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Employee Benefits in the UK

Employee benefits are typically part of a larger compensation package for employees. They’re not considered part of a salary package (although they are usually tax-deductible).

Instead, they’re provided alongside the salary, and are specifically designed to draw employees to your company. They encourage employees to stay with your company and perform their jobs well (for reasons other than the monthly paycheck).

Recent changes in how companies view employee benefits have increased the importance of flexibility instead of giving employees the same choices.

Benefits for employees in the UK

Examples of employee benefits What is legally required?

It is legal to provide employees a number of statutory benefits.

Automatic pension enrollment – under law, you have to offer your employees a pension plan at work and pay the minimum contributions.

Holiday allowance Employees have the right to at least 28 days of paid annual vacation, which includes bank holidays (many companies provide higher than this minimum).

Sick pay – Employees can be eligible for statutory sick leave (SSP) beginning on the fourth day of sickness, and all the way to 28 weeks.

Maternity leave – mothers who are expecting have the right to 52 weeks parental leave (paid in increments of 39 weeks).

Paternity leave for new fathers have the right for a period of one to two weeks paid holiday.

Adoption leave: If an employee adopts the child, they’re legally entitled to 52 weeks paid leave (paid in increments of 39 weeks).

Parental leave for any child (up to the age of 18) Employees can use maximum 18 weeks unpaid time off to look after the children.

Flexible working – employees may request flexibility in work (for instance, remote or in part-time) following 26 weeks employment. However, employers can evaluate the request against the business’s needs and deny it with an adequate reason.

Employee benefits examples: different kinds of benefits for employees

Many companies offer more than what is legally required. Consider:

Healthcare – you could provide a full medical insurance plan (which also covers and provides access to treatments) or a less comprehensive health cash plan that covers things like optical and dental costs. Companies are increasingly providing the option of mental health services.

Cover in the event of death or illness It is a benefit for employees to cover their income in the event that they are incapable of working due to disability or illness, and life assurance will pay out funds to the beneficiary of an employee’s estate when they die while employed by your.

Additional pension contributions – some companies choose to provide greater than their minimum requirements and also educate their employees on pensions (and their financial situation in general).

Bonuses – A bonus program encourages employees to exceed the expectations of their job. Bonuses may be beneficial for employees working in positions which are driven by targets (like sales) or give an annual bonus for everyone in the same amount that is based on business performance.

It could be a bonus that is discretionary or a non-discretionary. The major difference is that bonuses that are not discretionary must be included within the contract of employment, where the rules are clearly stated.

The discretionary bonus is left for the employers discretion. The manner in which they are distributed to employees can be more flexible, and the conditions do not have to be specified on the contracts.

Other examples of employee benefits include:

Cycle to Work scheme (which includes taxes as well as National Insurance savings for staff and VAT savings for employers)

Season ticket loans for journeys (with the possibility of tax exemption)

PS55 vouchers for childcare or employer-sponsored care per week (which is tax-free in addition to National Insurance)

Benefits in the form of

Another type of employee benefits is benefits in the form of. These are benefits that aren’t listed in your salary or your pay cheque but are given to you in different ways. On job descriptions or the employee contract, they are commonly referred to as perks or fringe benefits. These benefits are paid for by the employer and they are enjoyed by employees.

In offering a reward in the form of a gift to your employees, you’re establishing the company’s culture and also showing your employees how important they are.

Examples of benefit in kind

Similar to other types of benefits, there are times when you might be required to pay benefit tax in kind. These benefits will have to be declared to HMRC via the form of a P11D. Examples of benefits that attract tax are:

Mileage payments

Car or company vehicle fuel benefits

Private health insurance

interest-free loans, e.g. season tickets loans

relocation expenses

Living space

home phones

entertainment costs (non-business related)

You can also provide benefits in the form of benefits that don’t require tax. Examples of benefits in nature where you do not need to have to pay tax are:

Office equipment

Travel expenses for business

Materials and stock

Safety and work clothing

Work-related training

Benefits for employees and your culture

There are other examples of employee benefits which are more in line with the company’s culture rather as opposed to offering specific products.

For instance Is it easy the employees you employ to work in a flexible manner (and as a result, are you confident in their ability to complete their work)?

Additionally, is there room at work where they can focus on their health and wellbeing? And are you able to schedule time to allow them to be connected to each the other?

Regarding employee benefits such as a pool table in the office and a Friday night drink have become commonplace as many companies recognize that the general culture has to promote positivity and promote employees’ connections and well-being.

However, they do reflect the necessity for employees to be able to connect with one another So think about which social activities are suitable for your company.

Finally, think about the flexibility of benefits and voluntary benefits.

Employees have the option of choosing from a variety of benefits that are flexible to make up their overall benefits package (think cinema tickets and gym memberships vouchers). This lets employees get benefits that are suitable for them.

However, voluntary benefits are usually additional levels of an employee’s basic benefits, that they may opt to purchase at a discounted rate. For instance, you may offer the basic plan of the health cash plan to all employees, and give them the option of paying for the next level at a group cost (which is more affordable than if they purchased it on their own).

Should you consider using an employer benefits system?

As we’ve already established that employee benefits can be diverse and varied. The examples below are intended to give you an idea of what you can offer.

It is best to determine the best options for your business through speaking with current employees or by focusing on your business’s principles.

Given that benefits are varied, you can consider investing in an employee benefits system to aid in keeping employees. By using these benefits, employees will log on to the platform and select the various benefits that are flexible and work for them.

Platforms like these also provide an array of benefits with methods to allow employees to meet and celebrate one another and also provide health and wellness tools.

Benefits for employees and taxes

Tax considerations for employee benefits can be a bit tangled however, the majority of employee benefits include tax and National Insurance responsibilities.

Bonuses and commissions are dealt with exactly the same way as salaries via PAYE. These benefits are also known as benefits in nature and may be handled differently, with reporting them on the form P11D from HMRC. But, you may also benefit from payroll deductions.

What is a minor advantage?

The term “trivial” refers to an benefit for employees that is not tax liability. Benefits that are trivial include those which:

It will cost it PS50 or less for the service.

They aren’t money or voucher

There isn’t any reward to an employee’s hard work or their performance

isn’t in accordance with their contract

A benefit that is considered trivial must satisfy all the requirements above. You do not have to pay taxes and National Insurance, or let HMRC be aware of them.

A few examples of small-scale benefits are having employees out for lunch to celebrate birthdays, or giving employees gifts for Christmas.

A lunch for the team to celebrate the achievement of goals isn’t a minor advantage, since this is tied to performance at work.