How to build an employee benefits package from scratch

Your employee benefits package lets you support your team and helps to ensure that they feel valued. When you first recruit staff, offering a high-quality benefits package signals that you prioritise employee well-being, increasing the likelihood that you'll attract the best talent. Your employee benefits package can boost employee engagement and job satisfaction, which are linked to a variety of benefits that can help you achieve your business goals.

For example, highly engaged employees are strong ambassadors for your business and deliver excellent customer service, both of which can drive higher sales. Employee engagement is linked to staff retention, reduced turnover and lower recruitment costs. Your team members are also less likely to take time off sick and more likely to look after colleagues and customers well.

So, how can you create an employee benefits package that helps you attract and retain top talent?

When developing your benefits strategy and deciding which employee benefits to offer, it's often a good idea to ask your employees about challenges your benefits package could help them overcome or which benefits they'd prefer. However, if you're employing staff for the first time, you likely won't have any employee data to help you make a decision. Thankfully, there are several factors you can consider when designing an attractive employee benefits package. Your employee benefits will evolve, and you can adjust your benefits strategy as you gather new information.

Your budget

You've likely already considered direct employment costs such as a market-value salary, insurance, and employers' National Insurance contributions. When choosing employee benefits, it's worth conducting a cost-benefit analysis to determine which offer the highest return on investment. Seeking professional guidance from your accountant, legal adviser, HR professionals and an insurance broker will give you the full picture. They'll also help you understand which employee benefits are tax-deductible and can reduce your corporation tax bill.

This analysis can be a deciding factor in determining which benefits to prioritise. It will also help you set an overall budget for investment in employee benefits.

Legal requirements

Several employee benefits are required by law in the UK. As soon as you hire employees, you must ensure your employee benefits package meets the minimum requirements. It's wise to offer enhanced employee benefits to attract candidates when you advertise new roles, but understanding the basics provides a useful starting point.

Statutory employee benefits include:

• Statutory sick pay of £123.75 per week for up to 28 weeks.
• Statutory maternity pay (SMP) and parental leave.
• Annual leave of at least 5.6 weeks per year.
• A workplace pension scheme, with statutory minimum contributions of 3% of salary from employers and 5% from employees.

As you can see, many of these benefits are low-cost but can impact staffing levels and how your business operates. Your employee benefits package can include additional perks, but it's also worth increasing the support available when providing statutory benefits.

Industry-related risks

Different industries and types of work carry differing risks and challenges. Your employee benefits package can provide support tailored to the demands associated with your industry. For example, you might have several office-based staff who spend most of their time working at a desk. These roles are at increased risk of health issues related to sedentary work, such as cardiovascular disease and obesity. Conversely, workers engaged in heavy manual work may experience musculoskeletal problems. Your health and safety assessments should consider these risks and what measures you can take to minimise them. However, your employee benefits package can also provide a safety net should staff need medical advice or treatment.

Consider which issues are specific to your industry and to each role, whether they relate to physical challenges, a high-stress environment, or frequent travel, and how your employee benefits package can help.

Employee demographics

You won't have any detailed information about employee demographics until you have employees. However, you'll likely have some idea of the type of employee you want to recruit. Are they young trainees or apprentices, or experienced professionals with more qualifications and experience? Their life stage will influence the benefits they value, and their priorities will change over time.

For example, young employees starting their first job may value more financial support and guidance, while older staff with families or those heading towards retirement may have other priorities. We're more likely to need medical treatment as we age, meaning an older workforce will need a different approach to private medical insurance. It's also worth considering your location, how it affects your team's commute, and whether help with travel expenses or flexible working arrangements may be helpful.

Popular benefits

If you can't ask your existing employees what they want from their employee benefits, you can still look to third-party research to track trends and understand what employees are looking for. HR software provider Ciphr conducts research to determine what benefits employees seek, understand the challenges businesses face, and examine how their investment in employee benefits schemes is changing as a result.

Considering independent research can help you understand the current landscape before seeking advice to tailor your employee benefits to your individual circumstances.

Business size and plans for growth

The size of your company, your business goals, and your growth plans will all affect your employee benefits strategy, as staff numbers can influence the benefits you provide and how cost-effective they are. It could also affect the service providers you choose.

For example, private medical insurance for businesses offers different services depending on the number of employees. Most insurers offer a small business medical insurance policy for companies with 2-249 employees and a corporate policy for companies with 250+ employees. It's worth considering whether both policies meet your needs, as this can make it easier to scale your employee benefits as your business grows.

Working patterns

Your working patterns and hours will likely vary depending on your industry and workforce composition. You may have a mixture of full-time and part-time staff who work during the day, five days a week. Other roles may need evening or weekend working, such as those in hospitality and catering. There may be longer day shifts or night shifts.

Your employee benefits strategy must consider how different working patterns affect staff and which employee benefits will serve their diverse needs. Fairness is key. Some benefits may be essential to a small group of staff but have no value to others. Considering how to provide benefits that support every staff member is vital.

Competitor benchmarking

Assessing your business against other companies in your industry helps you determine your position in the marketplace and understand your strengths and weaknesses compared to your competitors. The same approach applies when deciding how to develop a competitive benefits package. Understanding what other businesses offer can set a benchmark for your benefits package and show you ways to stay ahead and stand out in the job market.

It's worth considering that if you're a small business in an industry dominated by larger corporations, this could give you a competitive advantage. Your business can be more agile and is ideally placed to offer flexible, personalised benefits tailored to employees' individual needs.

The culture you want to create

Your values and approach to management set the tone for your workplace culture. How you choose to invest company money in effective employee benefits shapes the culture you want to create. For example, if you take a 'people first' approach, investing in benefits that support employee health demonstrates your commitment to their overall well-being.

Including details of your employee benefits schemes in recruitment materials, such as adverts and job descriptions, helps you attract top talent. You can talk about a commitment to staff well-being or other values, but demonstrating that you've invested in tangible employee benefits shows you mean what you say. There are various ways that your employee benefits can reflect your values, so it's worth careful consideration.

We've discussed ways you can develop an effective employee benefits strategy, so let's consider what that could look like in practice. As we've mentioned, there are statutory benefits that you must provide for your employees. It's also worth reviewing surveys that provide information on the benefits employees value most. A cost-effective employee benefits strategy can include a mix of paid, low-cost, and free options. Say you have parents with young children in your workforce. You may not be in a position to offer paid assistance with childcare costs, but you can signpost them to information on tax-free childcare or other funding sources.

Your benefits strategy is part of the overall reward package you provide to your staff, including their salary, so it's worth thinking of salary and benefits as a single package.

Here are some of the most popular employee benefits.

Health insurance

Private health insurance gives your employees fast access to medical care and a range of other healthcare services. A group policy can cover all your staff, allowing them to claim treatment when needed. Most insurers offer small business policies for 2-249 employees and corporate policies for 250+ employees, with services designed to help you manage workforces of different sizes.

Core coverage typically includes in-patient treatment, cancer care, some out-patient services, and mental health support, along with services such as 24/7 virtual GP appointments. You can extend or enhance your coverage with optional extras at an additional cost, helping you tailor your coverage to your employees' needs. Coverage varies, so it's worth talking to a broker to find the right provider.

Death-in-service benefits

Death-in-service benefits pay a lump sum to an employee's loved ones if they die while employed by you. It's a highly valued benefit, particularly for those with families, as it provides financial security if they're no longer around.

You can invest in a group life insurance policy to provide death-in-service benefits for all staff who then nominate their chosen beneficiary. The lump-sum benefit pays a multiple of each employee's salary, and you can tailor the benefit by selecting the applicable multiple. This also influences the premium, helping you use your budget wisely.

Financial support and education

There are various ways to provide your team with financial support. Income protection insurance pays a defined percentage of an employee's usual income, typically higher than SSP, and covers a longer period. It therefore reduces financial stress for those who can't work due to illness or injury. Critical illness insurance pays a lump sum if an employee is diagnosed with a serious illness that's listed on the policy documents. It's available with life insurance or as a separate policy.

You can also offer employee discount schemes to help staff save money on their day-to-day expenses. These are available with most medical insurance policies or as a separate perk. Season ticket loans can also help staff pay for monthly or annual travel passes, reducing the cost per journey.

Financial education can help your staff manage their money and seek support when needed. You can provide educational resources, organise training sessions or signpost them to independent advice. Many organisations invest in employee assistance programmes with financial and legal helplines.

Mental health support

We've mentioned the mental health support that medical insurance can provide. Core coverage typically offers 8-10 counselling or talking therapy sessions. However, if you work in a stressful environment or want to enhance the support your policy provides, you can extend your coverage to include additional treatment sessions and in-patient or out-patient psychiatric or psychological treatment.

Employee assistance programmes also provide 8-10 counselling sessions along with access to telephone helplines for legal and financial guidance. These are independent, third-party services allowing staff to discuss confidential concerns without worrying that information will be shared with their employers or colleagues.

Annual leave

We've mentioned the minimum statutory requirements, but it's worth considering whether you can offer an increased annual leave allowance. Time away from work helps your staff achieve a better work-life balance, spend time with their loved ones, and rest and recharge. That has positive benefits for their well-being and can also support business growth by improving employee engagement, concentration, and productivity.

An enhanced leave allowance is also low cost. When deciding on an approach, consider your business needs and the impact your annual leave strategy will have on other team members who may have to pick up more work while their colleagues are away.

Salary sacrifice schemes

Salary sacrifice schemes allow your staff to give up part of their salary in exchange for a benefit. It can lower their income tax and National Insurance payments and cut employers' National Insurance contributions. It also lets you provide a tailored benefits package where staff opt in to receive benefits they value and need.

Staff can use salary sacrifice to pay into their pension before tax and increase their retirement fund. It can help to fund childcare costs via the Workplace Nursery Scheme. Workers can also get help to buy hybrid or electric vehicles, or enrol in the cycle-to-work scheme.

As you can see, salary sacrifice schemes let your team tailor their benefits to their circumstances. Staff with children can opt in for funding support, while others can get help with travel expenses that suit their commute and working pattern.

Pension contribution matching

A pension scheme is a statutory requirement; however, you can increase your team members' retirement savings by offering pension contribution matching.

This benefit involves agreeing to match the amount your staff pay into their pensions up to a specified percentage. It's a good idea to seek professional advice from your account or financial advisers before setting financial limits. This can help with employee retention, particularly for older staff who may be reviewing their retirement plans.

Flexible working arrangements

Flexible working arrangements can support a positive work-life balance and good mental health, and make your workplace more accessible to disabled staff. You can offer flexible hours, where staff adjust their working patterns around other commitments. Working from home or hybrid working, where your workforce spends part of the time at home and the rest in the office, provides similar flexibility. You can use one of these or a combination of both.

Career development opportunities

Career advancement and professional development opportunities help you retain talent as they can see a future with your business. The opportunities you offer will depend on your business growth plans and the number of staff you plan to recruit. However, it's worth considering how upskilling staff will support your business in the future. You can provide mentoring, run in-house training or offer support with professional qualifications. Of course, if you're focusing on recruiting trainees or apprentices, this will likely already be part of the plan.

Developing your staff can also help you if you eventually plan to retire or sell the business, making your company more attractive to potential buyers.

Your business will change over time, and regularly reviewing your benefits strategy helps you keep pace with employee needs. Various growth milestones, such as organisational, workforce, economic or legal changes, can prompt a review, but it's also worth gathering feedback from your team at regular intervals.

Gathering feedback can take various forms, including staff surveys, focus groups and one-to-one conversations. Reviewing usage data and how you use your communication channels helps you understand whether benefits are undervalued or not understood. Always seek professional advice before making changes.

Creating a high-quality employee benefits package helps your business attract and retain talented employees. At Globacare, we provide tailored advice to help you choose cost-effective insurance policies that support your employee benefits strategy. Contact us for a comparison quote.