Retailer Tesco goes from strength to strength.
Group benefits manager Mark Roberts explains how the supermarket’s perks encourage staff to take a stake in the business and subscribe to its core values.
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The UK’s supermarket industry is a hotbed of competition. Not only must retailers compete for prime locations for new stores, but many have been forced to enter into price wars in the battle for business and customer loyalty.
Under the stewardship of chief executive Sir Terry Leahy, Tesco is currently leading the pack as the UK’s largest supermarket chain having notched up more than 30% of sales made through all UK supermarkets in the run up to Christmas. The results of a survey published by analysts CACI last year show that the company is now the number one supermarket in 68% of Britain’s postcodes. The survey also estimates that Tesco accounts for 50% of all supermarket sales in six areas in the UK, including Truro in Cornwall and Inverness in Scotland.
Last October, the company announced record half-yearly profits of £1.1 billion. This was followed by January’s announcement of a 5.9% growth in like-for-like sales over the Christmas period, ahead of the 5% reported by rival Sainsbury’s. Not bad for an organisation that started life as an East End market stall in 1919.
However, Tesco is not without its critics. Along with its competitors, it has been accused of contributing to the decline of local businesses, such as corner shops and greengrocers, as well as having a negative impact on the environment by building on previously green sites. In some cases, public outcry against the supermarket chain has been so great that it has effectively stopped the retailer from opening new stores, as was demonstrated at the end of last year when residents in Darlington blocked the development of a Tesco superstore on the site of the old town hall.
Staff housing and voluntary benefits
Over the past decade, the Tesco brand has become synonymous with value as reflected in its slogan ‘Every little helps’, a philosophy which could be said to apply to the perks on offer. Just last month, Tesco announced plans to build housing to be offered to staff in a bid to overcome the current shortage of affordable accommodation in London.
Mark Roberts, group benefits manager, certainly believes the slogan underpins Tesco’s voluntary benefits scheme.
“I think the philosophy is about having a strong benefits offer that adds value to pay, [and] which is communicated to, understood and valued by staff. Staff look for value because they work for Tesco. One of the findings two or three years ago was that there were a number of benefits in place that staff weren’t using, the reason being that the level of discount or value they got wasn’t sufficient. Staff were telling us they could find similar deals or offers elsewhere. We’ve [now] got a much greater focus on probably making the offer slightly smaller, but making the content stronger, and great value. Putting in offers that can be replicated [elsewhere] is just wasting time, so it’s [about] making stuff unique and special and staff feeling valued,” he explains.
As a result of staff feedback, employees are also offered additional ad-hoc discounts on some products. Over the Christmas period, for example, all could take advantage of money off their Christmas shopping and seasonal goods such as crackers and wrapping paper. Throughout the year, employees also receive discounts via vouchers contained in their payslips on goods such as Tesco clothing. Louise Pocock, benefits manager, explains that such offers are typically taken up by 50,000 employees in the month that they are sent out.
Roberts adds that these perks have a strong business benefit. “Staff are saving money and feeling valued as a result. They’re also increasing their understanding of the goods and services that we sell, which enables them to serve customers well.”
Employee Share Schemes
One of the mainstays of Tesco’s benefits package is aimed at encouraging staff to take a stake in the business through its three all-employee share schemes. The longest running of these is its save-as-you-earn or sharesave plan, which this year celebrates its twenty-first anniversary.
Running alongside this are the company’s buy-as-you-earn (BAYE) or employee partnership scheme through which staff can buy shares out of their gross pay, which are free from tax and National Insurance provided they are held in trust for a sufficient length of time, and its free shares plan titled Shares in Success, which was launched as a replacement to its previous profit-share scheme.
“There’s a real commitment from the board right through the business to encourage share ownership so staff are rewarded as part of the success they help create. Certainly, our recent schemes have done that. We’ve seen a strong growth in share price and staff have done very well,” says Roberts.
Out of Tesco’s 260,000 UK employees, 90,000 staff are currently taking part in its sharesave schemes, while a further 30,000 have taken up its BAYE scheme. In addition, the company last year awarded £77m worth of free shares to staff, the equivalent of 3.6% of employees’ earnings.
Both Roberts and Pocock believe that these take-up levels are, in part, due to the communications strategy around all three schemes. “We have a real commitment to making information clear and accessible to help people understand about share schemes because if you’re not aware of what shares are, [and], if you’re not close to share schemes they can be daunting, so we put a great focus on making what could be complicated messages as simple as possible and really ensuring people understand the way the schemes work, what it means to them and when they can access shares if they want to. In every building within Tesco, we actively promote the share price so staff are aware of share price changes. We know that’s a good gauge of morale, so when the share price goes up people are very buoyant within our stores,” explains Roberts.
To help boost understanding and take up, the company puts a great deal of emphasis on communicating its share schemes both when they launch and when they mature. All employees receive an annual statement detailing how much their shares are worth and when they will be able to access them. Those who have chosen not to take part in a scheme, meanwhile, receive an overview of the plans. Last year, a summary of information about the share schemes was also translated into a number of key languages for the first time in order to better meet the needs of the company’s diverse workforce.
“A lot of our staff choose to retain shares, which we’re very proud of. It is helping people to understand on joining, and also on maturity, what the scheme is about, what it means for them and what their options are,” says Roberts.
Reaching all staff with benefits communication, however, can be a challenge as employees are spread over numerous locations and, due to the nature of the business, most do not have computer access at work. “Given that we have many shops around the country, and people don’t have access to a computer, and work in different environments, it is sometimes quite difficult to get messages across and to be able to give the right support messages to staff directly along with the mailings that go to home addresses. We do that through briefings through managers. Helping people make an informed choice takes a lot of effort,” says Roberts.
Over the past year, the company has been reviewing how it promotes its package to staff and trialling new branding for its benefits communications. Pocock explains that this is aimed at making benefits easier for staff to understand. “Previously, the look and feel hadn’t been consistent so that was one of our aims, to make it consistent and simple. We tested our approach to make sure that the understanding was there, because previously that wasn’t, and the results have been good,” she says.
Feedback from the trial is currently under analysis, and new communications material is scheduled to be rolled out later this year. “It is very important to have a consistent and a visual identity [for] benefits so staff know immediately it’s for them. So when we now mail stuff to people at home, it’s clear it’s about Tesco [and] it’s clear it’s about staff benefits,” adds Roberts.
This emphasis on communication and ensuring staff understand the benefits on offer also feeds into the company’s pension scheme. Unusually for a retailer, Tesco offers a final salary pension scheme for all employees from the day that they join.
“The business is very committed to giving people peace of mind and security in their retirement. It’s committed to providing a strong pension scheme to people. It’s a very strong part of the benefits package for staff. It’s also important to communicate pensions very well to staff so that people understand it. Historically, pensions have been a very difficult thing to communicate. It’s a very dry subject so I think it’s important to bring pensions to life and use case studies or real examples to show to other people what pensions mean, how they work and what actually they are getting instead of just losing money out of their pay,” explains Roberts.
Overall, it appears that Tesco’s slogan applies just as much to its staff as it does to its customers
Mark Roberts has been Tesco’s group benefits manager for the past three years, after taking up the role a year after joining the company.
Prior to this, he held a number of positions in HR consulting before completing a Masters in Business Administration (MBA).
The return to studying enabled him to reassess what he wanted from his career and change direction accordingly. “I used to work in [the] banking [sector]. I think leaving banking and doing an MBA enabled me to re-evaluate what I wanted and made me change the sector I wanted to work in.
“I liked the focus on people in retail. I liked the customer contact and the fact that it was very obvious what the business was about,” he explains.
Louise Pocock joined Tesco seven years ago shortly after graduating. After a spell working for its corporate affairs department, focusing on areas such as internal communications, she joined the company’s benefits team eighteen months ago as benefits manager.
Pocock believes that her previous experience at Tesco has helped to shape the skills she needs for her current role. “Primarily, my career at Tesco has been about improving communication for staff. This experience has helped a lot in this job because it is very important for benefits to ensure staff understand what is available to them,” she says.
Case study: Perks are a real medicine
Paul Eaton is an in-store pharmacist. He joined Tesco six years ago, initially on a part-time basis while at university before taking on a full-time role two years ago.He particularly values Tesco’s all-employee share plans, and has taken advantage of its save-as-you-earn (Sharesave) scheme, the last one of which matured last March. “It was very useful as it enabled me to buy furniture for my house as I’d just moved.” He adds that staff typically appreciate the scheme, because even if the company’s share price falls, they will not lose the money they have invested in the plan.
Eaton also appreciates the free shares employees are awarded through the company’s Shares in Success scheme. “As far as I’ve seen it, it’s money for nothing,” he says. All employees also receive a 10% discount on their shopping at Tesco, which Eaton values. “It is very useful as it takes the edge off of weekly bills.” Looking to the future, he is currently considering joining Tesco’s pension scheme.
Final salary pension scheme open to all employees upon joining the firm.
Private medical insurance for some managers and senior managers. Healthcare cash plan for all staff.
Standard 20 days, rising to 25 days after five years service.
Work-life balance policies
A number of employees work on a part-time basis. Other policies include: emergency leave, career breaks, shift swaps and flexible hours.
Split between staff with a business need and status drivers for some management grades. Employees can choose between a company car or cash allowance. Fuel cards are also available for staff who take a company vehicle.
Save-as-you-earn (sharesave) scheme, buy-as-you-earn plan and free shares scheme available to all employees after a qualifying service period.
Tesco at a glance
Tesco was founded by Jack Cohen in 1919, when he began to sell surplus groceries from a stall in London’s East End. Cohen went on to develop a range of Tesco own-brand products before opening his first store in Edgware, London, ten years after the business began. This was followed by the opening of Tesco’s first self-service supermarket in 1956 and eventual expansion overseas to countries such as Hungary, Poland, Thailand and China. The company now operates more than 2,500 stores worldwide, across 11 markets, and is currently focused on international expansion and the development of its UK online business. Globally, it employs over 450,000 staff, more than 260,000 of which are based in the UK. In October last year, Tesco announced record half-yearly profits of £1.1 billion.