A Pension Scheme for Haulage Workers
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A Haulier's Experience Reveals the Advantages and Disadvantages of Various Schemes By P. A. C. Brockington,
rr 0 preserve' industrial harmony 'during the return of emplOyees . from British RoadServices to private enterprise, hauliers will have to use tact and consideration. Even more important, they will have to show workers that they will be no worse off and may, in fact, benefit by denationalization.'
That is a short-term policy dictated by the needs of. the moment. Enlightened employers are conscious that now the haulage industry has matured, efforts must be made to give men the stability of conditions that are afforded in many other-walks
... of life. .For that reason, _interest in pension schemes. and other incentives of mutual benefit to the employer and employee is increasing.
Practical Experience
The experience of Mr. R. P. Miers, managing director of Miers Transport, Ltd., Bradmore, Wolverhampton, who has recently introduced such a scheme, may be helpful to other hauliers who are examining the question of relations With employees.
Before he decided to invite quotations for a staff provident and pension scheme, he considered a number of alternative suggestions by which the concern could increase the benefits of employment. A. profit sharing scheme was discussed with the 40 employees, but this was unpopular, the general view being that variation in profits would introduce uncertainty.
Another bonus scheme, based on turnover, was unacceptable because of difficulties in proportioning payments according to grade.
For a given financial benefit these proposals also had the disadvantage, in Mr. Miers' view, that they did not require contributions from the employees and that payments would probably be in lump sums. This might have discouraged thrift and encouraged haphazard spending.
Volte-face
A pension scheme has now been in force for some months and has been accepted by about 90 per cent. of the staff, despite its similarity to a scheme that was rejected by the men six years ago. The reason for the first scheme's failure is indicative of a commendable but misguided sense of justice.
Men who had been in the concern's employment for a long period said that the employer's contributions to " pensionable past service" were unfair to the younger members of the staff. This contribution is proportionate to the years of past service and enables a pension to be paid R18 commensurate with the total length of service.
After a number of pension schemes had been carefully examined one was accepted from the National Mutual Life Association of Australasia, Ltd. The advantages which decided its adoption are interesting.
To Mr. Miers, prerequisites of any approved scheme were simple bookkeeping, contributions by the employees directly related to the wage earned, and a fixed annual cost to the employer, given that there were no staff or wage changes. All of these qualities are inherent in the scheme selected.
With regard to the contributions paid. by the employees, it was considered essential to avoid any complication which might leave the men
in doubt as to present and fun Payments.
Clauses which were not read understood and vaTiations in 1 contributions payable that were proportionate to changes in earni capacity would, it was consider. have detracted from the schem appeal. In the event of its adopti they would have resulted in mu unnecessary work for the wat clerk dealing with questions a complaints.
Cost to Employer In the scheme chosen, ea employee. contributes 5 per cent, his annual Salary in excess of fl and the concern contributes a to sum decided by the employe wages and length of service. F the current year, the net cost to I employer, allowing for the saving income, tax, will be 3.86 per cent. the total annual payroll.
This sum will remain unchang except as affected by new entran increases in wages or fluctuations the rate of income tax. In practi. the percentage will decrease as t older men retire on pension.
If an employee leaves t employer's contribution ceases. some schemes, the conditic stipulated that the employer's pa service contribution be continued a number of years after t employee had left, and this wot have introduced an unnecessar uncertain factor in estimating tutu costs.
Another advantage of the accept scheme is that payments are made arrears at the end of the month aft weekly deductions from t employee's wages. Other polic: required payment in advance, whi would have been inconvenient al would have complicated the boo keeping.
Fixed Cost
The qualification of fixed cost the employer relates to the percer age of the existing pen sionat salaries paid by the employer contributions. In some schemes t percentage increased after a giv. period of years, and in one instan annual payttents were to be made advance and the percentage w practically doubled after 10 yea' When complicated by staff changi such conditions would have cams' unacceptable cost fluctuations.
Where 90 per cent. of tl employees contribute to the schern a medical examination is n
required. In 'some instances tl stipulated percentage was 100, whit would have been impossible obtain. Contribution to the schen condition which must be ited by all eligible new Jyees.
e pension on retirement is ti of the pensionable salary 11 is the annual salary less £52) 2:abh complete year of future and to this is added, for each ■ lete year of past service, 1/160th le pensionable salary of those joined the scheme at its nencement.
e minimum age is 20 years and ormal retirement age is 65 years. age limits for female members he staff (there ,is one female oyee in the concern) are 24 years 60 years respectively. The mum. salary qualifying participain the scheme is £156.
Duration of Pension
pension is payable for five years, or as long as the employee ves, whichever is the longer Payments are made to his
personal representative in the t of death before the five-year xd has elapsed. The employee ven the option of converting his ial pension into a smaller joint ion payable to himself and his , or approved dependant, while T survives.
death benefit in cash is paid if :mployee dies in harness before pensionable age and with the ent of the company a cash pay can be taken in lieu of the ion benefits on retirement. This be up to 25 per cent. in normal s or up to 100 per cent. M event Drious ill health at that time.
an employee leaves before ement, the policies secured by contributions are transferred to and, at the discretion of the pany, the policies secured by the pany's contributions may also be sferred to him in whole or in
he is dismissed for redundancy,
however, the company's policies are transferred without question. The value of any surrendered company policy is credited to the company.
Wages or salaries upon which contributions are based are those paid by the employer, excluding payments for overtime, bdnuses, directors' fees and so on. When an employee receives an increase in salary, his contributions and benefits rise proportionately, given that the increase is not effected within 10 years of retirement and that the benefits are such that an increment of not less than £25 in death benefit is secured (with the appropriate increment of pension).
Some of Miers' employees have 20 or more years of unbroken service to their credit and some are younger men who have been with the company for a few months. Representative examples taken from various age groups should, therefore, serve to illustrate the working of the scheme.
The employee with the greatest number of pensionable past-service years (25 years) is 49 years of age and contributions will be payable for the 16 years before his normal retirement age of 65 years is reached. His annual salary is £535 a year and his contribution is 8s. 4d. a week, or £21 13s, 4d. a year. The employer's annual contribution is £84 4s. 8d. and the employee's pension (at .65 years) is a guaranteed minimum of £173 per annum.
£2,098 in Cash
With bonus additions based on the last bonus scale the pension would reach £191, and bonus additions should then raise the cash payment, as a conditional alternative to the petision, from £1,891 to £2,098. The minimum death benefit is £742 plus the return of all contributions paid to the employee. Wage increases would secure a proportionate increase in benefits. A second examplt relates to an employee of 25 years of age, without any pensionable past-service years, who has the prospect of 40 years with the company before retirement and is now earning a sum of £364 a year.
This employee pays 5s. a week (£13 a year) and the employer £12 15s. 8d. a year. The guaranteed minimum death benefit is £330 (plus return of employee's contribution) and the pension, without bonus additions or allowance for pay increases, is £156. The minimum and " probable " cash payments (instead of the pension) are £1,654 or £1,911 respectively. If the employee's salary were progressively increased by, say, £30 every fifth year, the minimum pension at retiring age, without bonuses, would be about £207.
Joined at 42
Another employee who recently joined at the same wage is 42 years of age and his contribution is also £13 a year. Although the maximum number of years before retirement is only 23 he will be eligible for a minimum pension of £90 and the corresponding death benefit and cash-payment alternative to the pension. The employer's annual contribution is increased to £21 13s. 4d.
The scheme accepted by Miers Transport was based on the particular requirements of the concern and cannot be regarded as necessarily typical of other pension schemes offered by the Association.
When I asked Mr. Miers whether the scheme might be prejudicial to older men seeking employment, Mr. Miers stated emphatically that this would not be the case. In his view, older men deserved sympathetic treatment in connection with any bonus or pension scheme, and he is convinced that such consideration will be amply repaid.