Where to start with employee benefits

Employee benefits are paid as additional compensation over and above their salary. A high-quality benefits package can include various elements designed to give employees financial security, improve their health and well-being, and provide a better work-life balance.

Some employee benefits are mandatory, but you can choose others based on business needs, budget and the employee's requirements and preferences.

Employee benefits help your business with attracting and retaining talent. They can also improve employee morale and increase productivity, boosting business growth.

Excellent employee benefits also increase employee engagement. Research suggests improved employee engagement has many benefits, such as better relationships with colleagues and customers, reduced sickness absence and fewer workplace accidents.

The CIPD's Good Work Survey 2023 found that 18% of employees surveyed were considering changing jobs, and 34% of those seeking better employee benefits. Factors such as improved job satisfaction and professional development opportunities were further down the list.

There are some mandatory benefits that employers must provide to their employees. These include a workplace pension scheme, annual leave, sick leave, statutory sick pay, and parental or bereavement leave. Entitlement to these employee benefits varies, so you must consider what requirements apply to statutory benefits and seek professional advice if needed.

It's also worth remembering that these benefits represent minimum requirements, and it's wise to go beyond these to create a high-quality employee benefits package.

Annual leave

Every UK employee is entitled to 5.6 weeks of annual leave a year. This includes agency workers, those with irregular hours or who only work part of the year, and, for example, term time-only employees. Bank holidays can count towards an employee's annual leave entitlement.

The 5.6-week entitlement is based on the days an employee works each week. For example, someone who works five days a week would get 28 days of leave, but a colleague who works three days a week would be entitled to 16.8 days.

The Government website includes a holiday entitlement calculator to determine how many days of leave a part-time or irregular worker can take.

Sick pay

If employees can't work due to illness or injury, they're entitled to Statutory Sick Pay (SSP) of £116.75 per week for up to 28 weeks or until they return to work, whichever is sooner.

You can offer more if you want to; more on that later. An employee's contract must include details of paid sick leave so they understand what they'll receive. Annual leave also continues to accrue during sick leave, so they can take paid annual leave.

Workplace pension

Since 2012, all employers must automatically enrol employees in a workplace pension scheme. Auto-enrolment applies to all staff aged between 22 and the State Pension age who earn at least £10,000 a year and work in the UK. This applies if an employee travels regularly for work but is mainly based in the UK, but not if they work overseas permanently.

Employees must pay at least 8% of their earnings into their pension, while employers must pay at least 3%.

Parental leave

There are three types of statutory parental leave in the UK: maternity, paternity, and shared parental leave.

Eligible employees can take up to 52 weeks of maternity leave and are entitled to up to 39 weeks of maternity pay (SMP), comprising 90% of their average weekly earnings for the first six weeks and £184.03 or 90% of their average weekly earnings (whichever is lower) for the next 33 weeks.

Fathers can take one to two weeks of paternity leave, either together or separately, which must start after the birth. Paternity pay is either £184.03 per week or 90% of average weekly earnings, whichever is lower.

With shared parental leave, parents can share up to 50 weeks of leave and up to 37 weeks of pay.

Bereavement leave

Employees have a right to time off if a dependent dies, such as their spouse or civil partner, or a parent. However, there's no statutory minimum leave allowance or pay. Instead, you must consider what's reasonable. Leave could include time off to arrange and attend a funeral.

By contrast, parents who lose a child or experience a stillbirth are entitled to up to two weeks of parental bereavement leave. They can take this with other types of leave, such as annual or parental leave. Some parents may also be eligible for statutory parental bereavement pay, which is equivalent to the last 33 weeks of SMP.

As mentioned, while you must comply with statutory requirements for employee benefits, a high-quality benefits package typically goes far beyond this. Your employee benefits package demonstrates your willingness to invest in your team in and out of the workplace. It can contribute to a positive work environment, excellent company culture and increased employee morale.

Various types of employee benefits can be summarised as financial, health and well-being and work-life balance benefits. We'll consider each type and examine which employee benefits you could consider.

Financial benefits

Financial benefits can offer employees financial security during their working life and retirement. Depending on your chosen benefits, it can also provide employees' families with financial support if they're no longer around. Some employee benefits can help your team save money on their regular expenses.

Here are a few examples of financial employee benefits.

Market value salary

We usually define employee benefits as anything other than their salary. However, we think salary is worth mentioning as it's still an essential element of an employee's overall compensation package. A market-value wage is a priority for employees and job seekers. Researching to ensure employee salaries are consistent with those of other companies in your industry is essential; otherwise, you risk losing skilled workers to your competitors.

Equally, if an employee takes on additional responsibilities, proper remuneration will likely be more important than a change in job title.

Pension contribution matching

We've discussed the minimum requirements for workplace pension contributions. However, matching employees' contributions up to a specified level demonstrates your commitment to their well-being in retirement as well as at work.

Employers' pension contributions are also an allowable business expense for corporation tax purposes, so increasing your pension payments could also reduce your tax bill.

Travel assistance

Travelling to work can be costly, but employers can help by helping with travel expenses as an employee benefit.

You can help employees with travel costs on public transport by offering interest-free loans to help them spread the cost of season tickets, which are typically cheaper than individual tickets. Alternatively, you can pay for their season tickets via salary sacrifice or by reimbursing the cost. You can also subsidise free or low-cost public transport. There are some tax implications; you can learn more about reporting requirements here.

The Cycle to Work scheme encourages employees to travel to work by bicycle. Employees can buy bikes via salary sacrifice, meaning payment comes out before tax, and they won't pay income tax on the cost of the bike.

Death in service benefit

Death-in-service benefits give employees peace of mind, knowing their families will have financial security if they die while working for you. You can offer this benefit by investing in life insurance benefits for your team. Life insurance typically pays a lump sum on death, although some policies will pay a regular income.

Employees can nominate beneficiaries to receive the payment. Most policies pay between two and four times an employee's usual salary and end on an employee's anticipated retirement date, so it's a good idea to discuss their retirement plans when adding them to the policy.

Find out more about the two types of employee life insurance policies: group life insurance and relevant life coverage.

Income protection and critical illness insurance

Income protection insurance can be an affordable way to increase the sick pay available to employees during an absence. Group income protection policies cover your whole team and typically pay up to 80% of their usual income for up to two years, meaning they can pay their bills. There's typically a deferral period between the absence starting and the payments starting, which you can tailor to suit your requirements.

Employees must pay tax on the payments, but they're tax deductible against corporation tax.

Critical illness insurance pays a lump sum if an employee is diagnosed with a serious illness listed in the policy. It doesn't provide a regular income but can provide additional support with medical treatment or other expenses.

Employee discount scheme

Most health insurance policies include member rewards and discounts, but you can also offer a standalone discount program for your employee benefits. Members can get discounts on various products and services such as their weekly shop, trips to the cinema, spa days and summer holidays.

Providers vary, so always check the small print.

Workplace Nursery Scheme

The Workplace Nursery Scheme lets employees pay childcare costs by salary sacrifice so they pay less tax. The Childcare Voucher Scheme used salary sacrifice to let parents pay for their chosen setting with vouchers. However, this is now closed to new applicants.

With the new scheme, your business can partner with a nursery and pay a monthly fee, usually equivalent to the amount you'll save in National Insurance contributions.

Work-life balance

A good employee benefits package can help your staff find a positive balance between their work and personal lives. It can improve employee morale, reduce stress and increase employee well-being.

Flexible hours

Flexible hours let employees tailor their working hours to suit their needs and commitments outside work, such as taking their children to school or caring for elderly relatives. There are several ways to offer flexible hours. An employee could shift their working day earlier or later or take a longer lunch break. Alternatively, you could set core hours and let employees work flexibly around that as long as they work their full hours each month.

Flexible work location

Flexible working arrangements can combine changes to employees' working hours with a flexible location. For example, your team could work from the office, at home, or a combination. This requires careful coordination and communication around business needs and employee expectations.

If staff work from home full time, it's worth considering what mental health benefits you can offer.

Annual leave

Annual leave lets your team take a complete break from their desks to spend time with their loved ones. Consider whether to offer additional annual leave as an employee benefit or stick to the statutory minimum. You could give all employees a higher annual leave allowance, or let them earn more each year they're employed. Whichever approach you take, remind staff of the benefits of time off, particularly if some staff leave their allowance unused.

You could also consider offering bonus days, such as giving every employee an extra day off for their birthday or closing the office between Christmas and New Year.

Health and well-being

There is increasing awareness of the need to care for our well-being, which means employees look for employers who support their physical and mental health.

Employee benefits can provide access to medical treatment, advice, and valuable business support services.

Health insurance

Health insurance benefits let your employees access medical treatment quickly and provide other benefits and support services. Group health insurance covers all your employees, and you can tailor the coverage to suit your needs and budget. All health insurance policies include core coverage, such as in-patient treatment and cancer care and out-patient services, such as diagnostic tests. You can enhance your coverage by adding further therapies and treatments or extending the number of treatment sessions available.

Health insurance can also include other health and wellness benefits such as 24/7 virtual GP appointments, helplines, well-being resources and employee discounts.

Workplace wellness initiatives

Workplace wellness programs can reduce absenteeism, increase employee engagement and help employees improve their health. It's wise to tailor wellness programs to your team by identifying key issues and supporting your efforts with information and training. For example, if your employees sit at a desk all day, you could organise lunchtime activity sessions or walking meetings to get them moving. Alternatively, you could promote healthy eating by providing nutritious snacks.

If you have employee medical insurance, these often include employee health assessments, which can provide anonymised data to help you identify areas for improvement. Depending on your chosen policy, your insurer can also help you develop suitable initiatives.

Mental health support

Employees increasingly value mental health support as part of their employee benefits. Medical insurance typically includes 8-10 counselling sessions per year in its core coverage, which employees can access when needed. You can also extend your coverage to include in-patient treatment and additional counselling and CBT. Some insurers also offer dedicated mental health telephone helplines.

An employee assistance program (EAP) provides telephone counselling. EAPs are available with many medical insurance policies or as a standalone service.

Now you have an idea of the types of employee benefits you may want to offer, you might wonder how to plan and implement new benefits. Budget will likely be one of the most significant factors, so consider a mixture of paid and low-cost or free benefits.

There are a few other factors to consider.

Examine third-party data

Various reports and surveys discuss which benefits employees value most and how employee benefits impact your business. HR and payroll software company Ciphr surveyed 1,000 employees about the benefits they valued most and asked employers which benefits they thought would be most important. The results were interesting as employees' priorities often differed significantly from employers' expectations.

Consider researching how different benefits impact your business goals to determine your priorities.

Talk to your team

Each workplace and team has unique challenges and aspirations. While third-party data can be useful, your team can give you detailed information about the benefits they would appreciate. You can gather information by speaking with employees one-on-one, setting up a staff forum, commissioning a survey, or all three.

Using a mixture of specific and open questions is a good idea to encourage staff to share their opinions while gathering specific data on which benefits should take priority.

Plan the administration process

Any new employee benefit incurs costs in the initial set-up or ongoing administration. There may be specific payments, such as insurance premiums. Before proceeding, consider whether your existing teams can handle any related administration. For example, adding new staff to life insurance or health coverage involves an extra step during onboarding. Organising wellness programs may require booking external activity, training providers, or assessing outcomes. Having the right administrative support ensures existing staff aren't overloaded.

Get professional advice

Adding new employee benefits can have far-reaching legal, cost and tax implications, so always ask your accountants, financial advisers and legal representatives for advice.

Many benefits involve investing in policies such as private medical insurance or life insurance. A specialist insurance broker can help you find the best products for your needs and budget so you only pay for coverage you and your employees will use.

Get in touch

At Globacare, we help our clients find insurance products that support their employee benefits package, from health insurance to life cover and income protection insurance. Contact us today for advice tailored to your needs and budget.