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The Joy of Enterprise Management Incentives
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Employee benefits: the complete list

Tax-efficient employee benefits to help you boost staff retention without breaking the bank.

Rachel Krish
Written by Rachel Krish

Rachel Krish is an Equity Consultant at Vestd.

Page last updated: 23rd November 2023

 

The most generous compensation package in the world isn’t a substitute for a competitive salary or a pay rise in line with inflation (especially in this climate).

But with costs skyrocketing, these ideas to suit different budgets will help you make the most of the money you do have so you can help your team navigate these trying times and reduce turnover along the way.

 

Financial benefits

Benefits that directly put money in your staff’s pockets – or give them access to discounts – could go a long way when it comes to helping them through this cost-of-living crisis.

Here are some ideas to make sure as much of the cash you’re giving your employees as possible ends up in their back pockets rather than the tax man’s. 

A cost of living bonus 

The most direct way to give your employees a helping hand during tough times is to join the likes of HSBC, John Lewis, and Virgin Media and give them a one-off cost of living bonus.

Just be aware: when you give a teammate a cash bonus it’s subject to Income Tax and National Insurance contributions (NICs).

Plus, bonuses bump up your employees’ total income for the year, which could affect their eligibility for certain means-tested benefits, such as Tax Credits or Universal Credit.

Additional pay also impacts those receiving child benefits who are then pushed over the £50k earnings level. They would end up with no extra money from Child Benefit. 

Instead of a cost-of-living bonus, you could spend that money on more tax-efficient benefits.

A salary sacrifice scheme 

Your employees can take advantage of the government’s salary sacrifice scheme to pay for things like childcare and cycling equipment – as well as make pension contributions – from their pre-tax salary.

For example, an employee can buy a new bike or mobile phone through salary to avoid having to pay Income Tax or NICs and those purchases. This can potentially save them hundreds of pounds each year.

Working with your employees to design a salary sacrifice scheme that works for them is a great way to get hundreds more pounds into their pockets each month.

You can work with your employees to design a salary sacrifice scheme that lets them use their pre-tax salary to pay for:

Note: Salary sacrifice could affect employees' earnings used to determine mortgage eligibility.

A company car

You can save your employees a pretty penny by partnering with a third-party car supplier. Your employees will then be able to cover their monthly car lease payments out of their pre-tax salary, meaning they’ll save on income tax and NI contributions.

Childcare/nursery 

Sadly, the government’s childcare voucher scheme is no longer open to new applicants. But, if they joined a childcare voucher scheme on or before 4th October 2018, an employee can still receive up to £55 a week of their pre-tax wages as childcare vouchers.

What you can do is open a nursery on your business’s premises or jointly finance and run a nursery with other local businesses. Employees can then pay for the nursery costs through the salary sacrifice scheme. Given the costs of childcare and how it can prevent parents from returning to work, this can be a very effective benefit for large businesses.

Health screening checks 

You can fund one health-screening assessment or annual health check-up from a company like Bluecrest Wellness or Nuffield Health for each of your team through salary sacrifice. This can save them a pretty penny since private health checks can be pricey.

Select medical treatments 

Your employees can also cover £500 worth of any medical treatments that are recommended by employer-arranged occupational health services each year through their pre-tax salary.

Work-related training

Your teammates can pay for any courses, conferences, or subscriptions that will help them improve a work-related skill through salary sacrifice.

Because HMRC frames “work-related skills” quite loosely, that covers the likes of language lessons for employees that may relocate in their role and leadership training for teammates with eyes on climbing the corporate ladder.

Providing it relates to the business, it also includes participation in charitable or voluntary activities too.

The Cycle to Work scheme

The Cycle to Work scheme enables your employees to get a bike (plus safety gear) for commuting by allowing them to "hire" it through salary sacrifice.

This means they don't pay income tax or national insurance. After the hire period, they can buy the bike at the current market rate.

Essentially, you're helping your employee get up to 42% off a brand-new bike and the gear to go with it.

A mobile phone 

Your employees can also get a new smartphone handset on the same basis as a new bike – “hiring” it from you through 12 months of salary sacrifice payments, then buying it outright when the “hire” period is over.

They can either use their existing SIM or get a SIM-only deal for their new phone, which tends to work out much cheaper than a SIM and handset contract.

Car parking permit 

If your office doesn't have free parking, your teammates can pay for a parking permit through salary sacrifice.

Pension contributions 

Forward-thinking employees who are planning ahead can make additional contributions to their pension through salary sacrifice.

Work from home tax relief 

Don’t have a physical office? Your employees can claim tax relief on whichever is higher between:

  • £6 a week, or

  • The exact amount of extra costs they’ve incurred from business phone calls and gas and electricity for their work area.

So, if a teammate pays the basic tax rate and claims work from home tax relief on £6 a week, they’d get £1.20 (20% of £6) back each week. That adds up to £62.40 a year – certainly, nothing to sniff at! Just beware that your employees can only claim tax relief if they have to work from home – not if they choose to.

Local discounts

You can help your teammates save money - and boost the local economy - by asking a local cafe or lunch spot to provide your employees with a staff discount. That way your people save on their morning coffee and lunch while a local business gets guaranteed custom.

Let staff have a side hustle 

Letting your staff take on freelance work or launch a side project - maybe even together - is a great way to give them the opportunity to earn more cash.

If you choose to give your employees this option, it’s a good idea to set a few ground rules first, such as:

  • Your staff shouldn’t take work away from your business. 

For example, if you run a design agency, you probably don’t want your employees doing freelance design work (and essentially becoming your competitor). However, you might be okay with your staff doing freelance video editing if that’s not a service you offer.

  • Your staff shouldn’t use staff equipment or subscriptions to do freelance work or work on a side project.
  • Your staff shouldn’t do any freelance work or work on a side project on company time.

Putting these ground rules in place early doors (and including them in the employment contract) will help you avoid any awkward conversations about non-compete clauses and Intellectual Property rights down the line.

Free financial education

You were probably well acquainted with Pythagoras' theorem by the time you left school. But you’d have been lucky if you got a single lesson on how to manage a household budget.

So it’s no wonder that so many otherwise competent and intelligent people struggle with their personal finances – especially with so much conflicting information online.

And this is especially true for the 'financephobes' in your team who would rather not think about money. Over one-third of UK adults feel anxious about their finances.

A few simple things that can go a long way to helping your employees navigate the cost-of-living crisis are:

  • Providing them with free access to training around budgeting and financial wellbeing - a money-savvy member of the team might be willing to lead a workshop or you could invite an external finance coach to come in.
  • Taking the time to share resources that will help your employees get to grips with their personal finances - like the free Nous app.
  • Covering the cost of their subscription to a personal budgeting app like YNAB.

An employee share scheme

A strong employee share scheme can help you attract your industry's top talent and incentivise them to stick with you for the long haul.

In fact, 95% of our customers that set up Enterprise Management Incentives (a tax-efficient share option scheme) told us it’s actively helped to improve employee loyalty. 

A share scheme isn’t just for big businesses with dedicated accounting and legal teams, either. Startups and scaleups can set up a retention-boosting employee share scheme with Vestd.

 

Trivial benefits

You can give your employees small tokens of appreciation, free from income tax and national insurance, known as trivial benefits.

A trivial benefit:

  • Costs less than £50
  • Can’t be cash (or a cash voucher)
  • Can’t be a reward for their work or performance
  • Can’t be in the terms of your employee’s contract
  • Can’t be given in lieu of a pay rise (but could make a tax-efficient alternative to a bonus)

Note: company directors can only receive £300 trivial benefits a year in total.

Supermarket vouchers

You could give each employee two £50 vouchers to their local supermarket each month.

Over the course of a year, your employee would end up being £240 better off than if you’d given them the equivalent amount (£1,200) as a bonus – with no extra cost to you.

Birthday gifts 

It's one day a year -  you can afford a birthday treat! Just a small token of goodwill like a gift card on their special day goes a long way. And it counts as a trivial benefit.

Seasonal gifts

Gifts aren't just for birthdays (or Christmas). You can honour any occasion in the calendar. If you do, do so inclusively; consider key dates across the globe and not just Christian holidays.

Annual party

Love them or hate them, Christmas parties are a big deal in the corporate calendar. But to be more inclusive (and avoid astronomical costs) many businesses throw a summer party instead.

Whatever social function you throw, so long as it happens annually and it costs £150 or less per person, it's exempt from tax and NI. Note: if the cost exceeds £150 per person none of the cost is exempt.

 

Health & wellbeing

Long considered to be a luxury, health and wellbeing programmes are now a necessity in the modern workplace. 80% of UK workers feel that wellbeing is equally as important as salary.

Investing in wellbeing is well worth it for the business too. According to Deloitte, the average ROI for every £1 spent on mental health initiatives is £5.

Private medical insurance

Providing your employees with a generous health insurance package can be a huge draw for new hires and a big reason to stick around for your existing teammates.

Just be sure to educate your team on everything they’re entitled to through the scheme you set up, as it can be easy for them to get overwhelmed by all the options - or forget all the costs you’ll cover for them. 

Employee Assistance Programme (EAP)

Go the extra mile by signing up for an EAP, this will give your people private and confidential access to face-to-face, telephone or online counselling and expert support they can tap into for both personal and work-related issues. If they ever do find themselves struggling, this can help them get back to their best.

Free eye tests

Under Health & Safety regulations, employees are entitled to a free eye test if they work on a computer. 

You could take this a step further by paying for or contributing to the cost of glasses, especially if they're needed for work.

Free flu vaccinations

Providing your people with free flu vaccinations is a win-win: they get looked after by their employer, and your staff are less likely to get sick.

Free or discounted gym membership

If you’re a big organisation with your own premises, you can create an on-site gym and let your employees use it for free (or very cheap). For most businesses that’s out of the question, but it can be a great incentive if you’ve got the space to make it work.

For smaller businesses, it can be a great idea to negotiate a corporate discount for your staff at a nearby gym if your people say this is a benefit they’d make use of.

Plus, you can pay for your folk's gym memberships as a Benefit in Kind (BiK), which they can then “make good” on from their net pay. 

Wellness app subscriptions

Another wellbeing benefit that tends to go down well is paying for your employees’ subscription to a meditation app or to attend a relaxation course.

An annual Headspace subscription costs just £49.99 but can arm your folk with the tools and mindsets they need to navigate life’s ups and downs. Some app subscriptions are included under private medical cover, depending on the provider you choose.

Fitness sessions

You could organise regular fitness workouts for your team onsite or online.

Perhaps one of your colleagues is a pilates expert or a former drill sergeant prepared to put the team through their paces! If they're willing, they could host a class. Alternatively, there are many external providers you could pay to lead a session. 

Health & wellbeing workshops

There's more to wellness than physical fitness. You could host a yoga class, sleep workshop, mindfulness activity, mental health awareness session or stress management training. Anything to improve overall wellbeing, positive thinking and resilience. 

 

Work-life balance

There are plenty of benefits that can help you hold on to top talent without directly putting cash in their hands. Introducing these “soft” benefits to your business will go a long way to making you an employer of choice in your industry.

Fair sick pay

Some businesses don’t pay their people sick pay until they’ve been an employee for a certain time. Following in their footsteps is a recipe for presenteeism problems – not to mention sick staff coming in and passing what they have to their colleagues.

Pay your staff sick pay from day one to avoid all these problems. Before transferring an employee to statutory sick pay, which isn't a lot, you could provide an extra five to ten days of sick pay.

Generous holiday allowance

The minimum amount of annual leave a full-time employee is entitled to is 20 days of holiday and eight paid bank holidays.

But 25 days annual leave in addition to bank holidays is pretty standard. Offer your people less than this and you’ll struggle to attract and retain the top talent.

Unlimited holidays

A controversial perk, but we've included it nonetheless. Some colleagues will make the most of unlimited annual leave, while others, despite the freedom, actually take very little time off.

Without prescribing a set number of days, it's easy for employees to get caught up in the daily grind and forget to rest. In some not-so-positive workplaces, employees are reluctant to take time off in case it reflects badly on them.

There's also a risk that some individuals will get carried away and hardly be present at all. Of course, that has a knock-on effect on productivity. So tread with caution.

Birthdays off

It's just one day; let them take the day off. An extra day's holiday for their special day won't hurt your business's bottom line. 

Extra holiday days

Celebrate a colleague with an extra holiday day per year of service. Show your team you mean business with mental health or rest days to prevent burnout. Or support new pet parents with 'pawternity leave' (yes, you read that right).  

Sabbatical

Offering your employees the opportunity to take an unpaid sabbatical (or a paid one after a certain number of years' service) can really set your company apart as an employer of choice.

For example, after five years at the company, HubSpot employees get a four-week paid sabbatical and a cash bonus.

Of course, giving people this option comes at a cost and requires quite a bit of forward planning on your end to make sure you’ve got cover in place for people taking weeks out at a time.

But you’ll be giving your top performers a big incentive to stick around if they’re waiting to qualify for their sabbatical – a benefit they’re not likely to get at many other companies.

Flexible & remote working

The pandemic well and truly opened Pandora's box when it proved that very few people with a desk job need to work from an office.

As a result, flexible working, in terms of hours and location, is now a non-negotiable for many employees – especially millennials and Gen Z.

In fact:

  • 71% of employees open to looking for a job are unhappy with how flexible their company is willing to be.
  • 56% of remote workers would look for a new job if their company demanded they return to the office.
  • 75% of workers say flexibility would be the deciding factor between two jobs with identical pay.

And that's not even taking into account the new Flexible Working Act, which allows employees to make two flexible working requests in any 12-month period which their employer needs to handle within two months.

Simply put: expecting your staff to commute to a physical office and sit glued to a desk from nine to five is a surefire way to tank your retention rates. (Find out what it's like to be a totally remote business).

Plus, giving your people the choice to work from home all or most of the time can save them thousands of pounds in commuting costs each year - essentially giving them a pay rise at no cost to you.

 

Career development

Help your people achieve their career goals!

As soon as an employee feels like they’re going through the motions rather than working towards their next promotion, they’re likely to start thinking about jumping ship.

In fact, 41% of workers say they’ve quit a previous job due to the lack of professional development and progression opportunities.

Learning and development

Carving out a healthy learning and development budget is therefore one of the best uses of the money you’ve set aside for employee benefits.

Plus you don’t have to report work-related training to HMRC or pay tax and National Insurance on it. Some of the best uses of your L&D budget are:

  • Paying (or partly paying) for your teammates to attend conferences.
  • Paying (or partly paying) for your teammates’ professional subscriptions and fees.
  • Paid study leave for employees pursuing professional qualifications.
  • Creating an internal mentoring programme to help your junior staff quickly progress their career (and senior staff give back).

Staff training doesn’t need to blow the bank, either. The likes of LinkedIn, Google and HubSpot offer free (or affordable) training on a wide range of professional topics. You can find courses on all sorts on Udemy and YouTube too. These can be great options for those skills that don’t need to be backed up by professional certifications.

People managers are key to spotting when your employees feel like they’ve hit a glass ceiling in your business.

They should be sure to make asking questions about their reports’ career aspirations a focus during one-to-ones and performance reviews so they can get a sense of whether they’re being met. This will help them find out what their reports’ career goals are so you can provide them with the professional development opportunities and training they’ll need to achieve them.

You should also empower your managers to rethink how duties are distributed among their teams. That way, if your top performers are ready to take on more responsibility, their managers can carve out a path that lets them take that on before they start eyeing their next career move.

Managerial training

One kind of professional development towers above the rest in terms of the return you’ll get on your investment: training your people managers.

The thing is: people quit managers, not jobs. 82% of workers have considered quitting their job because of a bad manager.

And it's hardly a surprise when you consider that one study revealed:

  • 26% of managers have never received any management training.
  • 39% only received management training when they first became a manager.
  • Just 35% of managers receive regular management training.

Worse still, a manager's impact on an employee's mental health is equal to that of a spouse. So imagine if that working relationship isn't a positive one!

Investing in training for your managers has a huge impact on how much your teammates enjoy their jobs - no matter which side of the management equation they’re on.

Make sure your managers have the confidence and the interpersonal skills they need to succeed in their roles. 

And since they play such a big role in your employee retention rates, investing in regular training for your people managers is one of the most effective uses of your company budget there is.

Professional coaching

Coaching provides individuals with personalised guidance and support to enhance their skills and professional development. Identify their strengths, weaknesses and areas for growth.

It's a perk usually reserved for those in the senior leadership team. But if money is no object, investing in a coach or a mentor for rising talent in the business could be the very thing that helps them reach their full potential.

 

Workplace perks

Quirky office perks are out, and meaningful benefits are in. But that doesn't mean you can't make your physical workspaces worth the daily commute.

Free lunches

One thing employees will always appreciate is free food! A recent study revealed that free lunches would tempt one in three Brits to choose one job over another.

If you offer every employee free or subsidised meals onsite or give them vouchers to cover the cost of buying meals onsite, you don't have to pay tax or NI or tell HMRC. 

Free drinks

Specifically tea, coffee and water - so long as everyone in the office can help themselves to these beverages, you don't have to pay tax. Arguably, free refreshments are the very least you should offer your team.

Free merch

Everybody loves free stuff. And if they love your company too, they'll have no problem donning whatever branded swag you give them. Here are a few ideas: mugs, reusable cups, tote bags, pens, t-shirts, and notebooks.

Free toiletries

Stock up on beauty, hygiene and sanitary items. After all, those who took advantage of your Cycle to Work scheme might want to freshen up on arrival at the office.

Scotland provides free access to period products, but England, Wales and Northern Island are yet to catch up. Free sanitary products will be greatly appreciated by those who need them. But don't bother with tampon machines; who carries coins nowadays? 

 

Final word

Want to know one benefit that won't cost you a penny? Baking recognition into your company culture.

A simple "thank you" can go a long way. Sounds obvious, right? But did you know:

  • 79% of people who quit their jobs say a lack of appreciation was a major reason they left.
  • 70% of employees say that motivation and morale would improve “massively” if their manager simply said “thank you” more often.
  • 37% of workers believe the most effective thing their employer can do to cause them to produce great work is to recognise them.

Don’t be fooled by the simplicity of recognising your people on a regular basis. It’s one of the most effective benefits out there when it comes to holding on to your top talent.

Far too many startups think employee benefits begin and end at beers on a Friday and a ping pong table in the breakout room.

Don’t get us wrong: these are nice touches. But they’re no substitute for “actual” benefits like a flexible working policy, paid sick leave, and an employee share scheme.

So, by all means, offer your people free fruit and staff nights out. But make sure these are the cherries on top, not the be-all and end-all of your employee benefits.

 

Disclaimer: the information on this page was correct at the time of writing and may be subject to change. If in any doubt, seek professional advice.

 

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