What are flexible benefits packages, and are they the future?

You're likely already familiar with employee benefits, where an employer provides a benefits package for all their employees. A flexible benefits package goes further, allowing employees control over their desired benefits. Offering flexible benefits is an excellent alternative to a 'one size fits all' benefits package that will cost your business money but which staff may not value.

Instead, your team can choose the flexible benefits that suit their needs.

While flexible benefit schemes are a great alternative to a standard benefits package, some employee benefits are still mandatory. All UK employers must provide a workplace pension, annual leave, sick pay and parental leave in line with the relevant legislation.

Businesses can use flexible benefits to enhance compulsory benefits and provide additional perks. Then, employees can choose which benefits suit their personal circumstances. Here's how it works. 

Employers choose which benefits to include

Designing a flexible benefits package starts with a company choosing which benefits to include in their plan. We'll look at ways to create a flexible benefits plan shortly. However, it would be best to consider which benefits your employees will likely value and how your flexible benefits package can support your business goals.

It's wise to include various flexible benefits to support staff with varying needs and circumstances.

Set flexible benefits allowances

Flexible benefits let your team design a benefits package that meets their needs by selecting from different optional benefits. However, you can also offer flexible benefits by giving each employee a budget to work with. For example, they may decide to invest most of their budget in insurance coverage such as health insurance, life assurance and income protection coverage to look after their family. Others may prefer to spread their budget across a broader range of benefits.

Employees tailor their benefits plan

When you've created your flexible benefits plan, you can share the details with your team. Training and information about the package will help staff select their employee benefits. For example, you may offer a flexible benefits platform such as an app or portal and provide training on using it. It's also a good idea to share information on the benefits of each option so employees can make an informed choice.

Review your benefits package

A flexible benefits plan lets you gather data about which employee benefits your staff value most. You may find that some benefits are more popular depending on an employee's life stage. For example, those with young children may invest in additional annual leave, life assurance and help with childcare costs, while older employees choose increased pension contributions.

Analysing the data can offer valuable insights into which employee benefits have high take-up and which are less popular, letting you tailor your flexible benefits package to reflect demand.

A high-quality employee benefits package has several business and tax benefits. Many employee benefits are allowable expenses for corporation tax purposes, meaning you can reduce your tax bill by providing them.

Flexible benefits offer many of the same advantages as a standard benefits package, plus a few more.

Increased employee engagement

Good employee benefits are a great way to increase employee engagement. They demonstrate your business' commitment to caring for employees' well-being and helping them balance their work and personal lives. Research has found that benefits which promote employee well-being are particularly good at improving engagement.

Flexible benefits show that your business isn't simply paying lip service to employee benefits. Offering employees real choice shows you see them as an individual and not just a number.

Tailored support for employees

Every employee has different needs and priorities, and flexible benefits mean they can tailor their package to suit. Some flexible benefits can work together to help employees achieve their goals. For example, an employee may want to get fitter to spend more quality time with their loved ones. You could offer private medical insurance that supports them in improving their health and lets them earn rewards to save money on their next holiday, plus additional annual leave to enjoy a longer break.

Cost-effective benefits

When you first set up a flexible benefits plan, there will be some associated costs. You'll likely need to invest in a broad range of benefits before gathering data on which offerings your employees value most. Ultimately, you can assess which benefits employees are using and allocate your budget in a targeted manner.

We've mentioned that employee benefits can help your business save money on corporation tax. However, some benefits can have tax implications for your employees. HMRC treats some perks as benefits in kind and charges additional income tax on the value of the benefit. Letting staff choose which benefits to include and how much to spend gives them control over their tax affairs.

Improved work-life balance

Flexible benefits can help employees improve their work-life balance. Flexible working lets employees adjust their working hours and location to suit their circumstances and is free to implement. However, other tailored benefits can support employees' quality of life in different ways. For example, health benefits could let staff access mental health support outside office hours or book exercise classes to suit their schedules.

Increased employee attraction and retention

Flexible benefits can help you attract and retain top talent in your business. Research suggests that job seekers consider employee benefits when deciding whether to accept a job. They will typically choose the role with better benefits if they have more than one offer.

In the CIPD's Good Work Index 2024, 43% of respondents said they would struggle to find a job as good as their current one. They believed that longstanding employees would likely have accrued various benefits that may not be available in a new role and recommend considering benefits as well as pay when attracting new staff.

Flexible benefits that let staff design a tailored package will help your business stand out as an employer of choice and increase employee satisfaction.

Targeted support for business challenges

Your benefits packages can support your business goals, help you overcome challenges, and support your team. Health benefits give employees access to treatment but can also supply valuable insights to help you reduce absenteeism by introducing wellness initiatives.

Greater diversity and inclusion

While some employee benefits have near-universal appeal, some only help a small section of your team. However, you must avoid discrimination when providing an employee benefits package. Offering flexible benefits is the ideal solution, as it gives all staff the same access to benefits but lets them select the options that best meet their needs.

A flexible approach to benefits supports workplace diversity and inclusion by providing tailored benefits.

Flexible benefit schemes can include a variety of employee benefits, just like a standard package. Your benefits should reflect your team's needs and include perks to help you attract new talent. Considering third-party insights on the benefits employees value most is a good idea.

While your staff can choose from a broad range of benefits to design their package, too much choice can be overwhelming. Having one-to-one conversations with staff, setting up forums or using surveys can show you which benefits are worth including.

There's a broad range of options you could include in your flexible benefits package. Here are a few examples that employees typically value and are worth considering.

Health insurance

Private health insurance provides quick access to medical treatment and services such as 24/7 GP appointments and telephone helplines. Most medical insurance plans also include discount schemes and the opportunity to earn enhanced rewards.

Policies often include health assessments and provide you with data so you can devise wellness programs to give you a healthier workforce. It's well worth including in your flexible benefits scheme.

You could also consider adding a health cash plan which pays cashback on your team's regular medical expenses.

Death in service benefits

You can offer death-in-service benefits by investing in group or relevant life insurance policies which pay a lump sum to employees' loved ones if they die during their employment with you.

You can include it in your flexible benefits scheme by offering it as an option or giving your employees an allowance to invest as they wish. It's ideal for staff who want to cover funeral expenses or want to provide financial security for their families.

Enhanced sick pay

Offering enhanced sick pay over and above the statutory minimum gives your team a financial safety net if they can't work due to illness or injury. It also means they can take time to recover rather than rushing back to work only to have another absence.

Offering income protection insurance as one of your flexible benefits is a cost-effective way to increase sick pay without it coming out of your budget. It pays a percentage of an employee's salary for up to two years.

Pension contribution matching

Offering flexible benefits, including pension contribution matching, lets employees making retirement plans boost their pension fund. You could offer a fixed, enhanced rate up to a specified level or let employees choose a rate that suits them.

Inheritance tax is now payable on inherited pension lump sums, so this provision lets employees tailor their pension fund to their tax planning.

Employee discount scheme

Employee discount schemes are often included with medical insurance but are also available as standalone plans. Some let employees save points or cash to spend later. Offering various options in your flexible benefits lets staff choose their preferred option or sign up for both.

Insurance plans also include discount schemes for life insurance customers. Some offer enhanced rewards for members who achieve their healthy living goals.

Flexible working

Flexible working helps staff improve their work-life balance. It's perfect for a customisable benefits package, giving staff flexible benefits tailored to their circumstances. It's also free to implement.

Flexible working can include flexible hours or working locations. For example, some staff could shift their working day earlier or later, work a condensed four-day week or spend a day or two each week working at home.

Travel schemes

Travelling to work costs UK workers 54 days' pay on average, so including commuter benefits could make a significant difference to your employees' regular expenses. For staff travelling by public transport, consider offering season ticket loans as part of your flexible benefits packages to help them spread the cost of a monthly or annual season ticket, typically less per trip than individual tickets.

The cycle-to-work scheme is great for staff who live close to the office and lets them buy a bicycle and pay in instalments. Both can use salary sacrifice schemes that reduce employees' income tax bills.

Help with childcare costs

The Workplace Nursery Scheme replaced the childcare voucher scheme to help workers reduce childcare costs. Recent research found that 17% of parents had left their jobs, and 62% had reduced their working hours due to a lack of affordable childcare. Providing flexible benefits that offer childcare access at a reduced cost could help you retain valued employees.

The Workplace Nursery Scheme lets businesses partner with a nursery and pay a monthly fee. Payroll systems can then pay employees' nursery fees via salary sacrifice.

Flexible allowances

A flexible benefits allowance lets businesses allocate employees a budget to use as they wish. You could specify providers for some benefits, such as health or life insurance. In some circumstances, a group policy covering several employees costs less per head than an individual policy. However, you could also offer employees a free choice in some circumstances. For example, you could include a budget for training or education to allow them to pursue their interests, whether career-related or otherwise. Letting staff choose a provider lets them tailor the benefit to suit their needs.

At Globacare, we help our clients choose insurance products that support their flexible benefits packages and teams. Contact us for advice tailored to your needs and budget.