-Royce says: `At one stage you got one package or nothing. We now mix and match as appropriate.’