Employee Benefits

Employee Benefits: What Are They and How Do They Work?

Written By: Andrew Mobberley | Last Updated: January 2023

Andrew has over 25 years of experience working within the employee benefits industry. He is primarily focused on our technology offering, but also helps with broader benefit consulting and employee communication solutions. He specialises in benefits, pensions and online solutions. He also heads up Sales for Broadstone and is part of the senior leadership team.

Andrew has spent the majority of his career consulting with medium and large UK and overseas companies across all employee benefits.

What are employee benefits?

Employee benefits is a wide subject matter that often covers a wide range of services, from insurance products and health benefits to job perks, employee discounts and much more. They are often put in place to help support employee attraction and retention. Aligning employee benefits with the company’s employee value proposition (or EVP – the technical lingo that is used to describe part of branding as an employer, in how they attract the right people with the right skillset, and keep them engaged), is essential to help drive up engagement.

There are many different kinds of employee benefits, some of which are “core benefits” – some of these are a legal requirement, and the cost would be covered in full by an employer. “Flexible” or “voluntary” benefits are often offered on top of these, which employees are able to opt-into, to support their lives in the ways they need.

Why do employers offer benefits to employees?

Offering employee benefits to staff members supports job satisfaction, and helps look after their wellbeing: physically, mentally, and financially.

They can help with a recruitment drive to attract the best talent, and also to retain loyal employees by giving them a reward package, which reflects how much their employer cares about their wellbeing.

As an employer, motivated employees that feel happy in their day-to-day roles will only make them more likely to be driven to work hard, improving efficiency and just generally being better for business.

The most common examples of employee benefits

  • Pensions & Saving for retirement – offering a workplace pension is not only a legal requirement; it’s one of the most effective ways of helping employees to save for their future and understand what their retirement could look like.
  • Holidays and time off – paid time off is a key element of the employee experience. It allows employees to relax and recharge and keep a healthy work-life balance. Taking breaks will help employees to be more efficient and better at what they do by preventing burn out.
  • Lifestyle Benefits – a range of goods and services that employees have access to at corporate rates that have been secured by their employer, to help improve their life on an everyday basis.
  • Discounts & perks – every little helps when it comes to the cost of living and helping to improve the financial wellbeing of a workforce by making things like groceries, high street shopping, meals, and days out more affordable through an employee discount scheme.
  • Training and development – investing in employees by developing and improving their skills may help to increase their performance and productivity. More importantly though, an employer showing that they want to invest in their people makes them feel more valued and could help with staff retention.
  • Healthcare and risk benefits – selecting the right healthcare, risk and wellbeing programme in a highly competitive labour market is essential to attracting & protecting employees – the most important asset to a company. There are many sustainable solutions available – as well as more premium benefits – from health cash plans and virtual GPs – to life insurance and income protection.
  • Reward & recognition – a scheme that makes working for an employer, rewarding for the employee. Employee recognition can often be neglected or overlooked and there has never been a better time to change this and give hard working employees the recognition that they deserve.

Rewards can be anything from gift vouchers or winning prizes, to more traditional monetary bonuses; whether for hitting targets or as a seasonal boost to an employee’s salary.

What are the mandatory employee benefits that need to be offered to UK employees?

In the UK, many employee benefits are a legal requirement and must be offered to employees. These include; a workplace pension that meets statutory minimum contribution levels, holiday pay, and parental leave pay.

Many businesses now choose to offer additional benefits that go above and beyond this to keep their staff happy and engaged, and to appear more attractive and competitive in the recruitment markets for their respective sector.

How to offer a good employee benefits package

How long is a piece of string? No one employee benefits strategy will suit all businesses, which is why employee benefit consultancy is so important.

Benefits should not be viewed in isolation but rather as a part of an overall Employee Value Proposition (EVP).

Once HR goals are understood as well as the vast and evolving needs of a workforce, it is then possible to design a benefit strategy that works for all, within a given budget and working to a set of objectives.

A good employee benefits package should consider the demographics within a group of employees and which benefits will most drive and engage them.

Employee feedback should not only be requested but encouraged, to ensure that money is being spent in the right places for the desired outcomes. Offering salary sacrifice benefits that can be personalised based on individual needs is a great way to achieve this.

Perhaps most importantly, employee benefits must be communicated well to ensure staff understand what is available to them and ensure the best possible return on investment.

The cost of employee benefits to a business

This will vary depending on the benefits that are selected, how many employees they are available to, levels of cover plus a number of other factors. For example, an employee’s age, salary and where they work all matter when it comes to insurance benefits.

As a guide, the average cost of benefits provision to the employer is usually around 14% of payroll. [1]

A salary sacrifice pension scheme is mutually beneficial to both employers and employees – as both can make tax and national insurance savings. The employee pays less income tax on the part of the salary that is being sacrificed, while the employer won’t need to pay any Employer’s National Insurance Contributions on that same amount.

Communicating benefits clearly and promoting their value to your staff

When it comes to employee benefits, good communications are essential. A truly effective approach to internal communications is cohesive, strategic and delivers straightforward content in an easily digestible format. This is how you ensure solid employee understanding of the benefits on offer to them, and the best possible return on investment.

A proven approach to making sure a benefit strategy works for a business has four key elements:

  • Gaining strategic advice from an independent benefits consultancy or intermediary
  • The creation of a strong reward brand and attractive employee benefits package
  • Creative content to effectively communicate the reward brand and benefits on offer
  • Effective delivery

Once these steps have been put in place – as with most strategies – gaining feedback and reviewing its development will allow for continuous improvement and a ‘best practice’ long-term approach.

If you have read this and would like to talk about which strategies are most likely to be effective for your business, Broadstone has a team of dedicated and specialist consultants that would be happy to hear from you, for a no-obligation discussion about your needs. Talk to us today.

[1] https://www.asinta.com/countries/employee-benefits-in-the-uk/

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