In the third of our series on opportunities for employers in a post-COVID 19 world, we look at additional employee benefits. Are the benefits that you currently provide appreciated? Could you provide additional benefits at little to no extra cost and effort or could you structure the way you provide certain benefits differently to deliver cost savings, or greater appreciation for your efforts?
Additional benefits: appreciated or wasted?
Have you ever thought about whether the additional benefits that you provide are valued by your employees? Private healthcare, life insurance, subsidised gym memberships or additional holiday, if it is not being used or appreciated you are not getting the return on your investment.
If you are looking to make some savings on your employee spend, or provide additional benefits to your employees without increasing your spend too much, now is a great time to look at the benefits you provide and whether they could be structured in a different way. And there could be non-financial benefits for you as an employer too. Some examples include:
- Buying or selling annual leave
Employees can increase their annual leave entitlement by buying additional days (subject to a limit) or sell them back to the employer (subject to statutory minimums being met). If an employee buys additional leave, the employer’s salary bill is reduced and there are National Insurance contribution savings. With work-life balance almost consistently in the top 2 reasons of why employees start a new job, or stay at their job, the opportunity to offer a work-life balance perk and save some cash at the same time must be a no-brainer?
- Cycle to work scheme
Usually offered on a salary-sacrifice basis, this enables the loan of a new bicycle and accessories to employees cycling to work, with the option for them to take ownership of the bike for a fee at the end of the loan period. Employees get access to bikes and accessories at discounted prices. There are National Insurance contribution savings for the employer as well as the benefits of healthier and more productive employees.
According to the Cycle to work Alliance (2019), the scheme has now involved over 40,000 employers across the country and has contributed to help more than 1.6 million commuters to cycle to work.
- Salary sacrifice for employee pension contributions
Operating employee pension contributions via salary sacrifice can save you and your employees National Insurance contributions. Take care with how you structure and communicate salary sacrifice. Salary sacrifice effectively requires the employee to ‘exchange’ part of their salary in return for an employer pension contribution equivalent to the value of the salary ‘given up’ which is paid into the pension scheme together with the employer’s standard pension contribution. As less salary is being paid to the employee, the National Insurance contributions paid by the employee and the employer will be reduced accordingly.
- Operating a flexible benefits program
Operating a flexible benefits program encourages employee ownership of benefits’ decisions, offering them flexibility to determine their benefits spend according to their needs. It can also promote responsible use of the benefits provided and provide more transparency on use of benefits and associated costs.
The employer determines the level of ‘core’ employee benefits (which might include the minimum pension contributions required by auto-enrolment, a minimum level of life assurance and a minimum number of days’ holiday). Employees are then given a flex allowance to spend on additional coverage, for example additional days holiday, additional life assurance, private medical or subsidised dental insurance. Flexible benefit programs have been shown to boost recruitment and retention rates. If structured and communicated well flexible benefit programs can ensure that you are not ‘wasting’ your money on benefits that are not appreciated or required. For example, employees with no dependents may forego the high levels of life assurance that you are currently providing in return for additional days holidays and some employees may not require higher levels of pension contributions if they have planned for their retirement income elsewhere. It can also open up the opportunity for you to provide enhanced benefits to your employees (for example partner or family private medical cover) at the employee’s cost – thus improving awareness of the benefits you provide and offering more ‘bang for your buck’.
These are just a few of the examples of additional benefits that can be provided cost effectively by employers – there are options available to suit all types of businesses. Whilst there are many advantages to offering more flexibility in your employee benefits program: increased employee engagement, improved recruitment and retention rates; a healthier workforce, there can be direct cost savings. Although to implement a full flexible benefits program will require financial investment at the outset, this can often be funded by National Insurance contribution savings available through purchase of additional holiday or operating salary sacrifice for employee pension contributions. Go Pensions have experience of selecting flexible benefits’ providers. If you are interested in reviewing your package of employee benefits and how it is delivered, give us a call on 020 8213 5860.