How cutbacks are worsening workers' basic benefits

Employees are waving goodbye to many perks.

Employees who drive their own cars on company business can expect to see their mileage rates fall in many organisations. The green agenda is converging with the demands of cost-cutting to push these rates down. The Lake District National Park Authority, for instance, is now consulting with employees to drop the maximum mileage payment from 65 pence a mile to 40 pence from April. In a move to force down CO2 emissions, staff are also being encouraged to use video-conferencing, the train or the humble telephone in preference to driving. The authority hopes that many other employers will follow its example.

Employers are taking all sorts of moves to cut their costs. While pay freezes and job losses are capturing most of the headlines, the changing terms and conditions of employees who keep their posts are attracting less attention. But many of these changes are dramatic and will could come as a shock to staff.

The changes cover a long list of areas, including: performance bonuses, sick pay (see box), redundancy terms, further developments on pensions, overtime claims, flexible working and travel expenses.

Performance bonuses are being tightened up, even if it does not seem that way for high-earning bankers.

Many workers, especially those involved in sales, get these bonuses but the criteria can be changed easily in most cases. If sales are lower, as they are likely to be now, then bonuses are likely to be smaller.

Redundancy terms have traditionally been far more generous in certain sectors than in others, but some of the better schemes are now being slimmed down. "Redundancy packages are getting worse," says employment consultant Richard Lynch. "They are moving closer to the statutory minimum [of a maximum £400 per year for years served up to the age of 40, and £600 for years served after]."

So many employers have already downgraded their pension schemes that more bad news might seem impossible. However, the requirement to enroll all employees into a scheme could see yet more employers pare back their contributions as the rule is phased in from October 2012. Consultant Aon Hewitt says that only 40 per cent of employees are currently in pension schemes in certain sectors, including retail. "There are more employers saying that, given the market conditions, they will have to consider leveling down," says Anthony Arter, head of pensions at solicitor Eversheds.

"The cost of maintaining existing "final salary" schemes has become crippling," says James Davies of the Lewis Silkin employment law team. This could mean that many workers see the level of contributions that their employers pay on their behalf fall 50 per cent from the 6 per cent that many companies pay now to the 3 per cent that the new rules will require.

Many other changes could happen in pensions. For instance, under an arrangement called the Public Sector

Transfer Club, public sector workers moving jobs from one employer to another can often take their previous "final salary" entitlement with them to their new employer, getting it updated for pay increases and inflation until they retire. Some public sector employers are now realising that this is, potentially, a hugely expensive benefit to offer. We could start to see some local authorities and other employers leaving the Club and refusing to take these transfers.

Overtime rates are also under attack, with many employers setting up TOIL (time off in lieu) schemes in preference to paying overtime.

One development that is more related to client service than the economic downturn is the spread of flexible working. "There has been widespread recognition that presenteeism in the office isn't the be-all and end-all," says workplace expert Natasha Morley, associate director for property consultant DTZ.

Two years ago, employers and employees worked in partnership with each other to save jobs by setting up sabbatical schemes, part-time working and even (as with the law firm Norton Rose) four-day working. But Alastair Hatchett, head of pay and HR at research organisation IDS, does not think we have the same environment now. "I doubt if the current climate will produce engagement or partnership," he says. That spirit of co-operation has been damaged by factors including pay rates falling behind inflation, cuts in pension contributions and many people working part-time and below their capacity just to keep on earning.

Many employers will simply irritate their staff with the unwieldiness of their cost-cutting measures. Implementing cuts can be done in a ham-fisted way, resulting in unforeseen consequences. For example, the sensible-sounding rule that some organisations have introduced which requires staff to book train tickets in advance (in order to get discounts) can backfire. It means that, if a meeting finishes early or is cancelled, staff can be left doing nothing for hours waiting for the return journey. Such a rule is demotivating as it can be construed as meaning that an employee's input is less valuable than a train ticket.

Changes to tax rules and the planned withdrawal from 2013 of child benefit for higher-rate taxpayers will make more employers look at offering flexible benefits for workers, says Marsha How, remuneration expert at consultant Aon Hewitt. Parents who pay tax at 40 per cent on just £1 of their earnings are on course to lose child benefit (at £1,055 for one child, for instance, or nearly £2,450 for three). Those employees would probably prefer schemes where they can swap salary for benefits. "Historically, employees haven't been greatly energised about benefits," says How. "But the benefits space is going to become much more significant."

While many, many employees will suffer in ways that they do not currently expect, there are some positive points. Richard Lynch sees no moves to tinker with holiday pay which is now set at a statutory level of 28 days including bank holidays. More staff will get smartphones, iPads and other attractive technology, and more will get greater control over how they receive their remuneration package. The green agenda will also play its part. The Lake District National Park Authority is planning to introduce, for the first time, a mileage allowance of 20 pence per mile for bike users.

Sickness and absence can prove costly

* Employers are seeing absence and sickness management as a way to cut costs, and many of them are taking action. So entitlement to company sick pay schemes is being restricted, private medical packages are being made less generous in smaller organisations and employers are taking a range of measures to cut absence in the first place.

* Absence rates are at their lowest now since the CBI began its annual survey in 1982, when the average was 8.2 days a year. In 2008, the average was 6.7, and in 2009 (the latest available statistics), it fell another 4 per cent to 6.4 days.

* Workers are probably taking less time off, not simply because they are healthier, but because administration systems have changed and because some of the sickness safety nets are getting smaller.

* The use of insurance benefits by employers is developing fast. "A lot of small corporates are keeping private medical insurance but downgrading it," says Mark Noble, of Aviva Healthcare.

* Many employers offer sickness schemes which are more generous than the weekly £79.15 given as statutory sick pay. But, says Mr Lynch: "We are seeing more companies introducing waiting periods before they get company sick pay." Looking at the situation for workers who suffer long-term health problems, James Davies, from solicitor Lewis Silkin, says: "Employers are replacing schemes which guarantee a proportion of income to retirement with schemes which last for a maximum period of no more than five years."

Useful links

* Acas (Advisory, Conciliation and Arbitration Service): www.acas.org.uk

* Citizens Advice: www.citizensadvice.org.uk and www.adviceguide.org.uk

* DirectGov: www.direct.gov.uk/en/Employment/index.htm

* TUC: www.worksmart.org.uk/rights

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

    £450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Senior Analyst - ALM Data - Banking - Halifax

    £350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

    Java developer - Banking - London - Up to £600/day

    £500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star