Benefits Clauses in Employment Contracts

Benefits clauses determine what additional benefits employees receive beyond salary and when these can be changed.

Contractual vs Discretionary Benefits

Contractual Benefits

Benefits that form part of the contract:

• Cannot be withdrawn without consent
• Breach if not provided
• Often explicitly stated as entitlements

"You are entitled to private medical insurance cover, details of which are available from HR."

Discretionary Benefits

Benefits at employer's discretion:

• Can be withdrawn with notice
• No breach if withdrawn properly
• Usually stated as non-contractual

"The Company may, at its discretion, provide private medical insurance. This benefit is non-contractual and may be withdrawn or varied at any time."

Common Benefits

Health Insurance

"You are eligible for membership of the Company's private medical insurance scheme subject to the scheme rules. Cover is provided for [you only / you and dependants]. This benefit is non-contractual and subject to the terms of the insurance policy in force from time to time."

Life Assurance

"You are covered by the Company's death in service benefit, providing [3/4] times annual salary to your nominated beneficiaries. This cover is subject to acceptance by the insurers and the policy terms."

Company Car / Car Allowance

"You are entitled to a company car or, at your election, a car allowance of £[X] per month. The Company reserves the right to substitute a car allowance for the car, or vice versa, with reasonable notice."

Gym Membership / Wellbeing

"The Company may contribute towards gym membership or provide access to wellbeing programs. Such benefits are discretionary and non-contractual."

Staff Discounts

"You may be entitled to staff discounts on Company products/services at rates determined by the Company from time to time. This benefit is discretionary."

Benefits Documentation

In the Contract

For important benefits, include in the main contract:

"In addition to your salary, you will receive the following benefits:

• Company pension (as detailed separately)
• Private medical insurance (self only)
• Life assurance of 4x salary
• 25 days annual leave plus bank holidays"

Reference to Handbook

For detailed terms:

"Full details of employee benefits are contained in the Employee Handbook. Except where expressly stated, benefits described in the Handbook are discretionary and non-contractual."

Separate Benefits Schedule

"The benefits applicable to your role are set out in the attached Benefits Schedule. This Schedule may be updated from time to time and does not form part of your contract except where expressly stated."

Eligibility Conditions

Service Requirements

"Eligibility for enhanced benefits begins after completion of [6 months / probationary period]. During the initial period, statutory entitlements apply."

Role-Based Benefits

"Certain benefits are available according to your job grade:

• Grade A: Benefits Package 1
• Grade B: Benefits Package 2
• Grade C: Benefits Package 3"

Full-Time vs Part-Time

"Part-time employees are entitled to benefits on a pro-rata basis where applicable. Some benefits may only be available to employees working a minimum of [20] hours per week."

Changing Benefits

Variation Clause

"The Company reserves the right to substitute benefits of equivalent value or to amend benefit schemes, provided any changes do not materially disadvantage you."

Notice of Changes

"Any changes to discretionary benefits will be communicated with reasonable notice. Contractual benefits can only be changed by agreement."

Benefits During Leave

Sick Leave

"Benefits continue during periods of paid sick leave. During unpaid sick leave, benefits may be suspended except where required by law."

Maternity/Parental Leave

"Non-salary contractual benefits continue during maternity, paternity, and adoption leave. Where benefits are based on salary, they are calculated on actual pay received unless the policy states otherwise."

Garden Leave

"During any period of garden leave, you will continue to receive full salary and benefits."

Taxation of Benefits

Clause on Tax Treatment

"Benefits in kind are subject to tax. The Company will report benefits to HMRC and you are responsible for any tax liability arising. The Company may deduct tax and NI where required or where you have agreed to salary sacrifice."

P11D

"You will receive a P11D each year detailing the taxable value of benefits provided."

Key Benefit Considerations

Benefit	Common Issues
Health insurance	Pre-existing conditions, family cover, tax
Company car	BIK tax, fuel benefit, private use
Pension	Matching contributions, salary sacrifice
Bonus	Discretionary vs contractual, pro-rata
Share schemes	Tax treatment, vesting periods
Loans	Tax implications, repayment terms

Best Practice

For Employers

1. Clearly distinguish contractual from discretionary benefits
2. Reference scheme rules and policies
3. Reserve rights to change discretionary benefits
4. Keep benefits documentation updated
5. Consider tax implications

For Employees

1. Read contract carefully
2. Understand which benefits are contractual
3. Check policy documents referenced
4. Consider impact of changing jobs
5. Review P11D for accuracy