About Cottrills
Trouble shooter
This is an edited extract from an article that appeared in People Management Magazine – 27 July 2006
The problem:
This organisation’s service-related award scheme has had a positive effect on staff loyalty and retention. But will the HR department be breaking the law if it continues to offer this benefit now the new Age laws have come into force?
Question: Working in an industry with lots of movement and an average staff turnover of more than 70 per cent, we are forced to consider ways to keep our employees engaged, motivated and, most of all, coming to work.
We developed a service-related award scheme that rewards our staff with points for performance, low absence rates and recruiting a friend to the business. We also award points for length of service and this has proved an effective way of increasing loyalty.
Our staff turnover which has dropped to 38% in the last financial year, which is low for the industry, but we are worried that the new Age legislation, which came into force in October, will make rewarding long service on ageist practice. Could this be seen as an employee benefit that is restricted to older people?
The solution:
Dennis Anderson – Head of HR at service award provider Cottrills.
“The new Age legislation will affect most HR activity and you are therefore wise to be looking closely at your long-service awards.
First, talk to your employees to find out their views. Your impressive retention statistics would suggest that most people would be great advocates of the scheme. Remember to include the issue of long-service awards in exit interviews. As part of our offering, we are introducing a service to survey recipients on the employer’s behalf; you may find your supplier offers something similar.
You could also set up review groups for long-service awards and discuss the issue at trade union and staff association meetings. For example, think about introducing lower levels of award since modern, multi-level schemes are now largely unrelated to the age of the recipient. I believe a properly structured and researched scheme will not offend the proposed legislation.
Lastly, I would stress the importance of documenting your decision-making process; mere assertions will not be sufficient to defend a claim for discrimination at an employment tribunal.”
Alison Loveday – Head of employment at law firm Berg Legal.
“The government has always indicated that the age discrimination legislation will permit certain employment practices which reward loyalty or long service.
Any benefit awarded staff with five years’ service or less will be exempt from the age discrimination regulations, as long as the rule is applied equally.
Where the employer plans to provide service-related benefits to employees with more than five years’ service, this will be lawful if (i) awarding or increasing the benefits is meant to reflect a higher level of experience of the employee, or to reward loyalty, or to increase or maintain the motivation of the employee, and (ii) if the employer has reasonable grounds for concluding that using length of service in this way fulfils a business need of his or her understanding.
The evidence you have in relation to the improvements to staff turnover following the introduction of the scheme should support your conclusion that using length of service awards meet business needs. You may also want to look into improvements in staff morale and retention, and any reduction in the cost associated with recruiting and replacing experienced staff. A staff survey/feedback would be useful here.”
Peter Reilly – Director of HR research and consultancy, Institute for Employment Studies
“Your scheme seems to be successful in an environment where workers are transient and it can be difficult to secure engagement. Recognising staff contribution over a range of measures seems sensible and easier to achieve with a points system than through cash.
If there is potentially a problem with including the length of service in your scheme, you should first look at whether having a five-years’ service benefit is a necessary feature. Perhaps it is really retention over a shorter period that you are trying to tackle?
If you want to incentivise longer service, then you will need to be able to show evidence of the business benefits that result from this element of your scheme. You may well be able to demonstrate that staff with longer service are more engaged and deliver better customer service.
IES research on the so-called “service-profit” chain has clearly established that more committed workers provide superior results. All you need to do is prove that length of service is a contributory feature to these developments.”
