In their latest Financial Times column, Brynne Herbert and Mrs Moneypenny share their take on company benefits and employee retention. See below for the full article.
Millennial v Boomer: Cash and equity are perks that workFinancial Times
*This article was originally featured on Financial Times.
More than half of the workforce is made up of millennials and they are the least loyal employees a company can hire.
Young employees constantly ask: “What can my company offer me?”. And companies must think hard about their response to this question if they want to reduce expensive and disruptive staff churn.
The answer is not always straight forward. Gone are the days of reliable and generous pension plans and, in many cases, high salaries. Even when a company is able to offer a good pension and bumper pay, mindsets have changed so much it is unlikely that these perks alone will garner millennial employees’ undying loyalty in return.
Instead of the reliable pensions employees once expected to receive in the future, staff now expect companies to make it worth their while to come to work on any given day. That means free food, ping-pong nights, commuting support, opportunities for projects abroad, bring your pet to work days and much more.
Walk the halls of any technology start-up — from Silicon Valley to Silicon Roundabout — and you will see this first hand. Cafeterias are filled with employees enjoying a salad from the freshly filled salad bar, while engineers take a break from a long day of building software by relaxing on beanbags. This is all part of the new “employee value proposition” and it has perks that millennials appreciate at its core.
But there is one very important long-term benefit companies can offer all employees — equity. Company ownership may be far less of a sure thing than an old-fashioned pension, but unlike a pension it allows staff to participate in the upside of their organisation’s performance. This culture of ownership, and the link between contribution and compensation, is at the heart of today’s start-up sector. Ask people why they joined Uber and you will hear stories of stock options and the company culture, not salaries and pensions.
Companies ranging from FTSE 100 to small privately-held firms must recognise this shift in mentality and align benefit packages for all staff accordingly. Otherwise they will be unable to compete in today’s employment market — particularly for millennials.
Benefits — even free lunches — are not new. My 30-year-old firm has been feeding its staff since correspondence was filed by carbon copy. But I believe such perks have limited appeal. Cash counts most when company handouts such as gym memberships are taxed, as they are in the UK. With the exception of private medical insurance (which I have made compulsory because I regard it as necessary for the running of the business) we will not provide any benefit for which staff carry a tax burden.
My employees buy bicycles through the government cycle to work scheme, which allows them to use their gross, rather than net, salary. If staff want to join a gym, we negotiate with the club on their behalf and lend the employee the cash to pay for it all up front so they get the best price. We deduct the cost from their net salary over a year, which means there is no taxable benefit to bother with.
Training is another perk we have supported from the start. If one of my staff wants to study for a qualification part time, we will look at paying for all or part of the course, depending on the expense. And we offer time off for studying. As a result I now have a qualified lawyer on the payroll, and a qualified psychoanalyst. In the UK, the courses are not taxed as long as they are relevant to the business.
Surprisingly few companies lend their employees money, even though the UK government allows them to lend up to £10,000. As long as the interest charged is at or above the government’s official rate, the benefit is not taxable.
I believe cash benefits will take off as new companies such as SalaryFinance make it easier and cheaper to administer them. Dan Cobley, former managing director of Google in the UK & Ireland, founded SalaryFinance after helping his children’s nanny refinance her personal debt by giving her a lower-interest loan. His company offers one rate to everyone through loans provided by their employer, with SalaryFinance bearing the risk and administrative cost. As general interest rates begin to rise, I predict more employers will use his services.
Brynne’s enthusiasm for take your pet to work days is fine by me, but pet beanbags under desks will not prompt as much loyalty from staff as employer loans that allow employees to acquire a dog in the first place.