Do you have to give all employees the same benefits?

In this guide, we'll suggest ways to tailor employee benefits to suit different team members' needs. However, your approach must avoid unlawful discrimination or any steps that could find your business facing an employment tribunal claim.

Before deciding which employee benefits to implement, consult your HR team or HR service and, if necessary, an employment lawyer.

Employee benefits can help your business attract and retain employees by demonstrating your company's commitment to their needs and goals at work and in their personal lives. A good employee benefits package can help employees achieve a better work-life balance, offer financial support and promote well-being.

Some employee benefits improve employee engagement, which can also increase employee retention. For example, research shows that policies and benefits that support employee well-being increase engagement. This can benefit employers by improving relationships with customers, suppliers, and within each team, so it's worth offering better benefits where possible.

Some minimum employee benefits exist, such as statutory sick pay, annual leave of at least 5.6 weeks and a workplace pension for all staff earning more than £10,000 and aged between 22 and State Pension age. Parents also have a right to paid parental bereavement leave if their child dies or they experience a stillbirth.

You must also provide eligible employees with statutory parental leave and pay. Parental leave can comprise maternity, paternity or shared parental leave.

Beyond the benefits required by law, you can build a benefits package to suit business and employee needs. Here are some of the employee benefits that are worth considering.

Well-being benefits

As we've mentioned, well-being benefits can support good employee engagement. These can include employee health insurance, support for mental health problems and an employee assistance program (EAP). Health insurance can provide employees with most of these support services, including direct access to counselling and an EAP. Depending on your company size, health insurance companies can also offer help in designing workplace wellness programs to improve employee well-being and reduce absenteeism.

Well-being initiatives can go further if employers offer ongoing practical support, such as free healthy snacks or discounted meals to promote healthy eating.

Financial benefits

Some employee benefits can provide financial support when employees need it most. It can also demonstrate your willingness to look after their families' financial security when they're no longer around or help them save money in their daily lives.

Income protection insurance can pay an income if employees can't work due to illness, while death-in-service benefits will pay a lump sum to their loved ones if they die during their employment. On a more cheerful note, employee discount programs can help them save money on their family holiday or enjoy treats such as free cinema tickets. You can also provide employee benefits that save them money on commuting to work.

Work-life balance benefits

Many employees prioritise work-life balance. Your employee benefits can help them achieve this balance in various ways. We've mentioned statutory minimum leave, but employees can relax, spend time with their loved ones, and enjoy their hobbies and interests if employers offer additional annual leave.

Flexible working can also let employees balance work with family and other commitments. Flexible working arrangements can include flexible locations or hours. Your business can offer flexible working to meet business needs while benefiting employees.

We'll consider individual employee benefits in detail shortly. However, you've probably realised that there are many benefits that you could consider including in your benefits package. Your budget will significantly impact the benefits package you offer. There will also be tax implications for your business and staff. For example, you can deduct the premiums from corporation tax if you offer health insurance. However, HMRC class health insurance as a taxable benefit, meaning your employees will pay more income tax.

You must also assess what benefits your team will value and what will help your business attract and retain new staff.

Team surveys and discussions

Put simply, there's little point in offering employee benefits that no one values, particularly if they involve a significant increase in costs. Working to identify the right employee benefits can show you what to discount and which benefits employees will value if they're delivered in the right way.

Conducting workplace surveys will give you information on what employees prefer from across the workforce. Setting up a staff forum allows discussion between different groups at varying levels within the company to increase understanding of other employees' needs.

Attracting new talent

Seeking your teams' views on employee benefits will help keep current employees happy. However, job seekers vary in their needs and preferences, so it's wise to consider research from other sources to help your business attract and retain new talent.

The CIPD's Good Work Index 2024 gives useful guidance on creating a positive company culture and ways to support employee well-being. Ciphr's employee benefits survey gathers information from workers about the employee benefits they value.

Employees' needs can vary depending on their role within the business. However, an employee benefit can also offer a personal benefit. For example, company directors and senior staff may need company cars because they frequently travel on business. However, they can also use them to travel in comfort on their family holidays.

Your business can offer differing benefits, but you'll usually need to demonstrate a business need to avoid allegations of unlawful discrimination. We recommend getting advice from an HR professional or employment lawyer.

Next, we'll consider various benefits and how these can vary between different employees.

Benefits for company directors

Remuneration for company directors typically differs from that of other employees. Many directors receive a small salary below the threshold for income tax and National Insurance contributions. It is generally more tax-efficient for companies to pay directors with dividends and enhanced benefits as these attract lower tax rates.

Directors will, therefore, usually receive more valuable benefits than their employees. However, businesses must still be mindful of their obligation to avoid discrimination by demonstrating a business need for any difference in compensation between directors.

Length of service benefits

Many employers reward long service by offering better benefits to employees who have been with the company for several years. Some commentators suggest this could potentially represent age discrimination. However, long-service benefits reward loyalty and can increase employee retention.

The most common long-service benefit is likely additional annual leave, where employees can earn extra paid holidays according to the length of their employment. Many employers reward five or ten years of service but must consider their legal obligations. The Equality Act 2010 states that employers can offer an additional day of annual leave for each year up to four years of service. Beyond that, they must demonstrate a business need. This will likely be straightforward. Rewarding loyalty increases the chance of that commitment continuing, helping businesses retain employees and avoiding increased recruitment costs.

Financial benefits

Financial benefits include an employee's salary, which will differ according to their role within the company. Some organisations, including public bodies such as the Police service and NHS, have pay grades which reflect seniority and experience. Elsewhere, pay increases or offers to new staff should consider existing wages for employees in similar roles and the market as a whole. Equal pay should be a key priority for employers. In particular, the gender pay gap remains a significant issue.

Salary can impact other benefits as some financial benefits automatically pay more for higher earners. We'll consider some benefits where value is directly linked to salary.

Pension contributions

All UK employers must enrol their staff in a workplace pension scheme. Employees must pay a minimum of 8% of their salary into their pension, and employers must contribute at least 3%. However, you can pay more if you wish. Pension matching contributions, where employer contributions match employees' up to a set level, are a valued benefit for many employees.

However, some businesses pay higher contributions for senior staff to boost their retirement savings plans. An employee with a higher salary will receive more retirement income even if their employer contributes the same percentage to all staff. However, businesses must demonstrate a clear benefit if employee percentages differ.

Death-in-service benefits

Most employers provide death-in-service benefits by buying group life insurance or relevant life cover. Life insurance pays a lump sum to an employee's loved ones if they die while employed by you, although the death doesn't need to be work-related or happen during work time. The lump sum is typically a fixed percentage of the employee's salary at the time of their death. With group policies, this is usually 2-4%, while relevant life cover can pay around 15-30%.

These percentages mean that higher earners will receive a bigger lump sum. However, businesses can also add relevant life insurance to provide an additional payment. As we've mentioned, company directors' remuneration often differs from that of employees. Businesses often use relevant life cover as part of directors' compensation packages.

Income protection insurance

Income protection insurance provides a monthly payment of 50-80% of an employee's usual salary if they can't work because of illness or injury. Accordingly, the higher the salary, the higher the payment. Employees can pay for personal income protection insurance. They'll typically receive a lower percentage as they'll use money that's already been taxed to make payments. When employers buy a group policy, the rate paid is higher as employees must pay income tax on their payments.

Trivial benefits

Trivial benefits are gifts that cost £50 or less, such as a bottle of wine to thank staff for good work on a project, a Christmas present or a gift voucher. They're separate from allowances for work events like the Christmas party.

Employees can receive unlimited trivial benefits. However, the rules for directors differ when a business has five or fewer shareholders or when all shareholders are also directors. In that case, company directors and their families can receive six trivial benefits each year. HMRC introduced this rule to avoid a situation where companies pay most directors' personal expenses as trivial benefits, resulting in a considerable reduction in tax payments.

Other benefits

Some benefits vary depending on what will benefit different employees. These can change throughout their lives as they age and their circumstances alter. The needs of an older employee making retirement plans will differ from those with young families.

You might think achieving equality is too challenging when individual needs differ so widely. However, equality of opportunity is the key here. A varied employee benefits package lets your team use the benefit that best suits their needs. If you retain employees long-term, their circumstances will change, and the benefits they access will, too.

Some employee benefits can also provide various services according to need.

Parental leave

As we've mentioned, parental leave can include maternity, paternity and shared parental leave and includes a minimum pay requirement during that time. You can pay more and offer enhanced income as a percentage of an employee's usual salary. For example, during maternity leave, some businesses pay full pay initially, dropping to half pay after a few months and statutory pay after that. You might also pay an employee's full salary during paternity leave. Research suggests that two-thirds of employers pay enhanced maternity pay over the statutory minimum.

You might wonder whether offering enhanced maternity pay means taking a similar approach during shared parental leave, which lets parents share up to 50 weeks' leave and 37 weeks of pay. However, case law indicates that maternity leave serves a different purpose from shared parental leave, meaning you can stick to the statutory minimum rates during shared parental leave.

Flexible working

Giving employees the opportunity to request flexible hours or working locations lets them tailor their work to suit their circumstances. While a 9-5 day in the office may be fine for many staff, employees with caring commitments may benefit from shifting their working hours or spending some days working at home.

Creating a company culture that supports a good work-life balance enables employees to ask for flexible hours or hybrid work that works around them. Ensuring equality in these circumstances means considering all flexible working requests equally.

Workplace Nursery Scheme

The Workplace Nursery Benefit lets businesses partner with a nursery and pay a monthly fee. Parents can then pay their nursery fees via salary sacrifice and reduce their tax bill. Employers also save money on their employers' National Insurance payments. The scheme is only available for children up to the age of five. Businesses can register with several nurseries to tailor the benefit to each employee.

Employees with older children can register for tax-free childcare, where parents pay into a childcare account for children up to 11. A basic rate tax-payer can pay 80% of their childcare costs, and the Government will add the remaining 20%. The account can pay for any registered childcare setting, including holiday clubs. You can support parents by ensuring they know about the scheme at no cost to your business.

Travel to Work Schemes

Travel-to-work schemes can help your employees save money on their commuting costs. Season ticket loans help staff who travel to work by public transport. Monthly or annual season tickets cost less per journey than individual tickets, with yearly season tickets offering the most significant savings. However, if your employees can't afford the price upfront, a loan lets them spread the cost as they can repay you via salary sacrifice.

The cycle-to-work scheme lets employees buy a bike via salary sacrifice and spread the payments.

While you must offer these benefits to every employee, they won't suit everyone. A bike would likely be impractical for employees carrying lots of equipment or transporting children to school en route. Public transport is irrelevant to anyone who lives within walking distance of the office or who spends the day driving to see clients.

Health insurance

Private medical insurance offers access to private medical treatment and other support services, meaning employees can access the services they need and ignore the rest. Group health insurance policies typically offer employee health assessments to help employees improve their health. They can also provide data insights to help businesses tailor their coverage and design workplace initiatives to improve employees' health.

You can also make private medical insurance an optional benefit by giving employees the choice to have health insurance and pay the premiums themselves. Group health insurance premiums are typically cheaper than individual policies, ideal for staff who have considered private medical insurance but have been deterred by the cost.

At Globacare, our specialist brokers help you find the right insurance coverage to support your team and offer a high-quality employee benefits package. Contact us today for tailored advice and a comparison quote.