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Employee Savings Schemes Could Constitute up to 11% of Employees’ Pay

Employee Savings Schemes Could Constitute up to 11% of Employees’ Pay

Employee Savings Schemes Could Constitute up to 11% of Employees’ Pay

The DARES (Direction de l’animation de la recherche, des études et des statistiques du Ministère du Travail/ The Department for Coordination of Research, Studies and Statistics) published a study [1] last December on the structure of private sector pay in 2014.

The report shows that for companies with at least ten employees, the pay variable components represented on average 19.2% of the total gross pay.

This variable part is made up of elements which relate to salaries, such as bonuses, overtime and additional hours, but also to employee savings schemes (participation, profit-sharing and matching shares from employers operating company savings plans) and other elements not relating to the employee’s salary (short-time work unemployment benefit, purchasing additional paid time-off (PTO) days from a vacation buy/sell program, weather-related layoffs benefit, etc.).

It’s not surprising to learn that bonuses, overtime and additional hours make up the largest part of these pay variables: 14.7% of the total gross pay.

In comparison, the percentage of employee savings schemes – 3.4% of the total gross pay – could seem almost ridiculously small. However, those who, like ourselves, are staunch defenders of the practice, may find in this study reasons to keep hope alive when looking at the figures a little closer.

Indeed, the part that employee savings schemes represents in the total gross pay varies considerably from one sector of activity to another, as well as according to the size of the company.

Hence, in industry employee savings schemes make up 4.4% of the pay but with major disparities. The palme d’or goes to the refinery sector with 11% of pay being made up of employee savings schemes. The extractive industries: energy and water, are way behind at 5%, and the transport equipment manufacturing sector at 4.8%.

The services rank significantly lower than the average at 3.1%. However, large disparities exist between the financial and insurance activities (8.2%) and the accommodation and catering sector (0.7 %).

It is also useful to look at the proportion of employees that are in involved in employee savings schemes. In general, 48.4 % of workforces participate in such schemes.

Here again, the average figure covers up large disparities. Moreover, one finds the same sectors leading the field: refinery (94.7 % of employees participate in employee savings schemes); financial and insurance activities (85.8 %); transport equipment manufacturing sector (84.4 %); extractive industries: energy and water (79.9 %). The accommodation and catering sector comes right at the bottom of the table with 23.3 %.

Segmenting the activity sector in this way doesn’t lend itself to understanding the question. For example, the TOTAL group just by itself boosts the refinery sector… In fact, the real distinction depends on the size of the company. Indeed, the larger the number of employees there are in a company, the larger the part made up of employee savings schemes is in the pay. This results in an above the average percentage (3.4 %); companies employing between 250 to 499 at 4% and those with 500 employees or more at 4.8%. It’s regrettable, however, that DARES’s segmentation isn’t more detailed. It would have been interesting to ascertain how much of the employees’ pay is taken up by employee savings schemes in large and very large companies’ pay structure.

By contrast, SMEs and VSEs are far from this figure. Those that employ 100 to 249 employees are close to the average with 3.2% of the pay made up of employee savings schemes and almost 50% of the employees involved. Whereas, in companies with between 50 to 99 employees, only 36% of the employees have access to one; employee saving schemes only represent 2.2% of the total gross pay. The figures fall steeply again in the smallest companies.

Conversely, taking into account the proportion of the employee savings scheme in the variable pay elements (19.2 % on average), one observes that it rises with the size of the company. And so it rises to 13.2% in the companies employing between 50 to 99 employees, 17.3% in those employing 100 to 249 employees, then 20.4% for the category of companies employing between 250 to 499 employees. Finally, for the largest companies, employee savings schemes reach 22.3% of the variable pay elements. Admittedly, the part taken up by the employee savings scheme is still far from that of bonuses (68%) however, representing nearly 25% of the variable elements, it is far from negligible.

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Yet, there’s no reason why employee savings schemes should only be for big groups. Being an election year, we would like to make a proposition to the electoral candidates, whether they are looking for fresh ideas or not. It’s a proposition that would cost very little:  Why not enable more employees to participate in employee savings schemes by relaxing a certain number of regulatory requirements which, at times, make them inaccessible to SMEs.

Indeed, let’s open up employee savings schemes to all companies and in exchange revert back to times, over 10 years ago now, when social insurance contributions (PRSI) were not compulsory.

[1] « The Pay Structure in the Private Sector in 2014 » DARES, Results No. 74, December 2016