12/03/2008 - 22:00

EPAC in STeP

12/03/2008 - 22:00

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Adelaide-based salary packaging service provider, EPAC Salary Solutions, has made its first move into the Western Australian market.

Adelaide-based salary packaging service provider, EPAC Salary Solutions, has made its first move into the Western Australian market following its acquisition of local company, STeP Salary Packaging.

It was a matter of timing for STeP managing director Julian Keys, who said he had plans to take the family company to a national level but needed hand getting there.

“EPAC rang me in the new year and we’ve been negotiating for about seven or eight weeks,” Mr Keys said of the recent merger.

“It’s an exciting opportunity for us to become part of a national company and we’re really combining different strengths.” During the past nine years, STeP has focused on servicing the state’s aged care and community service organisations, and currently has 5,000 employees or members signed up.

Following the merger with EPAC, Keys said that figure would jump to about 13,000 members, which did not include three major new WA clients secured by EPAC that led to the acquisition.

The news has not come as a huge surprise in a market where consolidation activity has increased in recent years.

Salary packaging provider Paradigm Total Management Solutions chief executive, John Morgan, said businesses had to consolidate to compete with salary packaging giant McMillan Shakespeare, which he said has around 200,000 members.

“Any industry that is based on scale is ripe for consolidation, and this is an industry that requires the making of hundreds of thousands of payments on an annual basis, all driven by computer systems,” Mr Morgan said.

“There’s also a lot of pressure on pricing within the industry.

In the last WA Department of Treasury and Finance tender for the provision of salary packaging services, there was a 23 per cent reduction in the average price compared to the previous tender.

“So when you’ve got pressure on pricing like that, many organisations seek to lower their average cost and one of the key ways to do that is through consolidation with other industry participants.” It is a view echoed by Perth-based salary packaging provider Pay-Plan operations head Mike Tucker, who also said the company, which had clients nation-wide, was focused on staying independent.

EPAC managing director Greg Meyer said the company was aiming to be in the top three Australian salary packaging companies by the end of the year, alongside McMillan and Smart Salary.

The sale date for STeP is April 1, at which time it will undergo a name change to EPAC Salary Solutions.

All 12 staff will be retained and Mr Keys will head up the WA branch.

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