Investment in employees, province has immeasurable returns.

Maybe you should be ashamed of your company's retirement plan. As the owner of a Saskatchewan business you would like to do more for your workers but right now you have a lot on your plate. Here's an idea that won't cost you anything, may drum up a little employee good will and--most importantly--will be invaluable to your employees' long-term financial planning.

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Setting up a SaskWorks Payroll Investment Plan took almost no time at all, says Crestline CFO Daryl Bitz. It entailed a short presentation from an investment advisor to the Crestline employee group followed by half-hour sessions with interested employees.

From a bottom-line perspective the company puts out very little and gets nothing in return. Except, that is, employees who are happily building a nest egg--boosting morale, loyalty and attitudes while doing so.

"Most people are short-sighted, caught up in their day-to-day lives," observes Berkshire Investment Group Inc. financial advisor Ron Areshenkoff. "But once you show employees that a $5,000 investment will only cost them between $1,050 and $1,600, then they see that they almost can't afford not to do it."

Particularly when they notice very little change in their paycheque. As with any Saskatchewan labour sponsored fund, a SaskWorks investment triggers RRSP tax savings and federal and provincial tax credits. The calculations of those benefits are done every pay period by PFM Capital Inc., manager of the SaskWorks Venture Fund.

"We've spent quite a bit of time to ensure we have a payroll plan that works inside any company that operates in Saskatchewan," says PFM president and CEO Randy Beattie.

PFM wrote the software and ran their payroll plan in several trials. Implementation has been seamless in every company they've approached, says SaskWorks vice-president of investments Chris Selness.

"Employers by and large are challenged every day to deliver the most competitive compensation package possible," Selness asserts. "One direction the financial services industry has been moving toward is the area of pre-authorized transactions, and the payroll plan follows those lines, allowing investment to be spread out over the year and giving people another option for building their savings and buying shares in the SaskWorks fund."

Not everyone can come up with investment dollars at the end of February so the plan makes sense for employees, says Beattie, who adds "there are a lot of companies and employees out there who can benefit from our payroll deduction program." On top of this, the reward for the province comes in jobs, economic benefits and certainty that investment capital stays in Saskatchewan.

"The provincial government is foregoing tax dollars and they want a return on their investment," explains Areshenkoff. "They've looked at venture capital funds and seen that they have had a lot of success, seen that they're good for the province and a good use of tax dollars."

"There is a lot of benefit all around. They're good for everyone."

Investments in venture capital funds must be held for eight years, but after the holding period expires the money can be rolled over and the first $5,000 will once again be eligible for the 35 per cent federal and provincial tax credit.

Areshenkoff recommends SaskWorks for the first $5,000 of RRSP investment because of the tax credits. Beyond that, venture capital funds work well in partnership with other assets within a client's investment account.

"SaskWorks complements existing retirement plans that are in place," he says. "This isn't magic and it isn't the be all and end all for clients' accounts but it is one important piece of the puzzle."

Berkshire Investment Group conducted an extensive audit, watched how funds were managed and developed tremendous confidence in PFM as the firm managing the SaskWorks fund. Areshenkoff believes PFM has assembled a reputable and competent group.

The local management team at PFM has been able to find good companies out of the several hundred they look at each year, resulting in an investment 'hit rate' of around four per cent or 10-12 companies per year. They've been proactive as a group, Beattie says, and have focused on investing in the right management groups.

"We have one of the most active investment teams you'll see and we tend to take a vigorous approach to investing. We get involved," Selness says, adding PFM team members hold directorships with approximately 75 per cent of their invested companies, a value-added component for those companies.

Crestline is one of the companies in the SaskWorks portfolio. PFM led a syndicate of funds - the deal was too big for SaskWorks to do on its own - into a management buy out (MBO) in a deal that closed in November 2004. Bitz has been impressed with the PFM approach from the beginning.

"We went to six or seven different potential financial partners and we had alternatives outside of Saskatchewan," Bitz says. "We were selective and when it came down to it we saw that PFM would be prepared to work with us and allow us to do what we do well."

"There are always bumps in the road and even with everything we went through to get this deal done, PFM always had a level of governance and professional management that we felt we wanted in a financial partner."

Crestline proceeded with their MBO while SaskWorks was confident that backing the country's leading ambulance manufacturer was a sound investment. Bitz knows this mutual confidence is well placed.

"Obviously, as a venture capital fund SaskWorks is not in the business of owning companies for the long term but I'm sure we'll see an orderly transition in the future," he says.

There are still some companies out there that look at SaskWorks and see only a bag of money, Beattie says. SaskWorks functions best when it adds value after the investment is made and then successfully exits when the time is right.

"We've completed that cycle on numerous occasions," he says.

Selness notes SaskWork's primary sectors are oil and gas, manufacturing and value-added agriculture, adding: "We're growing the unit value and we are now seen as a pretty attractive investment."

"We invest in real companies making real products with real cash flows. That's one of the big differences in SaskWorks as a venture capital investment fund in this province."

Traditionally, small and medium-sized companies in Saskatchewan haven't had much access to venture capital, Beattie says, and there remains a clear need for capital growth in our markets. Opening up that avenue is crucial for companies and investors.

"That's the unique thing about this investment. You're investing in your own future and you're also investing in companies right here in your home province," Beattie says. "You receive the tax deduction and tax credits, you do it painlessly through payroll deduction and you have that feel-good byproduct of knowing that you're not only investing in your own future, you're also investing in Saskatchewan."

From an employer's point of view, Selness adds, by setting up payroll they are investing in their employees and in Saskatchewan companies without incurring any cost of their own, unless the employer chooses to contribute on their employees' behalf.

Beattie also points out that SaskWorks is an attractive investment vehicle even without the incentives.

"SaskWorks gives investors an opportunity to invest in private companies they wouldn't normally have access to, including Saskatchewan's growing resource sector," he explains.

As a registered labour sponsored investment fund sponsored by the Communications, Energy and Paper-workers' Union (Saskatchewan Area Council), SaskWorks also gets its share of promotion and support from across the labour-management spectrum. In fact, everyone in the province is likely to know someone connected to a SaskWorks investment.

"We communicate it in that manner and once people view it in the context of their other investments they are generally supportive," Areshenkoff says. "The vast majority of people think it's a very good opportunity."

Written by Jeff Arthur