What are Employee Benefits?
When you apply for a job, one of the first thing you look at will probably be the salary – that is, the amount financial reimbursement you will be making each year. This is understandable since it is the figure that will most likely have the biggest impact on your ability to continue the role in the long term.
Whilst salary is one of the most well-known and impactful employee benefits offered by an employer, you might also see a wider employer benefits list on offer. In most cases, employees will also be entitled to a range of benefits. These benefits are typically offered either in addition to the prospective employees salary or instead as part of it.
There is a range of different benefits that may be on offer, from the basics like a pension, to less common examples like cycle to work schemes or gym membership.
Employee benefits list
So, what are employee benefits? Many companies and employers tailor the benefits offered to their employees to suit the role and company culture, this means that there is no comprehensive employee benefits list that could cover everything you might be offered when starting or developing in your role. However, there are several benefits that are offered more commonly. Including:
- Financial benefits (E.g. Salary sacrifice, financial bonus, cost of living payments)
- Company Car
- Subsidised childcare
- Health screening checks/Vaccinations/ Health insurance
- Cycle to work scheme
- Company provided technology (e.g. mobile/ laptop)
- Enhanced pension contributions
- Employee discounts
- Access to learning & development programmes
- Employee Assistance Programme (EAP)
- Access to discounted gym memberships
- Generous entitled annual leave/ additional entitled annual leave
- Flexible or remote working
- Workplace perks (e.g. free lunches, merchandise etc)
What is annual statutory leave?
Annual leave allowance is one of the most common benefit that is offered by employers to incentivise employee engagement. Whilst many employers offer an enhanced annual leave package as a reward to high performance of long-term service, there is an annual statutory leave entitlement that every UK full-time employee is legally entitled to.
So, who is entitled to a statutory annual leave allowance? Employees that work a 5-day week have a legal entitlement to 28 days of paid annual leave per year. If an employee works regular, but part-time hours throughout the whole year are entitled to less than 28 days but a minimum of 5.6 weeks of paid leave. This will statutory annual leave entitlement is calculated according to their working hours.
If you want to understand your personal entitled annual leave, use this Holiday Entitlement Calculator provided by gov.uk.
What are healthcare benefits?
Private medical insurance is another of the most popular employee benefits. In medium or large organisations it is now almost considered a given that a remuneration package will include private medical care.
As an employer, the range of healthcare benefits you might provide is staggering.
Are Pensions a workplace benefit?
When considering a new position, the details of the pension on offer is important. A pension is a common pension that employees often rely on as a way to protect their future selves. Because of this, it is important for both the employer and employee that the pension contributions are clear and competitive.
Before we dive into what is involved in a competitive pension benefit, you need to understand the terminology. Do you understand the difference between a final salary, money purchase, and stakeholder pension scheme? Your choice of pension type could have a major impact on the amount that you (or your employees) can retire from employment with.
As an employee, you should make sure that you are familiar with the salary sacrifice concept and how it can impact your pension. As well as coming from your employer, salary sacrifice and pension contributions are also deducted directly from your pay packet – so you should make sure you know where your money is going.
If you are an employer, it is also important that you educate your employees about the nature of their pension, for example through a seminar or in a written guide that is provided to each member of staff.
Why offer employee benefits?
Employers can benefit from a range of advantages as a result of offering employee benefits. Perhaps the most important of these is the impact on employee’s morale. Many employees feel more valued by their employer if they are provided with a good benefits package.
There are also some tax advantages associated with employee benefits. You should note, though, that tax on employee benefits is a complex area, as is discussed later.
What are the advantages of enhanced benefits packages for employees?
The advantages for employees depend in great part on the nature of the benefits on offer. To begin with you should understand the salary sacrifice concept, on which many employee benefits work. This system means that you give up a portion of your salary in exchange for a benefit. If you are giving up some of your income, you need to be sure that you are getting a good deal. Flexible benefits are often a good option – but if you are giving up part of your salary in return for so-called ‘core’ benefits, you might not be getting the most for your money.
You should therefore make sure that you understand exactly what you are getting – and that you are prepared to negotiate with your employer for the best deal.
What is an employee benefits scheme?
Employee benefits schemes are a structured package on perks and incentives that are offered to employees in addition to or in place of a salary package. They are designed to appeal to prospective employees coming into your team, improve morale, reduce stress, and enhance employee experience.
If you are considering setting up a benefits scheme, you should first consider your legal obligations. You may be required to offer certain benefits including, for example, a pension scheme. As a result of the auto-enrolment rules, businesses of all sizes will be required to give eligible employees access to a pensions scheme.
Flex schemes, whereby employees can choose their benefits, are becoming increasingly popular. You should consider this type of scheme if you are unsure what sort of deal your employees would appreciate. We can help you set up or advise on benefit schemes.
What do you need to know about employee benefits tax?
Tax on employee benefits via the employer is complex, and it is an area in which employers are constantly in disagreement with HMRC.
Most employee benefits are treated as part of the total remuneration package given to the employee. This means that they are taxed like salary. But there are some tax efficient benefits, and you may be able to reduce the tax impact by thinking about how those benefits are paid. For example, a mobile phone provided by an employer to an employee may be more tax effective if the bill is paid directly by the employer, rather than by the employee who is then reimbursed.
There are a select number of tax-exempt benefits in the UK, these can include:
- ‘Trivial benefits’ covering items costing £50 or less that are not defined in the employment contract and/ or performance based.
- One annual health screening and eye test for employees in screen-based roles.
- One mobile phone per year.
- Christmas company party allowance of up to £150 per guest/
Can employee benefits impact employee culture and behaviour?
Many employers use employee benefits as a way of encouraging or discouraging certain behaviour among their staff. High absence levels affect many businesses, and this problem can prove expensive. Employee benefits can be a useful way of managing absence and improving your bottom line.
Employee benefits are a major element of many remuneration packages. If you are an employer, you should seriously consider taking professional advice to help you make the right benefit choices.
How to understand your employee benefit entitlement with SMH
If you are an employee, meanwhile, you should also seek help if you are confused about your rights or responsibilities. Personalised assistance is available for free from groups like the Citizens Advice Bureaux.
If you are interested in learning more about our Employee Benefits and how it can benefit your business, please contact the SMH Financial Services team, email info@smh.group, or call 01142 664 432.
The Financial Conduct Authority does not regulate advice on Employee Benefits.
