The ultimate guide to employee benefits

What are employee benefits?

Employee benefits are any perks or compensation offered to employees beyond their base salary. This can range from legally required benefits, such as pensions and paid leave, to fringe benefits like health insurance, salary sacrifice, or even gym memberships.

What are statutory benefits?

Statutory benefits are those legally required under UK employment law. Here are the key ones you need to be offering:

• Paid annual leave: Employees are entitled to at least 28 days of paid holiday per year, including bank holidays. This supports work-life balance and is crucial for wellbeing.
• Workplace pensions (auto-enrolment): Since 2012, employers have been required to automatically enrol eligible employees into a workplace pension. The minimum contribution is currently 3% from the employer, and 5% from the employee.
• Statutory Sick Pay (SSP): This ensures employees who fall ill receive income for up to 28 weeks.
• Maternity, Paternity, Adoption and Parental Leave: Parental leave entitles new parents to paid time off to care for their children. Shared parental leave allows parents to split the leave between them, offering flexibility.

With the basics out the way, let’s look at what voluntary benefits, the more alluring perks, look like.

What are fringe benefits?

Fringe benefits, also known as voluntary benefits, are perks employers offer that go beyond the legal requirements. They can significantly boost your company’s appeal to both current employees and job seekers. Here’s a few examples:

• Private Medical Insurance (PMI): Many businesses offer PMI, giving employees faster access to healthcare and reducing reliance on the NHS. This is particularly valuable for roles with high stress levels.
• Flexible working: Whether it’s the option to work from home or offering hybrid arrangements, flexibility is now seen as a necessity rather than a perk.
• Additional leave options: Offering employees the ability to buy extra leave, take birthday leave, or even offering creative perks like ‘duvet days’ adds flexibility and further enhances work-life balance.
• Mental health support: Offering Employee Assistance Programmes (EAPs) and mental health resources shows your company values employee wellbeing. This can include counselling services, wellness days, or even paid for meditation apps.
• Lifestyle perks: Offering perks like gym memberships, cycle-to-work schemes, and retail discounts can improve quality of life and help create an environment where employees feel valued.
• Company car: A traditional benefit in many industries, offering employees a vehicle for personal and professional use.

Think of your employee benefits package as a tool to both attract and retain the best talent.

In fact, research from Glassdoor shows that nearly 60% of job seekers say benefits are a major factor when considering whether to accept a job offer. And it’s not just about getting people through the door. Offering benefits that support your employees’ physical, mental, and financial wellbeing can have a profound impact on engagement and productivity.

Let’s dig a little deeper into the core reasons why employee benefits matter:

Boosting morale and engagement

Have you noticed a dip in office energy lately? Maybe employees seem disengaged or unmotivated? This is where a strong benefits programme can really shine. A well-rounded benefits package doesn’t just address the basics like pay – it shows that you care about your employees’ overall wellbeing.

By offering health insurance, wellness initiatives, and flexible working, you’re sending a clear message: we care about more than just your output. And the data backs this up.

Attracting top talent

In today’s competitive market, benefits are a major factor that candidates evaluate when considering a role. Are you offering a benefits package that sets your company apart from the rest? Candidates are more discerning than ever, often comparing potential employers based on the perks they offer. A unique set of voluntary benefits – such as mental health support or flexible working – can help you stand out from the crowd.

Leading employee benefits platforms offer customisable solutions that allow businesses to tailor their benefits offerings to suit their workforce. This is especially important as businesses continue to compete for top-tier talent.

Retaining top talent

One of the biggest challenges HR managers face today is employee retention. Losing top talent is costly – not just financially, but also in terms of team morale and productivity. A robust benefits programme could be the difference between an employee staying or leaving.

For example, companies that offer comprehensive healthcare, flexible working, and retirement planning The benefits provide a sense of security and personal development opportunities that employees value. And by offering these perks, you can reduce the costs associated with recruitment and training while maintaining team stability.

Improving productivity

Ask yourself honestly, how often do you think stress or health issues are impacting your team’s productivity? It might be more than you think. Employee benefits that support physical and mental wellbeing – such as counselling and once again flexible working – can help reduce absenteeism and presenteeism. Employees who are healthy and less stressed are far more likely to perform at their best, contributing to overall productivity. In fact, companies offering strong employee benefits experience an average 21% increase in productivity, according to recent studies.

Now that we’ve covered the ‘why’, lets look at the ‘how.’ Designing or choosing an effective benefits programme requires careful planning, a good understanding of your workforce’s needs, and a strategic approach to balancing costs with value.

Assessing your workforce’s needs

Before diving into benefits options, it’s important to understand what your employees want. You could offer the best benefits in the world, but if they don’t align with your employees’ needs, they won’t have the impact you’re looking for.

Surveys and focus groups can provide invaluable insights into what employees value most – whether it’s healthcare, work-life balance or financial wellbeing. Do they need more support in managing mental health? Would flexible working arrangements improve their job satisfaction? Ask the questions and listen to their feedback.

Balancing costs and impacts

HR is often caught in the balancing act of offering competitive benefits without blowing the budget. Using a mix of statutory benefits (which are required by law) and voluntary benefits (which can be tailored to your budget) is a smart way to deliver a comprehensive package without overspending.

Salary sacrifice schemes are a great example of how you can offer valuable benefits – such as purchasable extra annual leave or cycle-to-work programmes – whilst keeping the cost down. These schemes allow employees to exchange part of their salary for perks, resulting in National Insurance savings for both the employer and the employee.

If you want to offer a compelling package, you need to keep up with the latest trends. Here are some of the most significant trends shaping the UK benefits landscape:

Flexible and remote working

Since the pandemic, flexible working has become the new normal. Offering hybrid or fully remote options isn’t just a perk anymore – it’s an expectation. Businesses that provide these options have a competitive edge when attracting and retaining talent. In fact, many employees now consider flexibility as important as salary.

Mental health and wellbeing

With mental health becoming a top priority for both employers and employees, more companies are offering mental health support as part of their benefits package. This can include EAPs, access to counselling, and wellness initiatives. Offering mental health days – designated days off to focus on mental wellbeing – and stress management workshops can also help employees maintain a healthy work-life balance.

Financial wellbeing programmes

Financial stress is a significant issue for many employees, and more businesses are stepping up to offer support. According to a study by PwC, nearly 57% of employees reported financial stress that directly impacted their productivity. Whether it’s financial education workshops, access to saving schemes, or salary sacrifice options, helping employees manage their finances better can lead to reduced stress and improved focus at work.

Diversity, equity and inclusion benefits

Inclusive benefits are also on the rise. Offering support for LGBTQ+ employees (such as gender-neutral parental leave policies, which ensure all parents can access time off regardless of gender), flexible parental leave policies, and accommodations for employees with disabilities can help create a more diverse and inclusive workplace.

We’ve explored what you can offer in a benefits package, but let’s look at how some real companies are making it work in practice:

• Airbnb helps employees explore the world by offering an annual travel allowance to stay at any of their listed properties.
• Google makes sure their teams are well-fed and active with free meals, gym memberships, and wellness services.
• Netflix takes a laid-back approach, offering unlimited paid leave and trusting employees to manage their own time.
• Salesforce encourages employees to give back, offering paid time off to volunteer for causes they care about.
• Spotify is family-focused, covering fertility treatments and offering extended parental leave.
• Patagonia aligns with its environmental ethos, allowing staff to take time off to participate in activism.
• Microsoft provides financial planning and mental health support as part of its employee assistance programmes.
• Facebook (or Meta) takes care of family needs, offering support for fertility, adoption, and surrogacy.

In today’s fast-paced, tech-driven environment, managing employee benefits manually is no longer a sustainable option. Companies need solutions that are agile, efficient, and scalable.

You’re likely looking for ways to streamline your benefits admin whilst ensuring your offering remains competitive and tailored to the diverse needs of your workforce. This is where employee benefits platforms can help.

Employee benefits technology is transforming how businesses design, manage, and deliver benefits packages. These platforms automate admin tasks, integrate with payroll systems, and provide employees with easy access to manage their benefits through self-service portals. Let’s explore what a good provider’s platform should offer:

Efficiency and automation

With any well-designed platform, admin tasks like benefits enrolment, tracking participation, and reporting are automated, freeing up valuable time for your HR team. Here’s how automation can enhance efficiency:

• Reduces manual work, especially during busy periods like open enrolment.
• Minimise human error by automating repetitive tasks.
• Ensure benefits-related processes are completed accurately and on time.
• Provides real-time tracking and reporting, helping HR teams monitor participation and compliance effortlessly.

Seamless integration with payroll

Choosing a platform that can seamlessly integrate with your payroll processes is a major advantage. By linking payroll and benefits, you ensure:

• Automatic deductions for benefits, reducing the risk of errors and saving time.
• Enhanced compliance, as automated systems help avoid costly mistakes.
• A more streamlined process for HR and finance teams, particularly when managing complex benefits like salary sacrifice schemes, where non-compliance can be an issue.

Customisation to fit your business needs

A good platform will allow you to tailor your benefit offering based on employee demographics, business goals and budget. This level of customisation not only boosts employee satisfaction but also maximises the ROI of your benefits programme.

Real-time user data and analytics

The ability to access real-time data and analytics is transformative, offering detailed insights into how employees are engaging with benefits. This will help you to identify trends, monitor participation rates, and measure the effectiveness of your programme. These insights enable data-driven decisions and continuous refinement of your benefits offering so it stays competitive.

Employee self-service and engagement

Empowering employees to manage their own benefits is a crucial feature for any modern platform. Self-service portals allow employees to enrol in benefits, update their preferences, and access relevant information at any time. This not only reduces the administrative burden on HR teams but also enhances employee engagement by giving them more control over their benefits.

Measuring the ROI of your benefits programme is key for demonstrating its value to the business.

Let’s assess how a well-designed benefits package can have a positive impact on a range of business metrics, including retention, productivity, and overall employee satisfaction:

Retention and recruitment

A competitive benefits package doesn’t just help attract top talent; it plays a vital role in retaining it. When employees feel their needs – whether healthcare, mental wellbeing, or financial security – are being met, they’re far more likely to stay loyal to their employer.

Did you know replacing an employee can cost a business six to nine months’ salary on average? For example, if your company offers an average salary of £38,000 and you’ve retained just five employees who might have left otherwise, you could save up to £171,000 (£38K x 4.5).

To calculate retention ROI, businesses could track improvements in retention rates post-benefits implementation and multiply this by the average salary of hires avoided. Additionally, factors like recruitment, onboarding and training costs – alongside lost productivity during transitions – can be factored in to determine cost savings.

Offering a well-rounded benefits package can reduce turnover, translating into significant cost savings. Investing in health insurance, pensions, and flexible working arrangements can provide the stability employees seek, leading to stronger retention rates.

Productivity gains

Employee wellbeing has a direct link to productivity. Health and wellbeing benefits can lead to fewer sick days and improved performance. By reducing absenteeism and presenteeism, businesses can see a tangible boost in productivity.

For example, long-term sickness, absenteeism rates, and presenteeism (where employees are at work but not fully productive due to illness or stress) can be tracked both before and after these benefits. This allows businesses to estimate cost savings from reduced time off, improved engagement, and better mental and physical health outcomes for their staff.

Providing access to mental health services of faster healthcare through private insurance allows employees to recover quicker, reducing the amount of time spent off work. Similarly, flexible working enables employees to better balance their work and personal lives, resulting in higher levels of engagement and efficiency during work hours.

Cost savings

Salary sacrifice schemes offer a win-win for both employers and employees. Not only do employees benefit from tax advantages with these schemes, but employers also save on NI contributions.

For instance, by allowing employees to sacrifice part of their salary for a pension scheme or cycle-to-work programme, both parties can benefit from reduced tax liabilities. Over time, this can result in substantial savings for the business, helping to offset the initial costs of offering such benefits.

To calculate the cost savings, employers can review tax and NI savings generated by salary sacrifice schemes, then compare these savings to the investment made in the benefits offered.

Enhancing employee satisfaction and engagement

Regularly gathering feedback through employee surveys or focus groups can give you a clear indication of how well your benefits package is meeting employees’ needs. Benefits that address mental, physical, and financial wellbeing contribute to higher job satisfaction, and satisfied employees are more engaged, motivated, and loyal to the company.

Satisfied employees are also more likely to become advocates for your company, contributing to a positive employer brand and attracting more top talent. Higher engagement leads to better collaboration, creativity, and overall performance.

Consider tracking eNPS (Employer Net Promoter Score), which can give you a good measure of employee engagement, satisfaction, and loyalty.

An employee benefit trust (EBT) is a type of discretionary trust established by a company to hold assets for the benefit of its employees.

These trusts are often used as part of employee incentive schemes, particularly for the purpose of offering tax-efficient rewards, such as bonuses, shares, or other forms of compensation.

EBTs are set up by an employer, and a trustee manages the trust, distributing assets based on the rules outlined in the trust deed. These trusts can provide long-term financial benefits, like share options, that align employee performance with the company’s success.

How do EBTs work?

An EBT operates by holding shares or other assets on behalf of employees. These assets can be distributed at the discretion of the trustee, based on performance, years of service, or other criteria determined by the employer. This can encourage loyalty and incentivise employees to perform at their best, as their benefits grow alongside the company’s success.

EBTs are often used as part of share schemes or long-term incentive plans (LTIPs), allowing employees to receive shares in the business, thus giving them a financial stake in its growth.

The benefits of EBTs

• EBTs give employees a financial interest in the company’s success, motivating them to contribute to its growth.
• EBTs can offer tax benefits, although it’s crucial to ensure they’re used in compliance with HMRC regulations. Misuse of an EBT for tax avoidance purposes has led to scrutiny from HMRC, so careful structuring is vital.
• By rewarding employees with shares or bonuses held in trust, companies can provide long-term incentives that help retain key staff over time.

HMRC and employee benefit trusts

In recent years, EBTs have come under increased regulation from HMRC, particularly when used to avoid tax. Employers need to ensure that the trust is structured and used properly, aligning with legal and tax guidelines. Misuse of an EBT could lead to significant tax liabilities.

If you’re thinking of setting up an EBT, we would recommend you seek legal and financial advice to ensure compliance with relevant regulations.

At Moorepay, we understand that every business has unique needs, which is why we offer a comprehensive, flexible employee benefits solution designed to scale with your business.

Our platform provides a wide range of benefits that can be customised to suit your workforce, from health and life insurance, to salary sacrifice schemes and mental health support.

With our optimal platform, you’ll not only improve the efficiency of your benefits admin, but also ensure that your programme remains competitive in today’s market!

Whether you’re a small business looking to implement a simple benefits package or a larger enterprise managing a complex set of perks, Moorepay’s platform has the flexibility and functionality to meet your needs.

Take a look at our brochure and book a demo today to learn more about how we can provide your dream employee benefits package and keep you ahead of the curve!

For more information on enhancing your employees experience at work, visit our Employee experience and wellness section.