When did you last discuss how your employee benefits package addresses and supports your overall business strategy and goals?

Historically, employee benefits were regarded as a moral duty of the good employer, as reflected by the altruistic approach of the Quaker owned companies of the 19th century. However, in the past few years employers have started to look very differently at these issues.

Looking pragmatically at offering a diverse range of benefits - as a start up business or assessing and amending your current offering to employees for established businesses - needs very careful consideration. You must ask;

What is the main purpose of you offering benefits?

Is it to:

• Recruit the calibre of staff you seek?
• Maintain competitive advantage over your peer group?
• Retain your best people?
• Motivate and engage the entire workforce?
• Maintain the moral high ground?

Or is it a combination of all these issues?

Do your employee benefits help you to achieve your business goals?

There appears to have been a shift towards a ‘total reward’ philosophy amongst employers to offer employee benefits that address their employee’s lifestyle and work ethic.  Rather than being of a purely monetary value many benefits now aim to motivate them with elements such as flexi-time, child-care vouchers, on-site nurseries, subsidised canteens/restaurants, gym membership, concierge services, or cycle-to-work schemes, some of which can be achieved by salary sacrifice provisions on the employee’s side.

These salary sacrifice provisions can benefit both parties, as the employee saves on income tax and National Insurance Contributions (NIC’s), whilst the employer also saves on the NIC’s.

A caveat to this route is that care must be taken not to jeopardise your employee’s potential entitlement to working tax credits, other state benefits, or impact on the national minimum wage you may, or may not, be offering.

Given that the cost of employee benefits can account for over 40% of your total employment costs, the selection of certain benefits can have a major impact on your bottom line and, more importantly your achievement of corporate goals in the medium and long term.

Government intervention in a number of these areas must also be taken into careful consideration.  Over recent years we have seen a dramatic increase in Government policy changes in these areas. This is especially the case in regard to pensions – potentially the most costly element of employee benefits to businesses of all sizes. These policy debates appear to be on-going and escalating, but employees see this one benefit of great importance to them.

The list is a long one of potential benefits, each with differing appeal to your employees:

• Occupational pension
• Occupational sick pay
• Private medical cover (for employee or plus family members)
• Dental Cover
• Critical illness insurance
• Life Assurance (Death in Service)

It is a minefield out there, with many pitfalls that need consideration.  An example is Death in Service benefit.  For high flyers and executives this is very appealing, but if the payout is substantial, it is added to the employee’s Life Time Pension Allowance that could easily take their pension pot over the £1.8M pension allowance, with subsequent major tax implications for their bereaved family.

Given that you have agreed the benefit package that you will be offering, you need to carefully consider how you are going to launch the package and communicate the message to your staff.  They will be looking to see how they will individually benefit from them, how will it motivate them and how flexible they are.

For your part, as an employer you need to ask, how will these benefits impact your overall HR policy, and how do they support your overall business strategy and goals?

It is important to take professional advice before making any decision relating to your personal finances.

NOTHING CONTAINED IN THE ARTICLE SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE. THE VALUE OF INVESTMENTS IS NOT GUARANTEED AND WILL FLUCTUATE. YOU MAY GET BACK LESS THAN YOU INVEST. PLEASE NOTE THAT THERE MAY BE VARIATIONS FOR THOSE LIVING IN SCOTLAND AND NORTHERN IRELAND.