Business Planning - Corporate Benefits

Employee Benefits and Pensions

Lexington Wealth Management have a specialist Employee Benefits Department headed by Warren Shute CFP.  Many of Lexington’s clients are business owners and therefore to offer the comprehensive service to your clients we offer this service to you.

Our belief is that if we support your business, it will support you and in turn your success will grow.  Your business is principally your staff and therefore you need to ensure your place of work is motivating so that you get the most from your staff.

There are a number of Employee benefits which you can offer your staff, you may choose some of these for some members and others for other members. 

Pensions

A Group Pension arrangement is the most common employee benefit, employers offer.  Traditionally for larger PLC companies a Final Salary pension was offered but in today's competitive arena this has changed to a Group Personal Pension.  This removes the unlimited risk from the employer but still offers a much appreciated benefit to the employee.

The great news is that now smaller companies can compete with the PLC’s in this area.  As a Small Medium Enterprise owner you can set up a pension scheme which will be the same as your FTSE listed competitor and therefore enable you to attract better staff which may have previously been enticed to the PLC because of the Final Salary Pension they offered.  With many of these Final Salary pensions closing, the playing field is now level in this area.

Stakeholder Pension

Since April 2006 The minimum an employer of 5 or more members of staff (this includes Direcotrs) must offer is access to a Stakeholder Pension scheme.

An employer can set conditions for employer contributions, but must offer access for the employee to join, if they wish.   The government has realised that this has not encouraged employers to contribute to the pension schemes for employees, and therefore they will launch in 2012 the Personal Account.

Personal Account

The Personal Account, renamed on the 7th January 2010.

Employers will have to contribute a minimum of 3 per cent on a band of earnings, although they can contribute more than this. The total minimum contribution for eligible workers must be 8 per cent (or equivalent) of the band of earnings. This is made up of the employer’s contribution, tax relief and the worker’s contribution.

A pratcial point to consider

Why not phase the contributions in, so that you slowly take these pension contributions on as an overhead, maybe off-setting these contributions each year with pay-rises and start early, so you are being proactive to your employees, offering this as a benefit, rather than because legislation is making you?

We are advising all companies to start now, and if they are unable to afford the 3% now, then start in 2010 at 1%, 2011 at 2% and 2012 at 3%, asking the employee to also phase their contributions over the same period.

This 1% ‘pay rise’ each year is probably the minimum you would offer staff and therefore is unlikely to effect your cash-flow like a 3% contribution would in 2012.

Exemptions

Who is exempt from a Personal Account?  Only those offering a suitable alternative pension scheme, with funding of at least 8% per annum as above.

Everybody else, 1 man employers, local recruitment agencies to FTSE 100 companies are all included.  Act Now!

Redundancy Insurance

If the Key member of the company is the owner, and on his/her death the company folds, the staff may be entitled to Redundancy Pay.

In the form of the company, this will be paid from company reserves and assets.  In the case of a sole-trader or partnership it will be taken from the Principal's personal estate!

A simple life assurance policy in Trust to cover these costs is essential.

Group Death in Service

A common Employee benefit.  A life assurance policy is arranged for all employees, or a group of employees.  The terms are more favourable than if it were written on an individual basis and underwriting is ‘spread’ across the group.  This can favour older members/owners of the business who may not have the health to obtain good terms personally.

Income Protection & Critical Illness - Long Term Sick Pay

A member of staff off work with long term sickness is a liability on your books.  This insurance enables you to transfer this risk, before a claim happening, to an insurance company.

For those smaller companies wanting to compete with the larger PLC’s, this is a way or you to offer longterm sick pay benefits whereas without the insurance this risk may be too high.

Group Private Medical Insurance - PMI

A common Employee benefit which is waited equally in employer and employee.  An employee may not take this insurance out personally, but likes the benefit it has for employee and/or the family.

For an employer, the knowledge that if a member of staff is in need of medical attention, it means they get private care, quickly and efficiently, improving the return to work rate.

Mortgage Service

Lexington’s Mortgage team offer a comprehensive mortgage service to all members of your staff.