What are employee benefits?
‘Employee benefits’ are the non-cash items provided by employers as part of the total remuneration package offered to their employees; the employee benefits’ package covers everything except the employee’s wages or salary, commission and bonus.
Although legislation requires you, as an employer, to provide some benefits, such as holiday entitlement and, more recently, inclusion in a workplace pension scheme, you have total freedom about what else you provide. Employee benefits are ‘optional extras’, you don’t have to offer anything other than what’s required by law; but what you do offer can be presented as a standard package to all employees, varied across different roles and pay grades or provided as a unique package for an individual employee.
Typical employee benefits include:
- Annual leave and time off
As an employer you are legally obliged to offer a statutory level of paid holiday entitlement which is based on the length of time an employee is contracted to work during the year; typically 28 days for a full-time employee working five days per week – there’s a holiday entitlement calculator on the ‘gov.uk’ website. Most employers include public and bank holidays within this statutory entitlement but others are more generous and add them to it. Other employers enhance the statutory requirement with a length-of-service scheme so that an individual employee’s holiday entitlement increases in line with their length of service with you.
There are also statutory entitlements to other types of time off, maternity and paternity leave for example, which may also be increased as you, the employer, thinks desirable.
Membership of a company or workplace pension scheme has long been a popular employee benefit particularly with large companies and public bodies although the latter sometimes use it to compensate workers in lieu of pay increases. On 1 October 2012, legislation introduced ‘automatic enrolment’, making it compulsory for employers to include most workers in a workplace pension scheme. Auto enrolment fundamentally changed workplace pension schemes, taking membership from being an ‘optional benefit for some’ to a ‘compulsory benefit for many’.
- Life Assurance, critical Illness and income protection
Dying, becoming seriously ill or not being able to work as a result of illness or injury often brings severe financial consequences that can affect both the person and their dependants. When such an unforeseen and unfortunate event happens, although having life assurance, critical illness or income protection cover won’t remedy the situation, it may help offset some of the consequences by providing a financial lifeline – a level of security appreciated by all employees.
- Healthcare and health benefits
Most full-time employees qualify for Statutory Sick Pay which, at around £90 per week, is only just ‘better than nothing’. As an employer, you are free to offer your employees membership of an occupational sick pay scheme which may, if you choose, be sufficiently generous to pay their salary or wages in full for a period of time.
You may also choose to offer other benefits such as private medical insurance, the speed of delivery usually getting your employee back to work sooner than the NHS, and you may offer membership of a health cash plan to offset day-to-day healthcare costs such as eye-tests and dental care. Both schemes are flexible in benefit and it’s possible to extend either to cover the employee’s family.
- Company cars and car allowances
Many organisations provide a company car either because it’s required to do the job or as a ‘perk’ that recognises an individual employee’s status. To overcome the hassle of being responsible for a fleet of vehicles, many employers prefer to pay a cash allowance to employees to assist with their buying or leasing of a vehicle or compensate them with a mileage allowance if they use their own.
- Other benefits
You are free to offer your employees whatever you like if you think it will differentiate your remuneration package and attract and retain the staff you want. Other benefits offered include childcare benefits such as childcare vouchers or workplace crèches; flexitime; cigarette breaks; free or subsidised staff canteens; on-site car parking; gym membership; subsidised or free travel; dress-down days; ‘health and wellness’ allowances; homeworking; cycle-to-work scheme loans; time-off for sabbaticals; season ticket loans and discounts against your products and services.
Letting your employees choose
It’s all very well offering your employees benefits – but there’s a reason for you doing so and there’s only any value to you if there’s a value to your employees. Offering life assurance is of no benefit to those employees without dependants, just as offering childcare provision is of no benefit to employees without children. Fortunately there are a number of ways you can introduce an element of individuality into how your employee benefits’ package is received by your employees which will affect their reaction to it.
- Voluntary and flexible benefits
Some employers offer access to a voluntary benefits’ plan that allows employees to buy third-party goods and services at a discounted rate from their post-tax income. In this case the employer researches and uses their purchasing power to make the benefit available; the employee then decides whether or not they want to buy it. Alternatively, employers can offer a flexible benefit scheme giving employees the choice over the mix of cash and benefits they receive.
- Clean pay
Building on the voluntary and flexible concept, some employers offer extra cash and allow individual employees to buy the benefits that best meet their needs at any given time during their employment. Often referred to as ‘clean pay’, it’s a concept that’s seen as being fair-minded although it can have drawbacks, for example, does the employee research and engage the benefit during work or personal time?
- Salary sacrifice
This provides the opportunity for an individual employee to offset part of the cash element of their remuneration against a specific non-cash alternative and is usually associated with pension schemes. In this example, an employee ‘sacrifices’ part of their wages or salary in return for an equivalent contribution to their pension pot. Employees save on income tax, in fact it may move them into a lower tax band, and both you and your employee save on National Insurance contributions.
How can One Financial Solutions help you?
As a firm of independent financial advisers we can provide you with impartial advice to help you design and create an employee benefits’ package with a competitive edge; one that can make a real difference both to who you recruit and who you retain.
We’ll help you plan an appropriate strategy, recommend the best products from across the whole of the financial services’ market and help build and develop the package you need. If you already have an employee benefits’ package, we’ll review it and recommend changes we think could turn it into something hard to refuse. We can provide an annual review to ensure your employee benefits’ package remains fresh and competitive, grows in value as your employees’ careers develop and stays within your budget.
So, if you’re looking for help with any aspect of your employee benefits’ package, please call us on 020 3714 9565 or ask us to call you by sending an email to email@example.com.