£18 million Employee PC scheme funded by AFM Solutions

Background:
An important supermarket chain– the UK’s largest – contracted with us to ensure simplicity and prompt supply chain payment for its 250,000 employee PC scheme with an “off balance sheet” treatment.

The Requirement:
Our service partner, a well established employee PC scheme manager, won a tender to deliver a scheme to this customer, across its UK-wide 250,000 employee base.  The customer set down a number of strict requirements:

  • frequent payments for the supply chain throughout the supply window
  • a single lease contract and a single sign-off by the Board of Directors
  • rental payments to shadow the salary sacrifice profile
  • leavers (the business had a significant churn of lower paid staff) to be managed in terms of redemptions

The Solution:
AFM established with the customer a lease facility under which:

  • a single contract was signed at the commencement of the project funding
  • throughout the 5 months supply, AFM settled supplier invoices, paying the supply chain against weekly “proof of delivery” notes
  • throughout the life of the contract, AFM assisted the customer with a reconciliation of the employees who had left and the resulting accounting treatment for sales, disposals and reduced lease rental

The Benefits for the Employee PC Scheme Manager:

  • Our partner was able to offer a large scheme with the benefit of a complete finance package
  • AFM handled the negotiations for documentary terms and agreed with the customer’s European Treasury department a transaction funded at a margin over sterling swaps
  • AFM also ensured transfer of ownership in the PCs to the employees at the expiry of the hire arrangement

The Benefits for the Customer:
The scheme was a success and AFM assisted in this:

  • The AFM lease was “de-recognised” on the basis of no risk or reward in the structure, enabling an “off balance sheet” treatment
  • AFM managed leavers on a 4-weekly basis
  • AFM ensured clean passage of title to employees at the end of the lease