What are the costs of employee benefits for your company?
Offering desirable employee benefits is a great way to attract and retain top talent, as well as increase productivity and improve wellbeing among your current staff. Here we look at the costs of employee perks for your company.
Employee perks and benefits are services or products offered by an employer to their employees in addition to their wages. Some employee benefits, like holiday pay and statutory sick leave, are mandatory, but offering more innovative and desirable employee perks is becoming essential in the current employee market to stand out. Yes, it’s time to dream bigger than just discounted gym memberships!
When launching employee perks and benefits as part of an employee reward strategy, there are several things to consider:
- Understanding the costs of employee perks for your company
- Know the statutory employee benefits in the UK
- Balancing perceived value by your team, with wider business goals
- Making the most of free or low cost employee perks like salary sacrifice schemes
What employee benefits are statutory in the UK?
There are certain mandatory employee perks and benefits that all employers must offer their team. These include:
- Pension plans with minimum contribution limits: you’ll need to auto-enroll all team members into an appropriate pension scheme, with the minimum employer contribution currently at 3% of the employee’s earnings.
- Paid holiday: all full-time team members are legally entitled to receive at least 28 days’ paid annual leave a year, including bank holidays.
- Statutory maternity pay and leave: all pregnant team members, and those who have legally adopted a child, are entitled to 52 weeks’ maternity leave and the right to remain employed.
- Statutory paternity pay and leave: if a team member and their partner are having a baby, adopting a child or having a baby through a surrogacy arrangement, they are entitled to up to two weeks’ paternity leave.
- Sick pay: you must provide a minimum level of Statutory Sick Pay, though most employers voluntarily offer contractual sick pay benefits.
How much do mandatory benefits cost?
The cost of employee benefits schemes in the UK vary according to a number of contributing factors:
- Cost of pension contributions
Pension contributions are one of the more costly parts of employee benefits schemes, with the amount you’re required to contribute being determined by your chosen scheme’s rules. If you’re using the scheme for automatic enrolment there are minimum contributions you must pay into your staff pension scheme – currently a total contribution of 8% of ‘qualifying earnings’, with at least 3% employer contribution.
- Cost of maternity pay and leave
All pregnant employees, and those who have legally adopted a child, are entitled to 52 weeks’ maternity leave. Statutory Maternity Leave for eligible employees can be paid for up to 39 weeks, usually as follows: the first 6 weeks at 90% of their average weekly earnings before tax, and the remaining 33 weeks at £156.66 or 90% of their average weekly earnings, whichever is lower.
- Cost of paternity pay
If a team member and their partner are either having a baby, adopting a child or having a baby through a surrogacy arrangement, they are likely eligible for Statutory Paternity Leave. They can choose to take either one week or two consecutive weeks’ leave. Statutory Paternity Pay for eligible employees is either £156.66 a week or 90% of their average weekly earnings, whichever is lower.
- Cost of sick pay
You’ll need to provide a minimum level of Statutory Sick Pay, which is £99.35 a week for up to 28 weeks for full-time team members. You can offer more if you have a company sick pay scheme, but you can’t offer less.
What are considered as supplementary employee perks?
In addition to mandatory benefits, many employers offer supplementary employee perks to their team. These can include:
- Private medical insurance
- Company loans for things like cars or season tickets
- Flexible / hybrid / remote working
- Season ticket loans
- Cycle-to-work schemes
- Childcare vouchers
Do employers pay tax on salary sacrifice schemes?
No, but they need to amend the tax they pay as an employee’s taxable income changes.
Under salary sacrifice schemes, an employee gives up part of their pre-tax salary in return for a non-cash benefit provided by their employer. Salary sacrifice schemes are one of the most popular low cost employee benefits for UK businesses, helping employees save on Income Tax and National Insurance, while helping employers save too. In fact, salary sacrifice schemes can even work out cost-neutral for businesses.
How can the EV salary sacrifice scheme support my organisation’s goals and people?
There are many benefits to offering an electric car salary sacrifice scheme to your team, including:
- Hitting your sustainability goals as an employer. An electric vehicle salary sacrifice scheme helps your business to reduce its carbon footprint, with no cost to the company, i.e. it's an easy win.
- Employees and employers will both save on National Insurance - making it one of the most attractive low cost employee perks - free for employers, with just 2% Benefit in Kind tax (BiK) to be paid by the employee. It’s worth noting this is currently fixed until April 2025, and then will increase by 1% each year until 2028.
- Employees save on Income Tax because the car is paid for out of their gross salary, effectively reducing the amount of their salary they need to pay tax on.
- Retaining and attracting top talent with innovative employee perks like an EV, enabling employees to access the latest EV models, many who often have never had the chance to drive a new car, let alone an EV.
- Offering a scheme that's free to set up and easy to run. With Octopus Electric Vehicles it costs nothing to set up and is easy to manage with our HR portal. Meaning minimal admin. Maximum team happiness. Our package comes with a free home EV charger and installation, and our amazing partnerships with the Octopus Energy renewable energy tariffs and free miles with Electroverse.
Our EV salary sacrifice scheme is great for businesses who want to show their team they care about them and the planet. Free to join and simple to run—find out more about why businesses choose our salary sacrifice scheme.