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Employee Benefits in the UK: A Business Owners Guide

Employee Benefits In The UK: A Business Owners Guide

Offering an attractive selection of employee benefits is a great idea for any business owner that wants to lead a happy, healthy, and productive workforce. Only 41% of workers feel satisfied with their benefits, according to the CIPD, so there’s clearly room for improvement here.

But where to start?

First off, understanding what options are available to you when piecing together a successful combination of perks and rewards.

To help, we’ve created a simple guide of employee benefits you can offer to your hard-working staff as well as addressing whether certain employee benefits are mandatory.

Need help selecting the perfect mixture of employee benefits and health insurance policies? Contact one of our friendly brokers FREE of charge on 01273 222805 or click on the bottom right chat box.

Healthcare options for your staff

To mark the success of a carefully thought-out healthcare package, both the employer and staff will benefit from the support available. Below we have listed the main options:

Sick Pay

‘Statutory Sick Pay’ kicks in after the first four days off work and lasts up to 28 weeks. But employers can choose to go above and beyond by offering Occupational Sick Pay (OSP) which lasts a longer period of time. Or they can offer a Sick Pay Insurance plan which provides short-term financial help for up to one year of sickness.

Group Income Protection

For longer-term ailments, you can pay part of an employee’s salary each month. It can be activated once Statutory Sick Pay or Occupational Sick Pay has come to an end. Group Income Protection can last for a period of time set by the employer, or until the individual goes back to work or retires.

Check out more on Group Income Protection here.

Dental and Eyecare Insurance

Businesses can choose to cover the dental or eyecare needs of its employees. Again, limits and exceptions can be set as required. Schemes can also be extended to family members.

Health Check Ups

Health screenings are a useful benefit to offer employees because they can flag up potential health problems before they occur.

Critical Illness Insurance

This covers employees in the event they are diagnosed with a pre-defined illness and survive for a minimum period of time. Typical illnesses include: cancer, heart attack, MS and other life-limiting health issues.

Check out more on Group Critical Illness here.

Health Cash Plans

Designed to cover routine health treatments and services, rather than unforeseen needs. Health cash plans can include: dentistry, eye care, physiotherapy, massages and more.

Check out more on Health Cash Plans here.

Private Medical Insurance (PMI)

You can choose to cover a range of medical treatments carried out in private healthcare settings to allow employees to skip the NHS waiting list, supporting them back to work sooner.

Check out more on Business Health Insurance here.

Death in Service Insurance

In the tragic event that a member of your team passes away, Death In Service Insurance ensures that the employee’s family is compensated. With only a third of Brits having life insurance, it can offer peace of mind to have the company looking after their needs.

With Group Life Insurance you can choose to pay out anywhere between two and 15 times the employee’s salary should the worst happen.

Check out more on Group Life Insurance here.

Benefits focusing on pension schemes

Workplace pension schemes are among the mandatory employee benefits in the UK. It’s applicable to employees who are between the age of 22 and the state pension age. A generous pension scheme can be highly sought after by prospective employees – and also a way of generating loyalty from your current team.

Here are some of the pension schemes you should consider:

Money Purchase Schemes

Employees can choose to have money placed into a fund which is then invested on their behalf. When they retire this money is then used to buy an annuity which gives them an income for life.

The individual takes the risk if the investment fails.

Final Salary Schemes 

The most common pension. The employee is paid a percentage of their final salary when they retire. It’s based on their basic salary (so excludes bonuses) and, of course, is a strong inducement for continued loyalty to the company.

The financial risk lies with the employer, so if there’s any shortfall in the pension, the business will have to plug the gap.

Stakeholder Schemes

Do you employ five or more people? If you do, and you haven’t provided an occupational pension, then you must enrol them on a stakeholder scheme. You are not required to contribute to the scheme, but you must provide basic guidance on what it is and how it works.

A percentage of the employees earnings is deducted from their pay via your payroll system.

Group Personal Pension Scheme (GPP)

In this type of scheme you pool together individual pensions from different employees. They are collected through your payroll and then given to the pension provider.

The employer is only required to contribute if they want to use the Group Pension Scheme instead of a stakeholder scheme. In which case, you have make a minimum contribution of 3% per staff member.

Other attractive employee benefits, perks, and rewards to consider

Cash bonuses

In performance-driven working environments cash bonuses can be a great way of motivating and rewarding staff. Particularly useful for business lacking the pay budgets of bigger employers.

Extra holidays

All businesses must offer employees at least 28 days’ holiday per year. But you can provide an extra incentive for potential employees by offering more time off, such as for birthdays or for different religious and cultural holidays. You might also choose to reward loyalty by increasing the amount of holiday based on length of service. A great way to boost staff retention!

Parental leave

Every employee has a right to maternity leave, regardless of how long they’ve been working for you. However, in order to receive statutory pay, an employee must have worked for at least 26 weeks and earned on average at least £120 a week.

Statutory Maternity Pay is paid for up to 39 weeks:

For the first 6 weeks, you pay your employee 90% of their average weekly earnings (before tax).

For the following 33 weeks, you pay £151.20 or 90% of their average weekly earnings (whichever is lower).

Meanwhile, a father may choose to take one or two weeks off of work. While they are off they may receive 90% of their earnings or £151.20, whichever is lower.

But of course, as an employer you may choose to be more generous in either case.

Flexible benefits

Rather than offering set benefits for employees, you can give them a menu to choose from. Whether it’s extra days off work, childcare vouchers, free gym memberships, extra pension provisions – you can offer a choice they can tailor to their own needs.

Voluntary benefits

Employees can choose to join a discount scheme. These can include partnerships with retailers, gym memberships and healthcare and other types up services. Often, employees will need to agree to small deductions from their pay in order to take advantage of the offers.

Travel expenses

The expense of travelling to and from work can accumulate for employees, so paying it for them can be an attractive perk.

Read more on employee benefits here!

What employee benefits are mandatory?

An employer is legally required to provide the following workplace benefits:

Workplace pension with minimum contribution limits:

  • Employers must comply with UK law and auto-enrol eligible employees (aged 22 or over) onto a pension scheme.
  • Employers also must pay a minimum contribution rate of 3% of earnings – though many employers chose to contribute more!

More information: Set up and manage a workplace pension scheme – Gov.uk

Maternity pay / Paternity pay

  • Designed for parents having a baby, adopting a child, or having a baby through surrogacy
  • Maternity pay: Statutory Maternity Pay / Leave, paid time off for antenatal care – paid for up to 39 weeks (90% of average weekly earnings for first 6 weeks then £156.66 / 90% of weekly earnings for next 33 weeks)
  • Paternity pay: 1 or 2 weeks’ paid Paternity Leave or paternity pay (£156.66 or 90% of average weekly earnings)

More information: Statutory Maternity Pay and Leave: employer guide – Gov.uk

Holiday pay

  • Employees are legally entitled to receive at least 28 days of paid annual leave each year.
  • Employers can include public holidays as part of the statutory annual leave.

More information: Holiday entitlement rights – Gov.uk

Statutory sick pay

  • Employers must provide a minimum level of statutory sick pay (£99.35/week as of February 2023) for up to 28 weeks.
  • Employers can choose to increase this amount or go even further by investing in an Income Protection scheme.

More information: Statutory Sick Pay: employer guide – Gov.uk

It’s important that business owners know what employee benefits are mandatory – not just to stay on the right side of the law, but also to consider how they can go further. Today’s forward-thinking business leaders are always looking for the opportunity to raise the value of their workplace perks in order to attract the brightest talent into their business.

A smart benefits scheme rewards everyone

There are many ways that you can tailor your company’s benefits package. When initially embarking on your employee benefits journey, see it as your opportunity to build a workplace culture which attracts and retains the best talent whilst protecting your business and staff.

Enlisting the help of an independent insurance broker is the best way to ensure you get the best deals and quotes in the market.

Hooray offers FREE advice and quotes to start-ups and SMEs looking to launch their employee benefits or review current health insurance policies already in place. We gather quotes from across the whole UK health insurance market to ensure the best policy ends up in your hands.

Need help in evaluating your options? Contact one of our friendly advisors for straight-forward honest advice at [email protected] or call 01273 222805.


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