Creating an effective employee benefits package
A good benefits package makes your team feel valued, improving recruitment and retention and giving you a more highly engaged workforce. It can also improve your employees' health and reduce their stress levels. A CIPD survey for their Good Work Index 2022 found that the main reason respondents wanted to change their job was to seek better pay and benefits elsewhere.
A high-quality benefits package doesn't have to be high cost. Instead, you can focus on the things that are important to your people and provide a combination of benefits that help them achieve their goals.
Employee benefits: the top 10 in 2023
In 2022, HR and payroll software provider Ciphr carried out a survey to assess which employee benefits were most important to their respondents. It won't surprise you that a market-rate salary and performance bonuses feature in their top 15 most highly valued benefits. However, they weren't at the top of the list. Workers increasingly value benefits which enhance their wellbeing and give them a better work-life balance. Creating a suite of employee benefits that positively impact your team's personal lives will make you an employer of choice.
Here are the ten most essential perks that you may want to offer.
1. Health insurance
Private medical insurance is a valuable employee benefit that provides your employees with private treatment. Depending on your chosen policy, your insurance can cover anything from consultant appointments, surgery, cancer treatment or routine medical care such as dental check-ups. As a result, your employee benefits from fast, high-quality care without the NHS waiting list.
How does business health insurance work?
A group health insurance policy provides coverage for all of your employees. You can opt to pay the premium yourself or make the scheme voluntary and invite employees to pay their premium. This is still a valuable employee benefit, as group premiums usually cost less than individual policies.
You can tailor your policy to suit your needs and budget. Each policy has core coverage, typically including inpatient treatment, surgery and cancer care as standard. There is also a range of optional extras, such as outpatient treatment which includes consultant appointments, diagnostic tests and physiotherapy.
There are also variations in the level of coverage provided, the policy excess and the hospitals each policy covers. Talking to an insurance broker will help you obtain and compare quotes to understand what's on offer.
Are there any tax implications?
Health insurance premiums are an allowable business expense, which means you can deduct them from your corporation tax return. However, HMRC treats medical insurance as a benefit in kind, so you will need to pay employer's National Insurance contributions on the premiums. Your employees will also need to pay tax on the benefit.
2. Flexible working
The COVID-19 pandemic meant that workers who had previously been working full-time in an office setting needed to adapt to working at home. They also discovered the benefits, including skipping a stressful commute, spending less on food and travel and creating a healthy work-life balance. As a result, many employees have been reluctant to return to the office full-time.
Flexible working arrangements can result in more highly engaged and productive employees and are well worth including in your employee benefits package. You can offer flexible working options in several different ways.
Flexible working hours
Flexible working options include flexibility in the hours that each employee works. For example, they may find the daily commute stressful and find that their mental health benefits from being able to shift their working hours earlier or later. In addition, employees with children can come to work after the school run.
Flexible working location
Technology has enabled remote access to work, and your employees may have found that they prefer to work from the comfort of home. Therefore, the option to choose where they work can be a valuable employee benefit.
However, talking with your team about the potential impact of working at home is vital. If there's a business case for ensuring that staff are in the office most of the time, it's essential to communicate this clearly. There is also a potential mental health impact on remote employees, who can become isolated if they work from home full time.
A FOUR-DAY week
There are two ways to approach the idea of a four-day working week as an employee benefit. First, some full-time workers may be happy to work their regular hours but compress them over four days instead of five.
However, businesses are increasingly considering a move to a four-day working week with an overall reduction in hours without cutting employee salaries. This may sound like a quick route to bankruptcy. However, companies that tried this approach found that it increased productivity and employee engagement. It can also help to bring parents back into the workplace as it reduces the impact of childcare costs.
3. Pension contribution matching
As the state pension age creeps ever higher, employees are increasingly looking for an employee benefits package that helps them save money for their retirement. In addition, every business is legally required to provide a workplace pension as part of its employee benefits package. Therefore, the amount you contribute and whether you offer pension contribution matching are crucial factors that will help you to stand out from other employers.
It also helps your employees feel valued and shows them that you are committed to their wellbeing even when they're no longer employees.
4. Paid sick leave
Ill health can affect any of us at any time. A short-term illness may only result in a few days off work, but a more serious condition can lead to long-term absence. A generous sick leave entitlement can help your employees feel supported and give them peace of mind, knowing that they don't have to worry about paying their bills while they're away from work. It's why paid sick leave is one of the most popular benefits.
Providing sick pay to an absent team member may provide them with financial security. However, it can strain your company's finances, particularly if you need to recruit additional or temporary help during their absence. Happily, there is a more cost-efficient way to provide financial support.
Group income protection
Group income protection insurance pays a regular income to employees who are absent from work because of ill health or injury. It means you can pay the premium, so you won't have to pay the full cost of your employee's wages while they're away. A group policy spreads the cost of cover over your entire workforce. However, it is still possible to tailor the coverage the insurance provides.
How does group income protection work?
Income protection insurance provides a monthly income to employees on sick leave. It doesn't cover their total salary but typically pays up to 80% of their regular income so they can pay their living expenses. It also reflects that their costs are likely lower as they won't be travelling to work.
The percentage that a group policy pays is usually higher than a personal income protection policy. This is because your employee has to pay income tax on the payments as it's a tax-deductible business expense for you.
How much cover do you need to provide?
It's a good idea to talk to an insurance broker for a comparison quote and to assess the percentage a policy will pay out. Then, you can tailor your policy to provide cover for a fixed period or until an employee's expected retirement date. Most income protection policies also have a deferral period, which is the time that elapses between the start of an employee's absence and when the policy starts paying out. So, for example, if you already provide full sick pay for the initial period of absence, you can set the deferred period to match.
Critical illness cover
Critical illness insurance can provide additional funds to employees diagnosed with a serious illness and can work in partnership with other income protection cover. However, it only covers a specified list of conditions and pays a lump sum rather than a regular income.
It's ideal if your employee's condition causes a disability, and they must buy equipment or pay for other adaptations.
5. Mental health and wellbeing support
Employee benefits that support your staff's mental health are increasingly popular. For example, 40% of respondents in Ciphr's survey reported that they valued mental health and wellbeing support as part of an employee benefits package.
Creating a positive work environment is a great start. Other employee benefits, such as flexible hours, can also help employees to develop a healthy work-life balance and improve their mental health. However, if you opt to include health insurance in your employee benefits, this can also provide mental health support.
Mental health cover
Most private medical insurance includes some form of mental health coverage as standard. These typically include helplines or online resources. Some may specifically focus on mental health, whilst others assist with legal or financial issues that can cause stress or anxiety. Some insurers also enable your staff to self-refer for CBT or counselling.
Health insurers provide different support services depending on your business size. These can include help with designing an employee wellbeing strategy, an employee assistance programme or health checks.
Most insurers also offer virtual or online GP services. These can help to reduce stress as they enable staff to get medical advice at a time that fits around their other commitments.
6. Employee discount scheme
An employee discount scheme can help your people save money on everyday essentials or give themselves a treat. This can help to reduce their financial stress and look after their wellbeing. Various providers can help you to create a discount scheme as part of your employee benefits and perks. However, if you're planning to offer medical insurance, many providers include benefits and discounts as part of their offering.
These can include discounts on cinema tickets, coffee and holidays, and wellbeing discounts such as discounted gym memberships, fitness trackers or mindfulness apps.
7. Extra holiday allowance
As we've already mentioned, creating a good work-life balance is a priority for many employees, so employee benefits that support that are also likely to be highly valued. There are various ways to achieve this, from creating a culture where employees are encouraged to leave work on time to ensuring staff aren't expected to check emails during the weekend.
However, providing adequate annual leave ensures staff can take a complete break to enjoy a long weekend or a holiday with their family. It's good for team morale and can also increase productivity. Of course, that relies on them using their allowance. If staff regularly leave their holiday entitlement unused, it's worth reminding them of the benefits of time away from their desk and encouraging them to book a few days off.
Companies are taking many approaches to annual leave allowances, so here are a few to consider.
Extra holiday allowance
All full-time workers in the UK are entitled to 5.6 weeks (or 28 days) of annual leave each year. However, you may choose to offer a higher allowance to all staff or adopt a phased approach. Increasing an employee's annual leave entitlement in line with the length of their service rewards experience and could improve staff retention.
Unlimited paid leave
The concept of offering unlimited paid leave may seem illogical. In theory, you could end up with an entire workforce deciding that they'd prefer to be on holiday all the time. However, major corporations, including Netflix and LinkedIn, are adopting an unlimited annual leave policy which suggests it may be worth considering.
The advantages of unlimited leave
The main advantages of unlimited annual leave are that they empower employees and enable them to take a break whenever needed. In addition, it demonstrates a high level of trust between you and your employees as you allow them to decide when to take time away, whether for a holiday, a family matter or just a duvet day. Making your employees feel valued and trusted improves engagement and helps them to maintain a better work-life balance. It can also enhance your ability to recruit new talent.
Disadvantages of unlimited leave
If you're considering offering unlimited leave as one of your employee benefits, your immediate concern may be whether staff will take too much time off. However, the reverse can also be true. For example, Kickstarter ended its unlimited leave policy because it created uncertainty around how much time off was acceptable. As a result, their staff took less leave and experienced burnout. Ensuring that every team member is taking adequate time off and that workloads are balanced between individual employees is vital.
Of course, in reality, no one can take unlimited leave. There will inevitably be times when the needs of the business make it impractical for staff to be away. For example, consider what would happen if the entire team of an accountancy firm decided to go on holiday for the last two weeks of January when tax return deadlines were looming. They may be sticking to the annual leave policy but soon need new clients.
Even with unlimited leave, your employees will likely need to request time off to ensure the work gets done. However, creating an expectation that staff can take time away whenever they like runs the risk that somebody will take that refusal badly, ultimately damaging their relationship with their managers. So it's vital you consider the practicalities, potential pitfalls and how you will monitor the policy.
Other days off
You don't have to offer unlimited leave or an enhanced entitlement to make your employees feel appreciated. For example, in Ciphr's survey, 21% of respondents said they'd value a day off on their birthday. By contrast, only 18% voted in favour of unlimited annual leave. Nevertheless, acknowledging that your employees prefer to spend special occasions away from work is an excellent employee benefit.
It's also worth considering whether to apply this approach to other celebrations, for example, Christmas. There may be practical reasons why you must have staff checking emails or on call between Christmas and New Year. However, enabling essential employees to work remotely or closing the office allows people to relax and enjoy a break without taking annual leave.
8. Support for parents
Last year, ONS figures showed that 27.6% of women didn't work because of family commitments. In addition, a YouGov poll found that 3 in 10 working parents had jobs below their skill level because they offered more flexibility than higher-level roles. This indicates that a flexible approach to work could enable your business to attract skilled employees who are currently out of the workforce or working below their full potential.
However, other options are available which can offer more practical support.
In a household where both parents work, childcare costs take up 30% of their income on average. This can result in one parent deciding to stay at home because it's more cost-efficient than paying for childcare. The knock-on effect is that your business, and the UK economy as a whole, lose a skilled worker.
The childcare voucher scheme is no longer available to new applicants. However, the Government's tax-free childcare scheme provides some help for working parents. You can also offer additional support with the Workplace Nursery Benefit.
With the Workplace Nursery Benefit, you partner with a nursery and pay a monthly fee. Your employees then pay their nursery costs via salary sacrifice. This means that employees pay fees before tax or National Insurance, so they save money. You'll also reduce your employer's National Insurance bill; this is typically enough to cover the cost of the monthly fee.
Your employees can potentially choose their own nursery, although the selected setting needs to be approved under the scheme. This means they can opt for childcare near home or the office according to their circumstances.
Paid parental leave
A parent's decision to return to work after the birth of a child may rely, in part, on practical considerations, including the childcare costs they'll likely face. The amount of parental leave they can take will also be a significant factor. Paid parental leave allows a new family time to adjust and helps them to feel supported.
Suppose you're in a position to offer extended parental leave as one of your employee benefits. In that case, you allow staff to decide when they feel ready to return rather than being forced to come back because they can't afford to take more time off. In turn, this increases employee engagement, giving you more productive employees who are less likely to leave in search of a more family-friendly employer.
Critical illness cover
We've already talked about critical illness cover, but it's worth mentioning here too. If you're considering providing group critical illness insurance for your team, ask about family protection when you look for quotes.
Some insurers will include a policyholder's children at no additional cost. This type of cover could enable an employee to take time off to care for their child if they develop a critical or life-limiting illness.
9. Death benefits
The death benefits you offer may not help your employees directly, but they're still an essential part of your benefits package. A death-in-service payment gives your staff peace of mind knowing their loved ones will have financial security when they're gone.
It's also a good idea to consider your approach to bereavement leave.
Group life insurance
The easiest way to provide death-in-service payments to your employees' families is to take out group life insurance. Then, your employees can nominate beneficiaries who receive a lump sum payment if they die during the policy term.
In practice, this means the policy pays out if your employee dies while working for you. The death doesn't have to be related to their employment.
Group life insurance is a fixed-term policy that ends on an employee's anticipated retirement date. If your business has a compulsory retirement age, you can use that. However, it's also worth talking to employees about their retirement plans, particularly if it's common (and practical) for people to continue working after the standard state pension age.
How much does group life insurance pay out?
You can choose the amount of coverage you want the policy to provide. However, policies typically pay a multiple of an employee's salary.
Most employers choose a multiple of between two and four times an employee's annual salary. However, theoretically, you could opt for up to fifteen times their salary. The multiple you choose affects the premium you pay, along with other factors such as the number of employees you have, the average age of your workforce and the type of work you do.
Relevant life cover
Relevant life cover offers the same benefits as a group life policy. However, it doesn't count towards the lifetime pension allowance like pension contributions and group life cover benefits do. This made relevant life cover a valuable way to offer increased death-in-service benefits to high earners without increasing their tax bill.
The lifetime pension allowance has now been abolished. However, there may still be some tax implications to take into account for individual employees.
You may not consider bereavement leave an employee benefit, but how you approach this issue can affect employee engagement and your standing as an employer of choice.
Parents are legally entitled to two weeks of paid leave after the death of their biological or adopted child, their partner's child, or in the event of stillbirth after the 24th week of pregnancy. Whilst there are no statutory requirements for other types of bereavement leave, it's vital that you consider other issues that may affect your employees.
Grief can affect someone's mental and physical health in ways that can impact their ability to work. Consider whether you can offer additional leave in certain circumstances and what adaptations you can make.
Should you offer paid bereavement leave?
Bereavement leave allows your employees to deal with the practical tasks that need completing when a family member dies. A specified period of paid leave will enable them to deal with matters including arranging the funeral, sorting out paperwork and perhaps clearing a property if necessary. It could also mean that employees don't have to worry about paying the bills during their absence.
You may also want to consider circumstances in which extended paid leave may be justified, for example, if the death occurred abroad.
10. Other benefits and perks
While we've focused on the top ten most popular employee benefits, some other perks and benefits are worth considering. These will help attract talented staff and offer your existing employees a better working life.
A positive working environment
Creating a good working environment combats workplace stress and positively impacts your employees' wellbeing.
This demands good management skills to foster a culture of openness that allows staff to voice any concerns and suggest improvements. It's also vital to enable staff to build positive working relationships, which provide peer-to-peer support.
Equally, consider whether your working environment is a pleasant and comfortable place to spend time. For example, is there plenty of natural light, comfortable furniture and space to relax during breaks? All of these elements can contribute to improved employee wellbeing.
When you include health insurance as one of your employee benefits, your policy may include support in creating a wellbeing strategy for your team. If not, you can still offer workplace benefits to improve your employees' health.
These can include:
- Free food, for example, healthy options for meals or snacks.
- Workplace activity sessions, for example, lunchtime walks or yoga classes.
- Training sessions to provide health and wellness information.
It's a good idea to discuss the options with your team and get advice from HR or occupational health to assess whether there are any issues affecting your staff that your strategy can address.
The potential for career development has become increasingly important over the past few years. For example, in 2022, the CIPD's Labour Market Outlook found that job-to-job moves were at an all-time high. This suggests that more workers are willing to change jobs to explore new opportunities.
Offering your staff the opportunity to progress their careers or move into different areas of the business can increase employee retention. There are a few different ways to achieve this.
If you can offer accredited training in-house, this can enable your staff to study for new qualifications and give you a more highly skilled employee. Equally, more informal (but still documented) training can develop and improve a staff member's skill set and allow them to apply for other internal vacancies when they become available.
Some career progression may not require formal training but can be achieved via exposure to more complex tasks and responsibilities. Mentoring by a more experienced staff member is a low-cost option that can still offer measurable results.
Finally, external courses may provide training and knowledge that you can't offer in-house. Tuition reimbursement allows your staff to access appropriate training and then claim back the cost.
Alternatively, suppose there are key providers offering skills training in your sector. In that case, consider setting up a system that allows your employees to book direct with invoices coming straight to you. This could save you time and effort investigating and approving third-party training following an application from an employee.
Getting professional advice
We hope this guide has given you food for thought and some ideas for improving the employee benefits you offer.
We recommend that you seek advice from your legal representatives and accountants to assess the impact of any changes you make.
At Globacare, we offer bespoke advice on a range of insurance products. If you'd like to add health insurance, income protection cover or life coverage to your employee benefits, please get in touch with us for a comparison quote.
We can also support you by reviewing your current provision to see if you can reduce your premiums, improve your coverage, or both.
Frequently asked questions
How can I find out what employee benefits my people will value?
You can start with an employee survey. Include a list of the possible options and an option for respondents to include suggestions.
Surveys allow you to collect anonymised responses from your team and assess which benefits they'll appreciate most. You can create a survey in-house or use an external provider.
What insurance policies are worth including in an employee benefits package?
Medical insurance, life cover, income protection insurance and critical illness cover are all worth considering. They can offer financial security and private healthcare to your employees.
Group medical insurance can also provide your business with additional support.
What are the top ten most valued employee benefits?
Aside from a market-value salary and performance bonus, these are the most highly valued benefits:
- Paid sick leave
- Flexible working
- Pension contribution matching
- Health insurance
- Mental health and wellbeing support
- Employee discounts
- Extra holiday allowance
- Life cover
- Extended parental leave
- Support with childcare costs
Will these benefits help my business attract new hires?
Yes. A good benefits package can make you an employer of choice and help you retain your existing staff.