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28 Apr 2023
by Nicky Stuart

Why the UK is a leader when it comes to benefits packages

With growing demands from workers, companies have a greater choice than ever of benefits they can offer to help keep talent

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According to job site Indeed, the UK is the third most attractive place to work in Europe because of factors such as pay, flexibility and employee benefits.

The emerging workforce in the UK demands more from employers – according to Benefex’s Great Expectations research, 70% of UK employees say their expectations of their employer have increased in the last year.

With labour shortages leaving many vacancies unfilled, companies are vying for candidates’ attention. As a result, employees can demand benefits packages that are personalised and flexible, delivered via intuitive benefits technology. Employee benefits and the employee experience are becoming a major differentiator for companies that want to attract, engage and retain the best talent.

Range of benefits

The employee benefits available in the UK are wide-ranging. The UK has more options than many other countries for employers to choose from when putting together an employee benefits package.

And UK employees value a high degree of choice and flexibility in benefits – 87% of UK employees say that benefits improve their employee experience.

Pension is the only compulsory benefit in the UK, but many employers choose to bolster support for their employees with a range of flexible benefits to support physical, financial, and emotional wellbeing.

Some offer core company-funded benefits. Others provide a range of voluntary benefits to choose from, using salary sacrifice where possible to take advantage of tax and National Insurance (NI) savings. Most employers provide a combination of these options.                        

Pension enrolement

Employers are legally required to automatically enrol employees into a pension scheme and, depending on an employee’s contract type, the employer must also contribute to the pension fund. Employees can opt out of their pension scheme or flex their contributions.

An increasing number of employers are offering financial education to help employees make informed decisions about pensions, particularly during the current cost-of-living crisis when employees may be considering reducing or even stopping their contributions.

Government schemes

Keen to reduce nationwide vehicle emissions, the UK Government introduced Cycle to Work and reduced the amount of tax payable for Ultra Low Emission Vehicles (ULEV) obtained via car salary sacrifice schemes.

  • Cycle to Work

Previously capped at £1,000, employers can choose their own spending limits. Employees purchase a voucher to spend on a bike and/or accessories to use for their commute to work. The cost is deducted straight from their pay over equal monthly instalments. Budgets are increasing, particularly as the demand for electric bikes grows. The Cycle to Work scheme also encourages employees to be more active.

  • ULEV car salary sacrifice

Employees lease a ULEV and spread the cost over monthly instalments. The cost covers maintenance, road tax, insurance and even EV charging points. This is a popular benefit as employees can make considerable tax and NI savings. Employees can also select a non-ULEV; however, these are not eligible for tax savings.

  • Childcare vouchers

Closed to new entrants, the scheme lets employees purchase vouchers via salary sacrifice. These are accepted by registered childcare providers nationwide and are exempt from tax and NI. For parents who weren’t members of the scheme when it was closed, the government offers a tax-free childcare initiative that tops up qualifying parents’ contributions by 20%.

Core benefits and flexibility

To differentiate their employee benefits programme, many businesses provide a strong core offering with a level of flexibility. Typically, the employer funds a base level cover for key benefits and employees can upgrade cover or add family.

Private medical insurance (PMI) and life assurance are two of the most common company-funded benefits.

Healthcare

Although UK citizens receive free healthcare at the point of need through the NHS, waiting lists can be long. PMI can be used to supplement NHS care and improve access, with several providers offering a free 24-hour GP service.

Where employers offer PMI, many provide it to all employees, but in some sectors it is more common to offer it to a specific group. Employees have the option to flex their cover to include their partner and children, or can choose to opt out.

Health cash plans let members claim back the cost of everyday health expenses – such as dentistry, eyecare, osteopathy, or physiotherapy – at both private and NHS facilities. This benefit is typically employee funded, but it’s becoming more common for employers to fund a core level of cover and offer employees the option to fund the addition of any dependants.

Financial support and resources

Education tools and discount schemes are hugely popular. Designed to help employees save on everything from everyday essentials to technology and travel, schemes include reloadable cards, exclusive discounts and reward points.

Tools such as SaveSmart are invaluable to employees who want to better understand and manage their finances. Covering, for example, budgeting, debt, saving and mortgages, employees can grow their confidence with money, at a time convenient to them. In a climate of uncertainty, financial tools are particularly popular with employees.

Download Benefex’s Going global with Benefits guide here.

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