What are the benefits of creating an employee benefits package?
A competitive employee benefits package improves the employee experience and shows your employees that you're willing to invest in them, and valued workers are more likely to stay with you. It can improve employees' physical and mental health, which can reduce employee absence and increase productivity.
Improving recruitment and employee retention
When you make your employees happy, they're less likely to look for work elsewhere. An attractive benefits package often reflects a positive company culture and can improve employee retention.
The CIPD's Good Work Index 2022 surveyed 6,262 UK workers and found that the number one reason that respondents wanted to leave their job in the next 12 months was to seek better pay and benefits elsewhere, with improved job satisfaction and a better work-life balance following closely behind. Amongst those who had changed jobs in the past year, improved pay and a better benefits package had been the main reason for the change.
Recruiting new employees can be a time-consuming and expensive process, so offering benefits may help your business to attract top talent by standing out as a prospective employer as well as helping you to retain employees.
Whilst offering benefits that enable employees to live a healthier lifestyle can reduce sickness absence, it's also vital to remember that stress at work can be a significant factor in employee absence.
When your employee benefits package provides tools that help your team members to reduce their stress levels, this can have significant benefits to your business. In 2017, the 'Thriving at Work' review found that mental health issues at work cost employers between £33 billion and £42 billion per year.
The types of benefits that you offer can provide employees with practical support. This could include access to psychological support but also help them with other potential stressors, such as financial issues or care responsibilities outside work.
Which employee benefits are most important?
There's no one-size-fits-all when it comes to employee benefits packages. It's crucial to balance the benefits employees will value with your priorities and budget. Many employers offer benefits packages that have advantages for both their business and their employees.
If you have a limited budget, it's important to remember that your employees may value low-cost benefits as much as more expensive ones. You could also consider offering incentives based on an employee's performance, particularly if this increases profits.
Employee benefits can be paid or low to no cost. Let's look at a few examples.
A market-value salary that reflects experienced employees' knowledge and expertise is an important
Business health insurance
Offering medical insurance as part of your employee benefits package gives you and your employees access to private healthcare when they need it most, making it one of the most sought-after employee benefits. This typically means that they can receive treatment more quickly than they would via the NHS, resulting in a shorter absence from work. As a business, your health insurance costs will depend upon the policy you choose, so it's well worth speaking to a broker to get a comparison quote.
All health insurance policies offer some coverage as standard along with a range of optional extras so you can tailor your policy to suit your employees' needs. If you pay the monthly premiums yourself, there are financial benefits, including being able to deduct the cost as an allowable expense on your corporation tax return. Alternatively, you can offer employees the option to enrol and pay the premiums themselves.
Other medical insurance benefits
A group health insurance policy provides private treatment but can also provide other health and medical benefits. Most insurers offer some mental health support in the form of helplines or even self-referral for counselling or CBT. All of the major providers also offer a digital or virtual GP service offering online GP appointments 24/7. This can reduce employees' stress and allow them to get support without worrying about taking time off.
Some health insurance providers also offer a range of discounts and incentives for members. These can include discounted gym memberships, fitness trackers or low-cost cinema tickets.
Group life insurance
Group life insurance gives your employees death-in-service benefits which will provide a lump sum to their loved ones if they die during their working life. You choose the level of coverage you provide, which is typically a multiple of an employee's salary.
This type of insurance is a fixed-term policy which ends on their expected retirement date. It means that it's worth talking to your employee about their retirement plans before they join the policy.
If they're a high-earning employee, you may also want to consider relevant life cover. This can offer additional life cover to higher-rate taxpayers without landing them with a hefty tax bill when they retire.
Group income protection
The idea that you might become critically ill or injured and need to take time off work can be a major source of stress. In fact, Ciphr's 2022 survey found that 67% of the 1,0001 employees they spoke to put paid sick leave at the top of their priority list. Whilst you'll likely already have a sick pay policy in place, a group income protection policy could be a worthwhile addition to your employee benefits packages.
How does group income protection work?
Income protection insurance policies pay a monthly income to current employees who can't work because of ill health or injury. The monthly payment is typically up to 80% of their usual income, so they'll be able to cover their usual monthly outgoings until they're ready to return to work. You can choose a policy that pays out for a fixed term or until the employee retires. It's great for employee retention as your team will only keep the benefit while you employ them.
Critical illness cover
Critical illness insurance provides a lump sum if an employee is diagnosed with a serious illness. You can offer group critical illness coverage as part of an income protection policy or separately. One of the benefits of this type of insurance is that it gives employees some funds upfront if their illness is life-limiting or causes a disability that necessitates adaptations at home. Some insurers will also include policyholders' children free of charge, so they can afford to take time away from work to care for a sick child.
A workplace pension is now a legal requirement for all your employees. However, you can choose your provider based on the terms that they offer and which pension plan will be the best fit. It can also be a cornerstone of an effective employee benefits package. Offering pension contribution matching helps employees feel that they're part of a company culture that cares about supporting them into retirement.
Support for employees with children
If you want to attract new employees with children or who may be considering starting a family, the support that you offer to working parents could be a crucial factor in their decision-making process. Equally, if your existing staff are thinking about becoming parents, their pay and benefits package will influence the amount of leave they take and whether they return to work afterwards. Their work-life balance will also be an important consideration.
The benefits that you offer here have a vital role to play in employee retention.
The average two-income family in the UK spends approximately 30% of their household income on childcare, which can mean that it's more affordable for one parent to stay at home. Unfortunately, this can mean that you lose valued workers.
The childcare voucher scheme closed to new applicants in 2018. Your employees can still claim tax-free childcare if they're eligible, however you can also opt to provide support via the Workplace Nursery Benefit.
This allows employers to partner with a nursery and pay a monthly fee towards their funding. The employee then pays their nursery fees via salary sacrifice and save money as they payments aren't subject to tax or National Insurance. You'll also make a saving on your employer National Insurance contributions which are enough to cover the cost of your monthly fee.
Paid parental leave
A new addition to the family has a significant impact on both parents and your maternity and paternity leave policies can help your employees feel supported as they get used to the change. If you're able to, offering enhanced parental leave with a higher rate of pay can make you an employer of choice. You can also ensure that your staff return to work when they're ready rather than through economic necessity.
This can improve employee engagement and also help you avoid the cost of finding a new employee because your existing employees have jumped ship to a job with more family-friendly policies.
A 2021 study found that 11% of employees were planning to retrain or learn new skills. Since the pandemic, more employees are reviewing their options and looking at career development or retraining for a new role.
Whilst some may choose a new career in a different sector, offering your employees options for career development within your organisation could mean that they remain with you. Workplace mentoring could be a low-cost option. You could also offer tuition reimbursement for any paid courses.
Some employee benefits are highly valuable to employees but come at a low cost to you. If you create a company culture that encourages employee engagement it's possible to make changes to their terms and conditions without reducing productivity.
The pandemic showed us that remote work doesn't have to mean a drop in productivity. Employees also experienced the benefits of avoiding the stress of the daily commute and having more time at home. Flexible work arrangements have become a desirable employee benefit as it helps staff achieve a better work-life balance.
Flexible working can take many forms, from flexible hours to a choice over whether they work at home or in the office. Full-time employees may prefer to work four longer days rather than five days, 9-5.
It's important to talk to your employees about the impact of remote work and the benefits of spending some time in the office. Spending time working in the same location can help your team members to collaborate and ensure they don't become isolated.
Extra holiday allowance
It may seem counterintuitive to encourage employees to spend more time away from work, but it can have a powerful effect on staff morale. The ability to earn extra paid holiday, either because of an employee's performance or through their length of service, is a powerful incentive to meet their goals and can also aid employee retention.
We hope that this guide helps you to create your employee benefit packages.
Getting professional advice
It's vital to get professional legal and financial advice before making any changes to your employee benefits package.
If you'd like to include group health insurance, life insurance or income protection insurance as part of your benefits program, contact us for a comparison quote.
Frequently asked questions
What are the benefits to my business of offering an employee benefits package?
Effective employee benefits packages will help you to retain employees, improve your staff's mental and physical health, reduce absences from work and help you to attract the best talent into your business.
How can I create employee benefits packages that fit my budget?
It's important to prioritise your spending on benefits employees will value. However, some perks can be provided at low-cost, for example, flexible hours or working location or additional annual leave.
How can I find out what benefits my employees will value?
Employee surveys allow your staff to give their views on the benefits they would value most.
What insurance policies can I include in my employee benefits packages?
Group health insurance allows access to private healthcare and can offer a range of other benefits and services. Group life insurance, income protection and critical illness insurance also offer coverage that gives your employees greater financial security.