Employee Benefits: Employer's Guide to Non-Statutory Benefits
Offering employee benefits beyond statutory requirements. Common benefits, tax considerations, and building a competitive package.
Last updated: 29 January 2025
Benefits beyond the statutory minimum help attract and retain talent. Understanding your options helps you build a competitive package.
Statutory vs Discretionary
What You Must Provide
Legal minimums:
- Workplace pension (auto-enrolment)
- 5.6 weeks paid holiday
- Statutory sick pay (SSP)
- Statutory maternity/paternity pay
- National minimum wage
- Rest breaks
What You Can Choose
Everything else is optional:
- Enhanced pension
- Extra holiday
- Health insurance
- Life insurance
- Enhanced family leave
- Training budget
- And more
Common Benefits
Financial Benefits
Pension beyond minimum:
- Higher employer contributions
- Matching arrangements
- Choice of schemes
Life insurance:
- Death in service cover
- Typically 2-4x salary
- Often tax-efficient
Income protection:
- Long-term sick cover
- Replaces salary if can't work
- Can be employer or employee paid
Bonuses:
- Performance related
- Company performance
- Discretionary
Share schemes:
- Share options
- Share incentive plans
- Tax advantages available
Health Benefits
Private medical insurance:
- Access to private healthcare
- Covers treatment costs
- Can include family
Health cash plans:
- Reimburse routine costs
- Dental, optical, physio
- Lower cost than full insurance
Employee assistance programmes:
- Confidential counselling
- Mental health support
- Financial/legal advice
Gym membership:
- Subsidised or paid
- On-site facilities
- Or membership contribution
Time Off Benefits
Extra annual leave:
- Above statutory minimum
- Purchased additional leave
- Length of service increases
Enhanced sick pay:
- Company sick pay scheme
- Above SSP
- Often linked to service
Enhanced family leave:
- Above statutory maternity
- Enhanced paternity
- Shared parental enhancements
Sabbaticals:
- Extended leave
- For long service
- Career breaks
Working Arrangement Benefits
Flexible working:
- Flexitime
- Remote/hybrid
- Compressed hours
Home working support:
- Equipment provision
- Allowances
- Technology
Reduced hours options:
- Part-time availability
- Job share
- Term-time working
Development Benefits
Training budget:
- Individual allocation
- Conference attendance
- Course fees
Professional subscriptions:
- Membership fees paid
- Chartership support
- Continuous development
Study leave:
- Time off for exams
- Study days
- Qualification support
Mentoring/coaching:
- Access to mentors
- External coaching
- Career development
Lifestyle Benefits
Company car/allowance:
- Company car scheme
- Cash alternative
- EV options
Cycle to work:
- Salary sacrifice scheme
- Tax efficient
- Promotes wellbeing
Season ticket loans:
- Interest free
- Repaid through salary
- Helps commuters
Employee discounts:
- Staff discounts on products
- Discount platforms
- Retail partnerships
Childcare support:
- Vouchers (closed to new joiners)
- Workplace nursery
- Emergency childcare
Tax Considerations
Benefits in Kind (BiK)
Most benefits are taxable:
- Reported on P11D
- Employee pays income tax
- Employer pays Class 1A NI
Tax-Free Benefits
Some benefits are exempt:
- Pension contributions (within limits)
- Cycle to work (salary sacrifice)
- Workplace parking
- Mobile phones (one per employee)
- Staff parties (£150 limit)
- Trivial benefits (under £50)
Salary Sacrifice
Employee gives up salary for benefit:
- Saves employer and employee NI
- Must be genuine reduction
- Affects pension calculations
- Check minimum wage compliance
Reporting
Annual requirements:
- P11D forms for benefits
- Class 1A NI by July 22
- Or payroll benefits (real-time)
Building a Benefits Package
Understand Your Workforce
Different demographics value different things:
- Young professionals: development, flexibility
- Parents: family benefits, flexibility
- Older workers: pension, health
- All: salary, work-life balance
Research Competitors
What do similar employers offer?
- Industry benchmarks
- Local market
- Size comparisons
- Recruitment difficulties
Budget Considerations
Costs to consider:
- Direct benefit cost
- Administration
- Tax implications
- Insurance premiums
- Opportunity cost
Prioritisation
If budget limited:
- Enhanced pension contributions
- Extra holiday
- Flexible working
- Enhanced family leave
- Often most valued
Communication
Benefits Statements
Annual total reward statements:
- Show full value
- Include pension contributions
- Insurance values
- Holiday value
- Total picture
Onboarding
Ensure new starters know:
- What's available
- How to access
- Eligibility periods
- Enrolment deadlines
Ongoing Communication
Regular reminders:
- Benefits available
- Underused benefits
- Seasonal relevance
- Updates and changes
Administration
Eligibility
Define clearly:
- When benefits start
- Service requirements
- Role restrictions
- Part-time calculations
Documentation
Clear policies for:
- What's offered
- How it works
- Eligibility
- Procedures
Contracts
Include in contracts:
- Core benefits
- Discretionary nature (where applicable)
- Right to vary
Providers
If using benefit providers:
- Regular reviews
- Service levels
- Cost comparisons
- Employee feedback
Common Packages by Size
Small Businesses (1-20)
Typical:
- Statutory pension
- 25 days holiday
- Flexible working
- Training support
- Company events
Cost-effective additions:
- Health cash plan
- Extra holiday
- Professional subscriptions
Medium Businesses (20-100)
Typical additions:
- Enhanced pension (5%+)
- Private medical option
- Death in service
- Enhanced family leave
- EAP
Larger Businesses (100+)
Often include:
- Comprehensive private medical
- Income protection
- Car scheme
- Significant pension
- Share schemes
- Multiple flex options
Flexible Benefits
What They Are
Employees choose benefits:
- Within overall allowance
- Trade benefits
- Buy/sell holiday
- Personalise package
Benefits of Flexibility
- Employees value choice
- Meets diverse needs
- Can be cost-neutral
- Increased engagement
Implementation
Consider:
- Administration complexity
- Provider capability
- Communication needs
- Core vs flex elements
Reviewing Benefits
Regular Review
Annually consider:
- Employee feedback
- Take-up rates
- Market changes
- Cost changes
- New options
Employee Surveys
Ask about:
- What they value
- What's missing
- Satisfaction levels
- Suggestions
Benchmarking
Compare to:
- Industry norms
- Local competitors
- Recruitment challenges
- Exit interview feedback
Checklist
Benefits Audit
- List all current benefits
- Identify statutory vs discretionary
- Calculate total cost
- Review take-up rates
- Check tax compliance
- Assess employee awareness
Package Development
- Understand workforce demographics
- Research competitor offerings
- Set budget parameters
- Identify priorities
- Consider administration
- Plan communication
Administration
- Clear eligibility rules
- Documentation complete
- Provider contracts reviewed
- P11D reporting correct
- Enrolment processes working
- Regular reviews scheduled
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Frequently Asked Questions
- What employee benefits do I have to provide by law?
- Statutory minimums include: workplace pension (auto-enrolment), 5.6 weeks paid holiday, SSP, maternity/paternity pay if eligible, and minimum wage. Everything else - like health insurance, enhanced sick pay, or extra holidays - is optional but can help attract and retain staff.
- What are the most valued employee benefits?
- Beyond salary, employees consistently value: flexible working, pension contributions above minimum, health insurance/cash plans, extra annual leave, enhanced sick pay, and professional development. Work-life balance benefits are increasingly important post-pandemic.
- What are the tax implications of employee benefits?
- Most benefits are taxable as Benefits in Kind (BiK). You report them on P11D forms. Some benefits are tax-free (e.g., pension contributions up to limits, cycle to work, childcare vouchers for existing users). The employee pays income tax on taxable benefits; you pay Class 1A NI.