lajC/HFRA/HR 20.4.05/RegionalControlCentres

8 March 2005

Appendix A

FIRE CONTROL PROJECT

Employee Retention

Release: Version 0.6

Release date:

Document Ref: RPT:0022SE/A

DOCUMENT CIRCULATION

(version, history and changes)

Table of Contents

1. INTRODUCTION 4

2. BACKGROUND 5

3. RETENTION - DEFINED 6

4. RETENTION OPTIONS 7

5. YEAR ON YEAR BONUS 8

6. TIME LINE BONUS 10

7. PROJECT COMPLETION BONUS 12

8. COMBINATION BONUS 13

9. TRAINING VOUCHERS 15

10. REDEPLOYMENT 15

11. NIL PAYMENT 15

12. PERFORMANCE BONUS 16

APPENDIX - RETENTION COSTS

A YEAR ON YEAR BONUS

B TIME LINE BONUS

C PROJECT COMPLETION BONUS

D COMBINATION BONUS

1 INTRODUCTION

1.1 The advent of Regional Control Centres means substantial change to all Fire Services, their personnel and, in particular, employees currently working within Control Rooms. The impact of these changes will be far-reaching and will transform current working practices and arrangements.

1.2 Organisational change is never easy and individuals react and cope with change in their own way. It is important for senior executives and managers to handle these changes as transparently and openly as possible.

1.3 The timetable for moving to Regional Control Centres is over a significant period and dealing with changes of this scale may result in Services seeing an increase in turnover, sickness absence and attendance. It is therefore, important for Services to consider key strategies that will assist employees in remaining with the Service to ensure business as usual. The first critical phase of this project is the location announcement due in the first quarter of 2005.

1.4 Once the location is known, individuals will consider their options to decide what their next step should be. Even with incentives, some employees will choose to leave the Service at that time.

2. BACKGROUND

2.1 The publication of the Government's National Framework Document clearly states the intention to introduce Regional Control Centres and it is anticipated that the Control Centres will be delivered during 2007/08. Work commissioned by Government has highlighted the running costs of control rooms and subsequent reports reinforced the conclusions that `regional control rooms were necessary to support resilience requirements and would achieve major efficiencies.' The document states that Regional Management Boards must:

· Ensure the phased transition from existing control rooms to the new control centres is delivered within the overall national timetable;

· Comply with national protocols on staff roles, training and mobilising and back up and resilience requirements.

2.2 It is likely that fewer staff will be needed for control duties when the new Regional Control Centres are established. The National Framework document says that `the Government expects authorities to make best efforts to re-deploy staff no longer needed for control centre work to other roles.'

2.3 It adds that they should also ensure retention of sufficient staff to manage individual control rooms until regional control centres have been established.

2.4 In addition, the Fire and Rescue Services Act 2004 says that a fire and rescue authority must in particular:

· Make arrangements for dealing with calls for help and for summoning personnel.

2.5 It is essential, therefore, to continue to provide a service to the public for responding to emergency situations. To ensure Services retain staff with the key experience, skills, and abilities during this transitional period, it may be appropriate to pay a retention bonus.

3. RETENTION

What is it?

3.1 Retention is used during organisational changes to encourage staff to remain with the business until the ultimate completion of the project. Most businesses offer retention in the form of financial benefit though other options are available. Financial incentives of this type are regarded as compensation for uncertainty but it does not guarantee that employees will stay until the end of the project. Retention payments are not pensionable but are subject to tax and national insurance contributions

Why pay it?

3.2 Retention is regarded as a loyalty bonus and rewards staff for continuing to provide their skills and expertise during a transitional period. It may also prevent the need for short-term recruitment. There is no legal requirement to pay retention and many employers use enhanced redundancy packages as an incentive for staff to remain with their business.

Who should receive it?

3.3 Retention bonuses are generally paid to business critical staff whose skills, knowledge and experience would have a detrimental effect to the business if they left before project completion. Within a Fire & Rescue environment, it may be appropriate to pay all operational control room employees. For employees not engaged on operational activities and for employees on alternative conditions of Service, it may be appropriate to pay performance bonuses.

3.4 One factor that should be taken into consideration is how other categories of staff have been or are being treated in a similar situation. Some Services (especially those who are aligned to a County Council) are undergoing productivity and efficiency reviews which may result in a re-structure and potentially make staff vulnerable and at risk of redundancy.

3.5 Although, they may not be regarded as business critical staff, employees often equate retention bonuses with their value to their organisation. If a group of employees feel they are treated differently to their colleagues, Services must be prepared to deal with the consequences and impacts this may bring.

4. RETENTION OPTIONS

4.1 The key to a successful retention strategy is to ensure that employees receive sufficient financial reward to remain with the organisation until the project end date.

4.2 In November 2004, the ODPM announced the timetable for transferring to the Regional Control Centre with the South East region expected to begin transfer in November 2007. With the location still unknown and the uncertainty of the length of time required to fully implement the technology and related computerised systems, it would be reasonable to expect a degree of movement to the projected timescales.

4.3 Another issue for Services to consider is funding. Until the Finance Working Party deliver their report, Services should make preparations to fund retention bonuses at a local level. To assist with financial planning, it may be prudent to consider delaying the implementation of a retention bonus until 2006/2007.

4.4 It should be noted that the year on year bonus as detailed in the retention strategy issued by the ODPM has been widely circulated and Control Room staff are aware of its content. If Services decide not to implement the year on year option, consideration will need to be given to how staff are informed and the impact it may cause.

4.5 The proposals within this document cover financial and non-financial options. However, Services are reminded that they are not obliged to pay retention bonuses and may wish to consider enhancing the redundancy package to facilitate retaining members of staff.

4.6 It is not necessary to offer direct financial reward. The key to retention is to provide sufficient benefits that are regarded as attractive and worthwhile for an employee to remain with the Service

4.7 It is recommended that the same strategy is adopted across the region and the following options are for consideration:

5. YEAR ON YEAR BONUS

5.1 The principle behind a year on year bonus is to reward staff over a set period of time in compensation for the long-term uncertainty associated with a project of this scale. The bonus would be a percentage of each employee's gross annual salary which increases every year until project completion:

EXAMPLE

5.2 Location announcement is made first quarter of 2005:

5.3 For the purposes of this example, the percentages used are based on guidance received from the Office of the Deputy Prime Minister. The percentages can be varied and should be taken as a guide. The costs for this option are detailed in Appendix A and the salaries used are the competent rates following the Stage 3 pay award (July 2004). The figures will, therefore, need to be reviewed following any future pay awards. The figures quoted are pure salary costs and do not include any on-costs. The final payment will only be awarded to employees whose Service is due to transfer to the Regional Control Centre after April 2008.

ELIGIBILITY

5.4 To be eligible for the year on year bonus, staff would need to be in the employment of their respective Service on 30 April 2005 and the percentage bonus would be paid against the individual's substantive role.

5.5 In certain circumstances, Services may wish to apply their discretion.

5.6 Staff joining after 1 April 2005 would receive a performance bonus.

PROS

· Proves commitment to staff for the long-term uncertainty

· Spreads financial cost over a long-term period

CONS

· Does not allow for slippage to time-scale

· Services may need to consider a contingency plan if transfer is delayed

· Budget pressure for year one

· No guarantee that staff will stay to final completion of the project.

· Potential that staff could collect bonus payments in year one and year two and then decide to leave the Service.

· Increased risk of recruiting on short term contracts and the impacts on Services for training.

6. TIME LINE BONUS

6.1 A time-line bonus is paid over a short period of time working backwards from the proposed transfer date. It consists of two payments that reflect and recognise the long-term disruption and uncertainty to the employees and also rewards them for remaining with the organisation until completion

EXAMPLE

6.2 Date of transfer to Regional Control Centre: November 2007. As the South East has a nine month timeframe to complete the transfer to the Regional Control Centre, each Service may decide to begin payment twelve months from their proposed transfer date instead of a blanket payment beginning in November 2006.

6.3 For the purposes of this example, the percentages used are based on advice from industry. The percentages can be varied and should be taken as a guide. The costs for this option are detailed in Appendix B and the salaries used are the competent rates following the Stage 3 pay award (July 2004). The figures will, therefore, need to be reviewed following any future pay awards. The figures quoted are pure salary costs and do not include any on-costs. For ease of reference, only one date has been cited in this example.

ELIGIBILITY

6.4 To be eligible for the time line bonus, staff would need to be in the employment of their respective Service on 30 November 2006 and the percentage bonus would be paid against the individual's substantive rank.

6.5 In certain circumstances, Services may wish to apply their discretion.

6.6 Staff joining after 1 November 2006 would not be eligible for the retention bonus.

PROS

· Allows sufficient time for financial planning

· Significant bonuses to reward employees who remain until transfer date

· Spreads financial cost over two year financial cycle

· More tangible reward for those who choose to stay.

· Regarded as a more viable business strategy

· Achieves retention objective of rewarding staff for staying until project completion.

CONS

· Length of time employees have to wait before they receive any reward.

· First payment date might be even later if the start date is delayed.

7. PROJECT COMPLETION BONUS

7.1 A one-off bonus paid when the project is completed and the Regional Control Centre is fully functional.

7.2 This bonus would need to be a significant sum to encourage employees to stay until final completion and reward them for the long-term disruption caused to them. A one off bonus of this type would normally attract a gross salary percentage payment between 15% and 20%. For the purposes of this example, the percentages used are based on advice from industry. The percentages can be varied and should be taken as a guide. The costs for this option are detailed in Appendix C and the salaries used are the competent rates following the Stage 3 pay award (July 2004). The figures will, therefore, need to be reviewed following any future pay awards. The figures quoted are pure salary costs and do not include any on-costs.

ELIGIBILITY

7.3 The final completion bonus would only be open to individuals employed on permanent contracts or employees employed on contracts of more than 12 months and whose last day of Service will be the project completion date. In certain circumstances, Services may wish to apply their discretion.

PROS

· Allows Services sufficient time for financial planning

· Provides flexibility should the transfer date be delayed

· If the percentage of salary is significant, it may encourage employees to remain until transfer date

CONS

· Employees liable for tax and National Insurance contributions - may feel that final sum after deductions is not commensurate with the long-term uncertainty.

· Might be regarded by employees as a de-motivator.

· Length of time employees have to wait before receiving reward.

· Does not show commitment from the Services.

· Perception that Services might renege on the agreement.

8. COMBINATION BONUS

8.1 A staggered bonus paid in two stages - one at the beginning and a final payment at the end of the project.

8.2 Payments of this type recognise the long-term disruption and uncertainty to the employees and also rewards them for remaining with the organisation until completion.

8.3 The initial bonus is a small payment followed by a larger sum at project completion. The New Burdens Paper has allocated each region a sum of money to be used for retention purposes and this equates to approximately £223 per person (before tax and national insurance contributions) and could, therefore be taken as the starting point for a bonus of this kind.

8.4 An initial payment for this type of bonus is normally 1.5% and a final payment bonus of 15%. The percentages can be varied and should be taken as a guide. The costs for this option are detailed in Appendix D and the salaries used are the competent rates following the Stage 3 pay award (July 2004). The figures will, therefore, need to be reviewed following any future pay awards. The figures quoted are pure salary costs and do not include any on-costs.

8.5 The initial payment would be paid in April 2005 and the final bonus paid at date of transfer.

ELIGIBILITY

8.6 To be eligible for the combination bonus, staff would need to be in the employment of their respective Service on 30 April 2005 and the percentage bonus would be paid against the individual's substantive role.

8.7 In certain circumstances, Services may wish to apply their discretion.

8.8 Staff joining after 1 April 2005 would receive a performance bonus.

PROS

· Shows commitment from the Services.

· Provides flexibility should the transfer date be delayed.

· Immediate and tangible reward for employees.

· Reflects the guidance paper issued by the Office of the Deputy Prime Minister which suggested a retention bonus to be paid in April 2005.

· Achieves retention objective of rewarding staff for staying until project completion

CONS

· Does not allow for financial planning as Services would have to make up the shortfall between the new burdens payment and the 1.5% figure.

· No guarantee that staff will stay to final completion of the project.

· Initial payment may not be regarded by staff as significant.

9. TRAINING VOUCHERS

9.1 Organisational change of this size force individuals to reflect on their career and consider whether they would benefit from a career change. It is standard practice for employer's to assist staff with training courses that are relevant to their current job or provides them with a skill/ability for promotion. However, in this case, Services may choose to offer employees an option to pay for re-training. There would need to be a ceiling imposed to this cost and the tax implications also need to be considered.

10. RE-DEPLOYMENT

10.1 If an employee was guaranteed a position within the Service, it may not be appropriate to pay a retention bonus. As a Service is able to offer continual employment, this would be regarded as a retention strategy.

10.2 As redeployment can form part of an organisation's retention strategy, it is not necessary to pay retention bonuses. However, an ex-gratia payment of £1,000 is often awarded to staff who are redeployed as a gesture of good-will and recognition of the uncertainty they have endured.

11. NIL PAYMENT

11.1 As there is no legal obligation to pay retention bonuses, Services may decide against a retention strategy.

11.2 If a retention strategy is not an option, Services must consider the impacts this may have on staff morale as it may be perceived that staff are not valued.

11.3 The Government have widely circulated proposals for retention payments and there is an expectation, particularly in the South East region, by staff to receive a reward for the long period of uncertainty.

11.4 Another impact Services may wish to consider is the length of time it may take to recruit and train new members of staff. The recruitment process can be lengthy and it could be at least four months before a new member of staff joins the Control Room and there is a period of training to be undertaken before an operator is proficient.

11.5 It might be prudent for a Service to complete a risk assessment to measure the impacts a leaver may have on the Control Room.

11.6 Services must consider their contingency plans should their turnover rise significantly and leave the control room deplete of experienced staff.

12. PERFORMANCE BONUS

12.1 For members of staff not employed for operational control duties or for those employees engaged on short-term contracts, it may be appropriate to adopt a different retention scheme.

12.2 In order to achieve the Service's objective to maintain as many key people as possible until project completion, consideration needs to be given to an alternative retention strategy.

12.3 Some of the roles currently undertaken in Control Rooms will need to be carried out until the transition is complete and it is, therefore, essential to maintain the knowledge, skills and experience of these individuals to ensure business continuity.

12.4 Services will need to conduct a review of these roles and determine what the effect might be on the business if the current postholder were to leave before the regional control is established. Once the analysis is complete, the manager in conjunction with the postholder should produce a set of work based objectives to complete during the transition period. At the end of the period and, if the objectives have been completed to the required standards a performance bonus would be paid to each individual. The level of payment would depend on the role of the individual and how critical it is to the Service's business continuity.

12.5 The objectives should be agreed in writing to the individual together with the retention payment they would be entitled to and the date they would receive it. The objectives should be reviewed periodically to ensure that they are being met and, in addition, to ensure they reflect the Service's requirements. If objectives are altered substantially, the payment may also need to be reviewed but this should only be in exceptional circumstances.

12.6 Payments of this kind are generally applied as a `one-off' payment at a fixed rate rather than a percentage of the individual's salary. As expressed before, the amount would reflect the role and the following options are examples only and can be varied/increased as determined locally:

· Flat rate payment of £1,000

· One month's gross salary