Happily, when it comes to competing for talent, smaller enterprises definitely have something to offer. A flexible and thoughtfully constructed benefits package, combined with a winning employee brand, can work wonders for staff retention.

Aon Hewitt, the insurer and HR consultancy, believes that with organisations large and small competing for talent, employee benefits are becoming more valuable than ever and –increasingly – flexible benefits are the order of the day.

Susan Ball, director of employment tax and advisory services at chartered accountants and business advisory firm, Crowe Clark Whitehill, says, “Smaller organisations can make considerable gains on the employee retention front by offering benefits that are appropriate for their workforce. The right choices will be popular and may also be low cost.”

Flexibility over holidays, for instance, generates plenty of goodwill, is easy to administer and inexpensive. Setting up a cycle to work scheme, or operating a childcare voucher system (both of which can be administered in house or through a supplier), also represents meaningful assistance for employees at no great expense to the employer.

Mark Withers, managing director of HR specialists Mightywaters Consulting, believes that a considered approach can be a real asset for the smaller company and its workforce. “The best smaller companies have some distinguishing features. They understand what matters to their workforce and personalise their approach to reward and recognition. This, in turn, works hand-in-glove with other features of the employment experience such as involvement, team working, wellbeing, community work and even having some fun”.

Pertemps People Development – the welfare to work and recruitment company – has a wide range of benefits including free confidential counselling, therapy treatments, scans, cashback for optical and dental treatments, profit-related pay, childcare vouchers, staff discounts and contributory pension arrangements. “These are reinforced by a strong focus on people development, involvement and wellbeing,” says Mark Withers.

Share schemes

For organisations that want to go beyond some of the lifestyle options and link benefit schemes to key targets, or use them to motivate staff, share schemes represent a tried and tested route.

“Share schemes are popular with start-up companies that may not be able to offer high pay packages”, Susan Ball points out. However, implementing a share scheme needs careful planning.

“HMRC-approved schemes such as the Enterprise Management Incentive (EMI) scheme will generate a favourable tax treatment for the employee when they come to exercise their options. There are strict guidelines in place and companies must adhere to HMRC rules. They must not have more than £30m in gross assets, and must issue options with a market value of no more than £250,000 per employee at grant (prior to June 2012 it was £120,000), or £3m in total”, Susan says.

However, it can be effective as a means of focusing key members of staff on the achievement of company goals. “You want to link the share scheme to what the company is trying to achieve. For instance, a technology company might be aiming for a flotation some years down the line.”

Companies may simply want to set up a share scheme that rewards individuals for long service. This can be more difficult, especially in a more volatile climate. “There is a danger that you will set up something that is not actually valued by an employee. In a difficult market, if a number of employees exercise those options at the same time, that would have an adverse impact on the company’s share price,” says Susan.

“Smaller organisations can make considerable gains on the employee retention front by considering what kind of benefits might be appropriate for their workforce.”

There are ways around the problem. “Offering additional shares to individuals who agree to stay in the scheme is one. However, company directors will need to agree a valuation of their shares with the tax authorities and should also be prepared to keep their whole approach to this kind of benefit under review.”

Mark Withers believes the most effective approach is to marry flexible benefits and share schemes. “What flexible benefits give employees is an opportunity to choose benefits that matter to them,” he says. “There has also been much encouragement for businesses to offer share schemes, as they are seen as a way of increasing motivation, commitment and productivity. Again, we see the best companies using share schemes or profit share effectively, but not in isolation. Sharing profits delivers most value when businesses also give employees a real voice in decision-making.”

Culture

Benefits are undeniably important, but a potentially overlooked area is the buy-in that companies gain by making themselves attractive places to be, and by giving staff the option to engage in activities that matter to them. Time off for work with designated charities or social enterprises is a popular option for big financial firms, for instance.

Outdoor clothing manufacturer Patagonia takes a relaxed approach to working hours and puts its family-friendly and eco-centric policies front and centre.

At the company’s European headquarters in Annecy, employees can go skiing and begin their day later without compromising holiday time, as long as work obligations are still met. The company also allocates staff time off for environmental internships. It is also possible to get financial support for non-motorised sports.

Financial measures undoubtedly play their part in incentivising staff, but providing a positive working experience as well makes for a winning combination.