Employee benefits: Everything you need to know
"Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients." Richard Branson
According to our recent report, ‘The Cost-Of-Living Crisis: Support Your People with Employee Benefits’, 69% of employees feel that their employers have a responsibility to support them. However, delivering on this support is another matter. Only 5% of employees feel that their organisation is doing enough to support them.
This comprehensive guide to employee benefits addresses why this discrepancy is an issue for employers and how an employee benefits platform can help provide employers with a cost-effective, hassle-free, workplace benefits hub designed to support employees’ mental, physical, and financial wellbeing.
Read on to discover:
- ● The core benefits every employer should be offering UK employees
● What your business can gain from having a strong employee benefits package
● A breakdown of the most sought-after employee benefits.
What are employee benefits?
The CIPD defines employee benefits as the 'perks' an employer offers to supplement a wage compensation package (e.g. salary, bonuses, and sales commissions).
Designed to attract and retain employees, these non-cash provisions, which can have a financial cost for business owners, are often used for the following business reasons:
- ● To motivate employees to achieve company goals
● To contribute towards improving employee wellbeing
● To boost employee engagement and commitment.
The state first introduced benefits at the beginning of the 20th century. The welfare state was then established after the Second World War, to provide access to the state pension scheme, sick pay, unemployment insurance, and the National Health Service.
Today, many employers choose to bolster their employee benefits package beyond the statutory employee benefits. In a post-pandemic era coupled with the cost-of-living crisis, the more modern approach to the types of employee benefits on offer includes focusing on healthcare benefits and supporting employee financial wellbeing.
We'll go into more detail about the most common type of popular benefits shortly, but an employees benefits package can be made up of:
- ● Statutory benefits (the mandatory benefits that employers must provide to their employees as a legal requirement)
● Voluntary or Flexible benefits (extra incentives employees can choose to offer to create a larger benefits package to boost job satisfaction)
What are the perks of employee benefits?
An attractive company benefits package has benefits for both employees and employers.
Attract the best talent
Our research into employee benefits found that between 97% and 99% of employers believe that ensuring employees feel supported during the cost-of-living crisis would help attract and retain talent – and 85% of employees agree. On top of this, 58% of workers are willing to switch jobs if it means they will receive better benefits.
Retain your employees
Of those surveyed in our study, 87% of employers agreed that employee benefits that help their staff manage their cost-of-living would help retain talent, and almost three quarters (74%) of employees agreed. This is particularly important as 83% of chief HR officers say that employee turnover is a significant problem.
Improve employee work-life balance
Not only is work-life balance one of the core reasons why people start a job, it is also what makes them stay.
Extra benefits such as flexible hours, medical insurance, dental insurance, life insurance, and extended holiday allowance can help to reduce stress, boost morale, and improve and maintain employee wellbeing and mental health.
Offering eligible employees the option of hybrid working can also help to improve their work-life balance. So, it's no surprise that 78% of employees are offering the option to work from home in 2023.
Bolster employee engagement
As well as encouraging required behaviours and values, the CIPD reports that employee benefits are an effective way to enhance staff engagement.
In fact, employees that are most happy with the workplace benefits on offer assess their engagement levels to be 11.5% higher than the average and more than 25% higher than the least satisfied employees.
Save employees and employer money
Offering benefits to employees can also lower tax and National Insurance contributions for both the employee and employer. This is because some employee benefits (such as cycle to work schemes) attract preferential tax treatment to encourage take-up.
With a workplace pension scheme, the employee sacrifices some of their gross pay and the employee makes an equivalent contribution. As a result, the employee saves on tax and both parties save on National Insurance contributions.
To find out the latest advice on tax-free employee benefits and those that are eligible for preferential tax treatment, check out the HMRC website.
The main types of employee benefits:
Every employee must provide a workplace pension scheme. Eligible employees will be automatically enrolled on the pension plan if they meet the following criteria:
- ● They’re classed as a ‘worker’
● They’re aged between 22 and State Pension age
● They earn at least £10,000 per year
● They usually (‘ordinarily’) work in the UK.
According to the Pensions Regulator, the minimum amount an employer and its staff must pay into the pension scheme is 8% of the employee's earnings. The employer must pay at least 3% of this, but can opt to pay more.
Holidays and time off
Employees are entitled to the following statutory paid annual holiday and time off work:
- ● Annual leave: Most employees who work a five-day week must receive a legal minimum of 5.6 weeks' (28 days) paid leave each year. Employers can include bank holidays as part of statutory annual leave
- ● Maternity leave: Eligible employees can take up to 52 weeks' statutory maternity leave. Government guidelines state that employees must take at least two weeks after the birth. Find out more here
- ● Paternity leave: Eligible employees can take either one week or two consecutive weeks' leave. Employees may qualify for Shared Parental Leave and Pay. More details are available here
- ● Carer's leave: Carer's leave entitles employees who provide or arrange care for a dependent alongside their paid work to one week's unpaid leave per year. Discover more here
- ● Jury duty service: You must let an employee have time off for jury service. Although you don’t have to pay employees while they’re doing jury service, many employers do. Find out more here.
The CIPD reports that the major types of healthcare benefits include:
- ● Employee assistance plans
- ● Eye care vouchers
- ● Death in service/life assurance
- ● Occupational sick pay
- ● Employee assistance plans
- ● Free flu vaccinations
- ● Financial support for employees who must self-isolate.
With 95% of companies believing that employers have a responsibility for the health and wellbeing of their employees, it's no surprise that benefit choices to encourage physical fitness are increasingly popular.
For example, our Cyclescheme encourages staff to swap public transport for cycling with up to 39% off the cost of a new bike and accessories and then spread the remaining cost interest-free. And MyGymDiscounts offers employees up to 25% off memberships at gyms, leisure centres, health clubs, fitness studios and bootcamp classes across the UK.
Company cars and car allowances
Some companies may choose to provide a company car if an employee needs it for their role or to honour their status within the company. This may be via a cash allowance that the employee can use towards monthly payments or for mileage allowances accrued on their own vehicle.
Another option is to provide employees with access to a green car salary sacrifice scheme. Not only does this provide employees with an affordable solution for getting an ultra low emission vehicle, but the benefit is another step towards your corporate environmental sustainability goals.
Financial wellbeing benefits
With rising inflation and the cost-of-living crisis set to remain the biggest challenge employees are set to face in 2023, many businesses are looking for innovative ways to ease the hardship. This financial help can include:
- ● Discounted gift cards: Extras Discounts lets employees get gift cards at a discount saving up to 15% with big name retailers
- ● Employee cashback card: Staff can earn up to 15% cashback on everyday purchases using our prepaid shopping card, bYond
- ● Tech salary sacrifice: Employees can save up to 12% on new tech items using the salary sacrifice benefit, Techscheme.
Which benefits do employees value most?
Our ‘The Cost-Of-Living Crisis’ report found that almost a quarter of employees are using their benefits more as they navigate rising costs in a time of uncertainty. So, which benefits matter most to them?
Research into the employee benefits and incentives that matter most to workers in the UK found the number one benefit to be sick pay. This is perhaps no surprise in a post-pandemic age.
Flexible working hours came in second, highlighting the importance of work-life balance, swiftly followed by pension contribution matching, showing that employees are conscious of preparing for when they reach retirement age.
Other employee benefits and perks that employees value most include mental health and wellbeing support, receiving a performance bonus, and having the flexibility to work a four-day week.
To meet the needs of a diverse workforce, many businesses are choosing to offer flexible benefits, where employees have the freedom to choose from a range of benefits. This helps to ensure employees receive the benefits they value most and reduces the likelihood of a company wasting time and money on underutilised benefits.
How to implement a winning employee benefit scheme:
To help you adopt an employee benefits package that best benefits your employees and your business, it's important to consider the following questions:
- ● Does the benefit support your wider employer plans and goals for the business?
- ● Does the benefit support your company culture by rewarding the correct behaviours and values?
- ● How will you communicate the benefits on offer to your existing employees and external candidates?
Many companies simply do not have the resources, time, or budget to put in place an employee benefits programme. That's where we come in.
Extras offers the workplace benefits your employees want and need on one easy-to-access platform. Trusted by everyone from large enterprises and SMEs to start-ups, there's no per-person fee and no upfront costs. Importantly for the employer, Extras is:
- ● Cost-effective
- ● Free to set up
- ● Hassle-free
- ● Offers a range of flexible, personalised workplace benefits.