Why do employee benefits matter in your organisation?

Your people are the biggest factor in any success your business has but they also account for your biggest expenditure each year.[1]

As such, ensuring the happiness and wellbeing of your staff is paramount to your business.

In this insight, we explore the importance of getting your benefits structure right, some of the typical benefits and ways in which they can be optimised.

What is the cost of an employee?

Practically, recruiting an employee is 20-30% of a new hire’s salary[2] and research suggests that the right benefits are a very important factor when deciding on a new role for a potential recruit.[3]

When you find the right person for your organisation, the cost of integration into your business is often very high. As an example, the average cost of an employing earning £27,600 is £62,890 in year one[4], and benefits make up a considerable portion of this.

While this is the case, the cost of getting an employee’s benefits package wrong can be crippling for businesses, with 55% of employees considering moving company for a more competitive benefits package.[5]

Optimising your business’ benefits structure

Providing comprehensive benefits to your employees can help with the recruitment and retention of your most talented members of staff, which is regularly highlighted as a concern for businesses.

When it comes to enhancing a reward package, there are a wide range of employee benefits available, including those which can be taken advantage of immediately and those which are longer term.

Azets’ Employee Benefits team can work with you to help ensure the benefits you put in place inside your business are:

Delivering the maximum value possible to your people
Structured around the needs of your business and your workforce
Delivered within budget and provide value for money
Understood by your employees and communicated effectively

Workplace pension

Since 2012, it has been a mandatory requirement for all employers to provide their employees with a workplace pension, ensuring they are saving for retirement and won’t be solely dependent on the state pension when they retire. Legally, employee and employer must pay a combined 8% of the staff member’s earnings into the pension scheme. The employer must pay at least 3% of this but they can choose to pay more, so can the employee.

There is the option of agreeing to a salary sacrifice scheme or Pension Salary Exchange (PSE), this is where employee and employer agree to reducing the employee’s salary, and the employer pays the difference into the employee's pension.

As the employee is effectively given a lower salary, this reduces the amount of National Insurance contributions (NICs) paid by both, making employees better off in the long term, and creating savings for the employer which can be retained or reinvested.

When it comes to pensions, there is no one size fits all, there are many different pension schemes available. Our specialist team are workplace pension experts and can help review, benchmark, and communicate to your employees the value of your workplace pension.

Group Risk - life cover, critical illness cover, and income protection

There are multiple benefits available to be provided to employees and their families if the worst happens.

Life cover can be put in place to financially support an employees’ dependents should they suddenly pass away whilst under employment with your business. This is often considered a foundational benefit in the UK.
Critical illness cover pays out a lump sum if an employee is diagnosed with an illness specified in their plan and survive for a pre-determined length of time following their diagnosis. The payment can be used to cover unexpected medical bills, to pay off a mortgage, or to cover any other bills that were previously not expected.
Income protection insurance provides cover if an employee finds themselves unable to work due to an illness or injury. This cover provides regular payments to replace part of an employee’s usual income and typically pays between 50% and 75% of an employee’s income if they are unable to work, depending on their policy.

Private medical insurance

When illness and injury happen, private medical insurance can help to alleviate any stress or anxiety an employee may have. There are many plans available, including those which allow an employee to be seen earlier by the NHS, or allow them treatment on a private ward. Private medical insurance is explored further here.

Helping your staff with the cost of living crisis

According to the Office for National Statistics (ONS), around 67% of adults are spending less on non-essentials because of the rising of cost of living.[6] This is having a significant impact on the financial, social and mental wellbeing of people everywhere.

Employers are currently talking to us about ways to provide tax-efficient cost savings to their workforces, and some of the areas we speak to our clients about are:

Cashplans – coverage paid for by the employer on behalf of employees to help employees cover expenses related to everyday healthcare costs, prescription medicines, health screening and therapy treatments.

Perks, rewards and discount schemes – methods of employees making savings on the costs of everyday items such as their weekly shopping.

Other insurance options

Dental, Optical and Audiological insurance – coverage paid for by the employer on behalf of employees to help employees cover expenses related to eye tests, new prescription glasses, contact lenses, routine dental appointments and hearing tests.

Low Emission Vehicles / Cycle to Work schemes

Electric vehicles (EVs) and Cycle to Work schemes are becoming increasingly popular alongside the UK’s Net Zero target. Both of these can deliver significant benefits and tax savings to employees. There is no cost to the employer for their setup, whilst savings on National Insurance are created.

Why do employee benefits matter in your organisation?