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How to create an employee benefits package your people love

30th November 2023
Joe Brennan
Content and Communications Lead
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Sometimes, the details make a big difference. For decades, organisations have understood that the benefits a company offers its employees make a tangible difference to talent attraction and retention.

But which employee benefits packages are the most enticing? And do different kinds of employee benefit suit different companies? In this article we run through why benefits matter, which benefits tend to be offered in different types of company, and how to optimise employee engagement with a compensation and benefits strategy that works.

What are employee benefits?

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Why do companies offer employee benefits?

Companies offer many different types of employee benefits, and they do so for a number of reasons. Of course, benefits contribute to talent attraction and employee retention: competitive employee benefits packages help companies bring great people on board and keep them satisfied in their roles. High employee attrition brings with it steep associated costs to the business. As well as absorbing bandwidth in the HR, people and talent functions, the teams suffering from employee departures lose capacity.

Many benefits save employees money, of course. But additionally, benefits help to engage employees and make people happy. When people feel cared for, they are more likely to be productive at work. A comprehensive employee benefits package can therefore have significant business impact, with financial benefits for all parties.

Then, some benefits are designed to better align people with the company's culture. Certain companies might choose to focus benefits on extra time off for well-being purposes, while others might emphasise learning and development. But companies can design employee benefits packages to reflect the most important priorities and professional qualities they want their employees to embody.

Employee benefits examples: which are the UK's most popular benefits?

Let's run through some of the most commonly issued employee benefits in the UK. We'll start with the legally required benefits, which every employee must receive from their employer.

Mandatory benefits

Which employee benefits are compulsory for employers to offer employees?

  • Workplace pension: it is mandatory for employers to offer retirement benefits, namely giving full-time and part-time staff the opportunity to participate in a workplace pension scheme, as long as they are aged over 22 and earn more than £10,000 per year. The minimum contribution is 8% of a worker's income, of which a minimum of 3% must be paid by the employer.
  • Holiday pay: full-time employees are entitled to 5.6 weeks of paid holiday per year. Some employers include bank holidays in this entitlement.
  • Sick pay: for employees that are too ill to work, employers must pay them a minimum of £109.40 per week for up to 28 weeks. Some companies offer occupational sick pay schemes that are more generous than this minimum: check with your employer if you're unsure about the terms of your sick leave.
  • Paid parental leave (including adoption): the UK offers birthing parents up to 52 weeks maternity leave, of which 39 weeks will be paid. Pay for the first six weeks of leave is 90% of average weekly earnings, and minimum pay for the 33 weeks thereafter is £172.48 or 90% of average weekly earnings, whichever is lower. For fathers or non-birthing parents, statutory paternity leave is two weeks.

Optional benefits

Optional or voluntary benefits are not compulsory for employers to offer, but many companies seek to stand out from the crowd by offering attractive employee benefits.

Medical benefits

Although healthcare is free for most people in the UK, many UK employers offer private medical insurance as a benefit to employees. Different packages might include health insurance, dental and vision insurance.

Offering these types of healthcare packages have company benefits, too: employers can deduct employee healthcare expenses from their tax returns.

Insurance

Employers often provide a range of insurance benefits to employees, ranging from group income protection insurance policies to disability and life insurance.

Flexible working arrangements

In the aftermath of the Covid pandemic, many employers have redesigned their employee benefits packages to place more emphasis on flexible working. Flexible working benefits might include the following:

  • Support for co-working spaces: if an employee is the only person working in their home country, or if they are based far away from the company HQ, employers might fund a co-working space for that employee.
  • Flexible hours: any employee with more than 26 weeks' service in England, Scotland or Wales can make a statutory request to adopt flexible working hours. This might mean working irregular hours outside the 'standard' 9-5 schedule, or moving from full-time to part-time work.
  • The four-day workweek: more companies are beginning to trial shorter working weeks, after successful trials in different markets.

Stock options and other forms of equity

Equity is a critical component of the reward and incentive structure in a growing number of companies. And employees with equity thrive in their roles: Ledgy data indicates that 84% of employees with equity say it makes a tangible difference to their motivation at work.

So equity is at the centre of many employee benefits offerings.

  • Employee Stock Ownership Plan (ESOPs): ESOPs grant employees the right to purchase a specific number of company shares at a predetermined price (the exercise or strike price) at a future date.
  • Phantom Stock Options Plan (PSOPs) / Virtual Stock Options Plan (VSOPs): A phantom or virtual plan gives employees the economic benefit of stock ownership without giving them actual company stock. It follows the share price, but doesn't give you the same rights as holding a share. Phantom shares are mostly found in European markets, especially Germany.
  • Company Share Option Plan (CSOPs): CSOPs give employees the option to purchase shares in their employing company at a predetermined price (the exercise or strike price) in the future. CSOPs are similar to ESOPs, but they different in the tax treatment they offer to employees
  • Warrants: Like options, warrants can be exercised and then convert into actual company stock. The difference is that sometimes they have a purchase price, meaning you have to pay to even get a warrant and then later on pay the strike price attached to it to get the real shares.
  • Restricted Stock Units (RSUs): RSUs are actual shares of stock granted to employees, but they are subject to a vesting schedule and other conditions that may vary (these might be related to performance or tenure, for example). Employees don't have to exercise RSUs: once vested, employees receive the shares.
  • Growth Shares: Also known as ‘hurdle shares’, in a growth share scheme, the company share price has to clear a hurdle set by the board before employees can see any value from their shares.
  • Enterprise Management Incentive Scheme (EMI): EMI plans provide a way for employees to acquire shares at a discounted price to market value. EMIs are only designed for relatively early-stage companies with fewer than 250 employees, but the tax due on EMI options when they're cashed in can be as low as 10%.
  • Share Incentive Plans (SIPs): SIPs are commonly used by UK companies as a form of tax-advantaged employee ownership. Employees can contribute a portion of their pre-tax salary to the SIP. These contributions are used to purchase shares in the company. In addition to employee contributions, some SIPs also allow the company to make contributions on behalf of employees. SIPs may have eligibility criteria, such as a minimum period of service before employees can participate fully in the plan.
  • PAYE and SAYE: The SAYE (Save as you Earn) equity plan is designed to encourage employees to save money over a fixed period, with the option to use those savings to purchase shares in the company at a discounted price at the end of the savings period. Employees participating in a SAYE plan make regular contributions from their pre-tax salary to a savings account, with deductions made directly from the employee's salary. PAYE (pay as you earn) equity refer to programs where employees participate in an equity plan, such as a share incentive plan or stock option plan, and any tax liability associated with the equity awards is managed through the PAYE tax withholding system.

Ledgy is able to handle many different types of equity plan, enabling companies to run different plans side by side. Below is a screenshot showing an example company-level equity plan, with a number of different plans in action:

Enhanced leave

There is broad support among employers for offering leave allowances that go beyond statutory minimums. For instance, a Chartered Institute of Personnel and Development survey found that around half of employers (46%) supporting an extension to statutory paternity leave.

Other forms of enhanced leave include paid days off for volunteering and charity work; in cases of bereavement; and even birthday leave.

Work-life balance and wellbeing benefits

There are a subset of employee benefits explicitly focused on work-life balance

  • In-office entertainment: sometimes, people want to have a fulfilling and entertaining break from work even when they're working from the office. In some companies, especially tech startups, the presence of table football or ping pong tables have become memes in themselves. But companies may
  • Drinks and snacks: some of the big tech companies, like Facebook and Google, provide unlimited free food for employees from multiple on-site cafés and restaurants. But many different companies, from small to large, provide snacks and drinks in the office for employees as one way to ensure people are well-nourished and ready to do great work.
  • Cycle to work schemes: it's possible for employers to lend employees money to purchase bicycles through a salary sacrifice scheme, meaning employees don't have to make income tax or national insurance contributions on the money used to purchase the bike.
  • Mental health support: more employers are putting into place policies that support their employees' mental health. Policies might come in the form of mental health days where employees can care for themselves, or access to in-person and online therapists. Some employers set up an Employee Assistance Programme, which is a service designed to help with a variety of different well-being issues.
  • Physical health benefits: companies may also offer free or subsidised gym memberships to employees, as healthy employees

Learning and development

Many employers now create learning and development budgets that fund training courses and certifications that will boost employees' professional credentials. Employers may also fund employees who wish to attend relevant conferences and workshops.

What about people who aren't employees?

There are several kinds of benefit available even to people who aren't directly employed by the business. Companies are able to grant equity to advisors or consultants, for example, rewarding different types of stakeholder for their contributions to the company.

How to create a benefits package that suits your company and employee needs

An effective employee benefits scheme can motivate employees, improving physical and mental health while helping people feel engaged and rewarded.

Ledgy offers a way for companies to crystallise the advantages of employee equity for team members. Equity is central to a forward-thinking benefits package – just click through to see how Ledgy levels up employee engagement strategies.

Employee benefits are any services, goods, discounts or other perks offered to employees by companies. Some benefits are optional extras that companies elect to give their staff, while other benefits are statutory, meaning they're mandatory for companies to offer.
Joe is Ledgy’s Content and Communications Lead. He has over a decade's experience working in marketing and communications for scaling tech companies and global professional services firms.

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