Your employment benefits package covers more than your salary
In today's competitive job market, employee benefits have become an essential part of the total compensation package offered by employers. While some benefits are mandatory, like paid holiday, others aren't. However, benefits and rewards are increasingly critical factors in attracting and retaining top talent and should be considered as part of your job hunt if you're looking for job satisfaction.
In this article, we explore the importance of employee benefits, how employee benefits have evolved in the UK over the years, and examples of employee benefits to examine when reviewing vacancies, particularly in a post-pandemic world.
What are employee benefits?
Employee benefits are the rewards and perks offered to employees in addition to their salary. Some benefits are required due to legal and employment obligations, such as paid holiday or a pension. Other perks may be offered to attract, recruit, and retain employees, such as medical cover, gym memberships, or learning and development opportunities.
Some companies may offer tax and employee share schemes too, like Share Incentive Plans (SIPs) or Save As You Earn (SAYE), which have tax advantages.
Often employee benefits are tied to a company's mission and values. Prevailing financial, legal, and social backgrounds play a part in shaping employee benefits and practices too. Employee benefits packages may depend on whether an employee is full- or part-time; often, part-time employees receive a reduced package.
Why are employee benefits important?
Employee benefit schemes are a key way that employers can attract the right talent and keep employees engaged and retained. A salary is rarely enough to keep employees invested, especially as staff sacrifice more than their time for the nine-to-five.
Research by Glassdoor suggests that 63% of job seekers pay attention to the benefits a company offers when looking for a new position. If anything, this proves that job hunting is a two-way street. An employer may be interviewing a range of candidates for a role to evaluate which is the right fit, but a candidate will vet multiple employers to see which will benefit them the most too. Both employers and job seekers require a competitive edge, and employee benefits are one way that companies can get ahead.
While beer fridges and pool tables might have been an important perk in the 2010s, in a post-pandemic world, financial assistance, enhanced sick leave, flexible working, and childcare provisions are likely to be the top of the list for both prospective and current employees.
Since it can cost up to 400% of an employee's annual salary to replace a high-level employee who leaves their role, an employer could pay a hefty price if they don't put staff requirements first and adjust their employee benefits packages in line with the times.
The history of employee benefits and rewards
The evolution of employee benefits and rewards in the UK is an interesting one. When employee benefits first came into existence, the policy was often called “paternalism,” as firms believed they had a duty of care to their employees, in the same way a parent might.
While occupational pensions existed before World War II, in 1948 a basic state pension was introduced and came into effect under the National Insurance Act 1946. It was funded by employees' national insurance (NI) contributions. During this time, unemployment insurance, sick pay, and the National Health Service (NHS) were introduced.
But panic arose over state pension expenditure and the increase in the cost of living. Therefore, the government created an earnings-related state pension scheme in the 1950s which offered tax incentives for employers with occupational pension schemes. This meant that employees who opted out of the state scheme could reduce their NI contributions.
In March 1974, inflation spiked to nearly 13%. Unemployment sharply rose and employers couldn't afford pay rises to keep up with the soaring cost of living during this time. This caused companies to develop generous benefits provisions, particularly for senior staff.
Employee benefits tightened in the 1980s, but remained a continued offering as it was difficult to revoke or reduce perks once they were established.
Today, employee benefits remain, but there has been a widespread shift. Some employers take an individualistic approach to rewards, where more risk (and potential reward) and costs go to the employees. For example, pension schemes have altered from defined benefit (DB) schemes to defined contribution (DC) plans, which place investment risk on the employee. Voluntary benefits have also pivoted from fixed to flexible, like paid training and development, wellness apps, and mortgage advice.
17 examples of employee benefits that job hunters should consider
Employee benefit types can be broken down into four different categories:
Benefits at work
Below, you'll find a range of work perks which could be on the table when looking for a new job. And notice, there's a lot more to consider than “a Friday beer trolley,” “office parties,” or “free snacks.”
Benefits at work
Common employee benefits within the workplace include:
Hybrid working/remote working: In a post-pandemic world, many people are looking for remote working options or a hybrid virtual model, as office workers realise that they can fulfil their role requirements from home.
Flexible hours: You may work an average of seven hours per day, but who says you have to work through in one sitting? Many companies that trust their employees offer flexible hours, such as a start time window, the 9/80 work schedule, condensed hours, or a four-day workweek.
Paid training and development: Companies offer learning and development opportunities to help staff to learn new skills, gain knowledge, improve their job performance, and advance their careers. Development programmes can take many forms, including online course subscriptions like LinkedIn Learning, a funded training course with a certificate, conferences, on-the-job training, and mentoring.
Company transport and allowances: Employees in jobs that involve travelling can be provided with company cars, vans, or other forms of personal transport. This is common if the role requires a vehicle, such as delivery or sales, or if an employee is in a high-level corporate position. Companies can have agreements with dealerships and they may pay a cash allowance to assist with the purchase. Alternatively, compensation may be awarded via a mileage allowance if staff are using their own vehicles.
Healthcare and risk benefits
Common employee benefits within healthcare include:
Life assurance/death in service: Life assurance, also known as a death-in-service benefit, is a type of insurance cover that provides a tax-free lump sum payment to the employee's designated beneficiaries in the event of their death.
Critical illness cover: Critical illness cover is a type of insurance policy that can help with financial issues when the employee is diagnosed with a serious illness from a set list. The insurer will pay out a lump sum to the employee, which can be used to cover household expenses and other costs associated with the illness.
Employee assistance programmes (EAPs): EAPs are services designed to support employees' physical, mental, and emotional wellbeing, particularly if there are personal problems that are affecting performance at work. EAPs are usually free and the service typically includes a confidential assessment, short-term counselling, and referral services for employees and their immediate families.
Medical insurance: Many large companies offer private medical insurance. The level of cover will depend on the policy, but the employer will often have options for upgrading the cover or extending it to family members for a fee. Basic cover can include online doctor appointments, annual contributions for private prescriptions, health checks and screenings, and therapy and counselling sessions.
Dental and vision cover: Companies tend to have separate policies for dental and vision cover. Treatments can include eye tests, glasses, dental check-ups, and hygienist appointments. Like all insurance plans, the level of coverage will depend on the policy. Some employers may issue vouchers to cover the spending too.
Common employee benefits associated with finances include:
Pensions: Pensions are common due to legal requirements. Eligible workers are automatically enrolled into a qualifying pension scheme, to which both the employer and employee contribute. It's important that prospective and current employees review the pension and retirement options in detail, as it's typically the most valuable employee benefit.
Employee share schemes: Businesses may offer an HMRC-approved share scheme, which involves rewarding employees with company equity. There are several types of tax and employee share schemes, which are listed on gov.uk. The most common are SIPs and SAYE. Company share schemes are a financial reward that ties employees to the organisation's mission and future and incentivises talented staff to stay at the company.
Discounts or cashback: Certain employee benefits schemes include cashback on everyday spendings, like your weekly supermarket shop, and discounts on gift cards or treats like holidays.
Common employee benefits associated with lifestyle include:
Cycle to work: Cycle-to-work schemes are a hugely popular tax-free benefit. The benefit usually incorporates a discount or salary sacrifice on the purchase of a bike to encourage staff to cycle to work, which comes with a whole host of benefits for the body and the environment.
Gym membership: The benefits of physical activity on the body and mind are numerous, so offering free or discounted gym memberships is a way that employers can encourage staff to be more active during the day.
Annual leave purchases: Annual leave purchase schemes allow staff to buy extra days off while spreading the salary deductions throughout the year. This can make all the difference if wedding season has hit you hard or if you're planning an extra long summer holiday.
Family leave: While there are statutory rates of maternity and paternity pay, some employers offer dedicated family leave with full pay. For example, while statutory paternity in the UK is two weeks, an employer may choose to offer four weeks of full pay. There will likely be eligibility requirements, such as being employed by the company for one year.
Volunteering and donation match: Many employers are dedicated to supporting charities and nonprofits. As part of the employee benefits package, staff may have a set number of days that they can volunteer for a charity of their choice. Plus, if employees make any donations, the company may match them to make the contribution go further.
There is far more to employee benefits than meets the eye and they must be carefully considered as part of your job search process. If you've found a role that offers the package you're looking for, submit your CV for a free review to ensure it captures the attention of your prospective employer.