BT boosts IT literacy across the company and increases employee loyalty through Home Computing Initiatives

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1 BT boosts IT literacy across the company and increases employee loyalty through Home Computing Initiatives EMPLOYER PROVIDED HOME COMPUTING INITIATIVES BT Case Study IN ASSOCIATION WITH

2 Case study BT A home computing scheme makes sense whichever way you look at it. It s good for your business, it s good for your employees and it s good for society. There aren t many company schemes that can offer so much to so many. CAROLINE WATERS, DIRECTOR, PEOPLE NETWORKS, BT GROUP PROFILE BT is one of Europe s leading providers of telecommunications services. Its principal activities include local, national and international telecommunications services, higher-value broadband and internet products and services, and IT solutions. Business situation BT wanted to encourage IT literacy at every level of the organisation and promote itself as a socially responsible business both internally and to prospective employees. Solution Employer provided Home Computing Initiatives (HCI) enable companies to loan computers to their employees as a tax-free benefit. In many cases, companies implement salary sacrifice arrangements where employees accept a reduction in gross salary in return for this benefit. Benefits Greater IT literacy across entire organisation More productive workforce Savings of 1m in the first year of the scheme Accelerates implementation of other salary sacrifice schemes Highly attractive to prospective employees Summary BT is keen to demonstrate leadership in the UK in the provision of benefits to employees. It has implemented a Home Computing scheme in the UK, taking advantage of the tax-friendly framework that exists to loan state-of-the-art computers to its employees for their use at home at significantly reduced cost.

3 Situation Businesses can dramatically improve their performance by increasing employee computing skills. Experienced technology users are typically more productive in the workplace, require less training for basic tasks and place less of an overall burden on the IT department. Unsurprisingly there is a clear connection between IT skills and home computer use. And now there is a cost-neutral and highly efficient way of enabling businesses to increase the number of their employees using computers at home and potentially reap the benefits of a more IT-literate workforce. Home Computing Initiatives (HCI) enable companies to loan computers to employees for their use at home as a tax-free benefit. They have won support from a rapidly increasing number of businesses that are either implementing or planning to implement computing equipment loan schemes to employees over the next year. BT is one large UK employer that is already reaping a wide range of benefits from its Home Computing scheme. It employs 96,000 people in the UK and enjoys a reputation as a forwardlooking employer that offers flexible working arrangements and many other benefits. Caroline Waters, Director, People Networks, BT Group, says: HR in many businesses now has a very business-driven role and BT is no exception. We have revenue and operational cost targets, and even media targets where we need to promote positive stories about the company. Says Waters: When we first looked at Home Computing Initiatives, it was clear that this is a way of making our employees salaries work harder by offering them a valuable tax- free benefit. BT decided to fix its loan term at three years. Says Waters: This made sense for us because we believe that most of our employees with home computers will want to upgrade about every three years to take advantage of advances in processing power and new applications. Implementation To begin with, BT had to decide how to finance the acquisition of computers for loan to its employees as part of the scheme. It faced a simple choice: whether to invest company cash in acquiring the loan scheme computers outright or to finance the scheme as an off-balance sheet item. John Hampton, Personal Tax Manager, BT Group Taxation, explains: Under our scheme, if we had gone for the off-balance sheet option, we could have loaned a computer to the value of 1,500 and still taken advantage of the full tax exemption. But acquiring them for loan to employees meant that we are able to offer equipment to the value of 2,500. Clearly there are benefits when leasing, but our priority is to give our people the greatest possible flexibility when selecting a computer. For this reason we decided to purchase rather than lease so we could offer higher value packages. Hampton also worked closely with the Inland Revenue, ensuring compliance with tax exemption and salary sacrifice regulations every step of the way. Although the Inland Revenue will only validate a Home Computing scheme retrospectively, it is important to work closely with them and keep them informed of what you are doing. We were successful in this, although in hindsight I think we would have implemented a pilot with about a dozen employees so that the Revenue could validate our scheme in a controlled environment. BT decided to combine salary sacrifice for the implementation of its scheme. In return for the benefit of a loaned computer, employees accept a reduction in their gross annual salary. The loan conditions are extremely favourable tax and National Insurance savings alone may effectively reduce the cost of obtaining a computer by over 40%.

4 Winning buy-in across the board In BT s case, the HR department was the driving force behind the implementation. The overall benefits of the scheme and the different areas of BT s business that it touched made HR the obvious choice to champion it, says Caroline Waters. This involved promoting the scheme to stakeholders in every area of the business. Waters and her team were able to demonstrate clearly to employees the financial benefits of the scheme, and the overall contribution that it would make to their home life. The business case for senior decision makers was equally compelling. As well as boosting IT literacy, any salary sacrifice scheme inevitably reduces the payroll bill and associated National Insurance Contributions, and these savings can be used to finance the acquisition of computers in the first place, if the company chooses. Five- month schedule BT gave the project the go-ahead in April 2002 and by September everything was in place ready for the launch. Every available angle was used to promote the initiative including BT s online newspaper, an announcement by BT Chief Executive Ben Verwaayen and mailings to employees. Says Waters: We even had computers set up in the staff restaurants. We kept the messaging to employees simple and compelling, highlighting the fact that you could save up to 46% on a new computer and that you could make your salary go even further. In its first year of operation, more than 6% of BT s UK employees signed up to the scheme, some 6,500 people. Waters says that new participants are continuing to join at the rate of per IT HAS CREATED A FRAMEWORK AND FOUNDATION FOR US TO RAPIDLY ROLL OUT OTHER SCHEMES OF THIS KIND. month. Waters stresses that it has attracted a wide range of people from across the company. We ve had first time buyers, people replacing old equipment and households buying second computers. Above all, it has attracted everyone from the lowest to the highest salary earners. BT s approach demonstrates the value of running the scheme continuously. For some companies it is better to run the scheme every year or six months, for example. But we found that word of mouth was extremely powerful we wanted people to be able to sign up as soon as they had heard the good news from a colleague who was already participating, says Waters. Benefits Boosting IT literacy The overall benefits of the scheme to BT are many and far-reaching, including the advantages gained by increasing IT literacy. From an employer s perspective this can only be a good thing. With the core knowledge of how to operate a computer, employees have the potential to be flexible and productive in the workplace. They also require less training for basic tasks. A computer connected to the internet at home also enables employees to undertake non-work related e-learning. Says Waters: Greater IT literacy is an important benefit of this scheme and means that we have a more productive and versatile workforce. Computers also play an important role in the education of BT employees children. They use a variety of applications including word processing software and the internet for their homework. And many schools are taking advantage of collaborative software and private extranets to enable teachers and pupils to work together out of school hours. There are wider benefits to employees and their families too, especially those with access to the internet for the first time. The cost of goods and services can often be more transparent online, and it s often faster to find good deals and discounts for everything from groceries and electronic goods to holidays. CAROLINE WATERS, DIRECTOR, PEOPLE NETWORKS, BT GROUP

5 Corporate responsibility With corporate responsibility now an important driver in most large businesses, the success of this project also demonstrates BT s social awareness, in particular its commitment to delivering the benefits of technology to employees as well as customers. Says Waters: BT is committed to driving the benefits of technology across all social groups. So it s important that we demonstrate that we can achieve this with our own workforce. We knew that many of our people would use a computer if it was easy for them to finance one, and that has been reflected in the take-up of the scheme. Employee retention The scheme strengthens the overall employer employee relationship. It s a way of giving people a whole new family of benefits and helps you to keep your staff. We also know that it s an effective way of attracting new candidates. It helps them get a better work/life balance, develops their IT skills and takes a lot of the hassle out of employment, says Waters. It also addresses an important recruitment trend. Most employees are keen to work for a responsible organisation. Recent surveys indicate that 84% of job candidates select their employers based on social and environmental awareness. The scheme goes some way to addressing the concerns of discriminating candidates. Boosting the role of the HR department From the HR department s perspective, the scheme offers a valuable opportunity to increase visibility and improve overall business performance. Says Waters: It moves an HR department up the value chain because you can move beyond traditional business measures to actually generating revenue. So far the scheme has cut operating costs by 1m by reducing the amount of the payroll bill subject to National Insurance Contributions. We are also playing a more important role in building the employer brand. The scheme has helped us to promote company values and support BT s position as an IT thought leader and socially responsible employer. Building for the future Waters is convinced of the far-reaching benefits of the scheme to BT, its employees and the HR department itself. If there is one piece of advice that I would offer to other organisations it is that a Home Computing scheme makes sense whichever way you look at it. It s good for your business, it s good for your employees and it s good for society. There aren t many company schemes that can offer so much to so many. And although we are a large business, the benefits that we have enjoyed could be applied to any organisation, large or small paying attention to your employees pays enormous dividends whether you have a staff of 10 or 10,000. A platform for innovative benefits Since implementing the scheme, BT has used it as a model for rolling out a childcare salary sacrifice scheme in a fraction of the time it would otherwise have taken. BT is also looking at continuing to expand its range of salary direct benefits. These types of benefits are so compelling to employees that we believe they give us a real competitive advantage. The beauty of investing resources in setting up our scheme is that it has created a framework and foundation for us to rapidly roll out other programmes of this kind, says Waters. WE KNEW THAT MANY OF OUR PEOPLE WOULD USE A COMPUTER IF IT WAS EASY FOR THEM TO FINANCE ONE, AND THAT HAS BEEN REFLECTED IN THE TAKE-UP OF THE SCHEME. CAROLINE WATERS, DIRECTOR, PEOPLE NETWORKS, BT GROUP

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