Retention of top talent a major issue

The seventh annual Origen Employee Benefits Survey has found that, even in these unprecedented times, nearly two-thirds of UK firms agree that the recruitment of high quality staff remains a challenge.

With the impending 50% tax bracket over a threshold income of £150,000 being introduced in the latest Budget, Origen advises that firms need to find innovative solutions to retain their top talent.

Continuing drop in open Defined Benefit schemes

Origen's survey reiterated the fact that although there are relatively few DB schemes in existence in the UK and only 40% open to new members, there are 240% more Board members enjoying DB pension arrangements than the category covering ‘all other staff'. However, with the Pension Protection Fund currently only promising to cover £31,936.32 of a pension in the event of a Defined Benefit scheme failing - and even then only if accepted - Board members may find that if their scheme is not fully funded, they should take advice as to whether continuing to make large pension contributions is the most suitable solution for them to secure their future financial planning.

According to the Office for National Statistics' recently published Pension Trends Report for 2008, private sector schemes have been on an ongoing and steep downward trend since 2002. This year, Origen has found that the average employer contribution to Defined Contribution pension plans is running at 6.7%. For large firms (with over 500 employees), the maximum contribution payable by employers is almost 50% higher than for SMEs; this highlights the need to keep their top talent for the overall successful running of these businesses.

Personal Accounts not going to be sufficient ...

The ONS Pension Trends Report also found that only 21 per cent of men and 32 per cent of women with gross weekly earnings of £300 or less are making contributions to their employers' schemes, reinforcing the argument for auto-enrolment proposed for the future Personal Accounts regime in 2012.

However, Origen has revealed that knowledge of Pension Reform is scant, at best. It was found that 60% of companies in the Midlands and East do not know about Pensions Reform or Personal Accounts at all. Of those who were aware of the Personal Accounts regime, not one firm surveyed thought that Personal Accounts would provide sufficient income for their employees in retirement.

Warren Page, Director, Client Services, Origen, commented: "What companies need to realise is that Pensions Reform will soon become law and become a major financial burden on them, as employers will have to contribute 3% of employees' salary. It is vital for firms to be on a firm footing with the advent of Pensions Reform and to understand how it will affect their business costs."

Origen recommends that in order for companies to retain their top talent, they need to look at alternative methods to stay under the £150,000 pay threshold. This could include:

the increased usage of share options instead of pay; or where there are no shareholders the use of alternative solutions such as ‘phantom share options', a form of bonus compensation for an employee in which the employee receives a quantity of units that equate to, but are not, shares in the company

for new members of staff approaching the threshold, it could be appropriate for that employee to forego a pay increase over £150,000 and direct any future ‘pay' into their pension - this would not count as salary sacrifice

Page continued: "By using specialist adviser firms, companies will be able to keep hold of their key employees through these difficult times and not only survive any recession, but go on to a successful recovery. Using a variety of reward and benefit solutions will enable the spend on employee benefits to be directed to achieve specific goals and ensure the maximum return on investment."