What are employee benefits?
Employee benefits are considered an additional compensation outside of primary salary.
Most businesses offer employee benefits nowadays, and they are a great way to recruit new talent. A study by EBRI found that 78% of employees agree that benefits influence their decision to accept a job.
Of course, employee benefits aren't just used for recruitment — they also help keep your team motivated, productive, and happy!
Types of employee benefits
On a large scale, benefits vary by business, industry, and country, leading to different types and forms of employee benefits. Generally speaking, these types of benefits are divided into:
- Health benefits
- Workplace benefits
- Financial benefits
- Lifestyle benefits
- Salary sacrifice
- Flexible benefits
Who can use employee benefits?
Every staff member who works at any kind of business has a right to employee benefits. Those rewards are called statutory benefits, which you legally must provide to your team.
If your business fails to deliver the statutory employee benefits for whatever reason, you will be breaking the law. There are five mandatory employee benefits in the UK:
- Sick Pay
- Holiday Pay
- Maternity/Paternity Pay
Check out the most common statutory benefits that are provided in the UK.
There are extra benefits that you're not legally entitled to give, but you can provide them either way. They're called non-statutory benefits, and they offer many advantages and perks for your organisation. Which include but are not limited to the following:
- Flexible working hours
- Dental Insurance
- Corporate Health cash plan
- Virtual GP Services
- Group Critical Illness Insurance
- Group Life Assurance
- Group Income Protection
Why are employee benefits important?
We've reached a point where employee benefits can be helpful for you and your employees. As it can save you costs, attract and retain a strong team, and achieve growth and success.
Sometimes, your company might need to cut costs for whatever reason. Which may lead to difficulties in increasing pay for your employees who deserve it. So an alternative reward is to provide a good employee benefits package since benefits don't require much funding.
Besides, benefits have become the main preference for employees. According to a Glassdoor survey, 80% of employees prefer the perks of benefits over a pay increase.
Another way that providing good benefits can save your company money is by strengthening your team's loyalty. Since losing them can cost you about £30k.
Your team is more likely to stay with your company if they’re satisfied with the benefits package, and as a result:
- Increase companies' productivity and efficiency.
- Promote employees' loyalty.
- Reduce employee turnover.
- Providing a happier and healthier work environment.
Are employee benefits on the rise?
Since Covid-19, there has been an uptick in companies spending more on their employee benefits. This is partly because employees' wants have changed over the last few years, and there's now more demand than ever for flexibility and health benefits.
Before the pandemic, many employees wanted to work from home, which was considered a luxury. For example, a 2019 LinkedIn survey showed that 82% of employees wanted to work remotely once a week, and 57% wanted to work from home three days a week.
Now, the pandemic has made remote working the new norm. According to EdenRed, 36% of workers work remotely at least once weekly.
Covid-19 has also influenced the mental health and well-being of workers. In 2021, Health and Safety Executive found that more than 800,000 individuals experienced work-related stress, anxiety, or depression.
In response, employee benefits became prioritised by companies, and they are planning to make changes regarding employee benefits. We have surveyed over 100 companies to learn about the adjustments employers will make.
Best employee benefits
The best employee benefits are the ones that help you and your team to stay motivated and proactive at work. Motivated employees will keep your organisation productive in the long run.
It's important to remember that employee benefits should differ from person to person. What works for someone might not work for another. So, surveying your employees to find out what they really want is always a good idea.
We surveyed over 400 companies in our Benefits Outlook Survey; here’s what we found:
- 32% of employees want medical benefits (PMI, vision, dental, etc)
- 25% of employees want to work from home.
- 24 % of employees want a pension plan.
- 17% of employees want an equity scheme and company socials.
- 15% of employees want allowance and subsidies.
- 14% of employees want expanded annual leave.
- 9% of employees want expanded maternity coverage and office snakes.
- 7% of employees want discounts.
Clearly, health and wellbeing benefits are a priority, especially after the pandemic. We recommend focusing on these for your team. Also, we have a guide that could help you Implement Employee Benefits for your employees.
How are employee benefits taxed?
When designing an employee benefits package for your team, you must consider how the tax will affect your plan, especially if you want to save costs. The good news is there are ways to provide good employee benefits without putting too much money into it.
By providing employee benefits that are exempt from tax:
- Health benefits. (e.g., medical check-ups, counselling, pension advice, and group life).
- Salary sacrifice
- Trivial benefits
- Working from home allowance
- Business expenses (e.g., staff entertainment, workplace canteen, late night taxis, learning & development, etc.)
But if you want to spend on employee benefits, you'll need to know which benefits are taxable:
- Carer's Allowance
- Pensions paid by the Industrial Death Benefit scheme
- Contribution-based Employment and Support Allowance
- Bereavement Allowance
- Incapacity Benefit
- Jobseeker's Allowance
- Widowed Parent's Allowance
- State Pension