Setting up employee benefits: a beginner’s guide

What are employee benefits?

Employee benefits are products, services and resources employers give their employees.

Your package could encompass anything from childcare vouchers/resources and flexible working to training and development opportunities and healthy living benefits e.g. subsidised gym memberships.

Insurance Policies

Some of the most common benefits are insurances. You pay premiums for your workers, who are the ultimate recipients of any payout. Such benefits include:

• Death in Service Insurance, which provides a tax-free lump sum equivalent to a multiple of an employee’s earnings should they pass away while under contract with your business
• Company Health Insurance, which pays for your workers to access to private medical treatment
• Group Income Protection, a form of enhanced sick pay that works with your sick pay policy to provide a proportion of a worker’s earnings each month if they’re medically unfit to work
• Group Critical Illness Cover, which pays out a tax-free lump sum equivalent to a multiple of a worker’s earnings if they develop a critical illness such as cancer, heart attack or stroke.

Why choose employee benefits?

While some employee benefits come at a cost to the business, in many cases these costs are outweighed by the benefits.

For example, employee benefits can:

• Improve employee retention, lowering staff turnover and recruitment costs
• Make it easier to attract top talent by levelling the playing field with competitors
• Reduce employee stress and associated absenteeism
• Increase employee goodwill towards the business
• Boost productivity among your workforce
• Help boost workers’ physical and mental health.

Can I get employee benefits as a small business?

Yes. Employee benefits aren’t just for big corporations. Plenty of smaller firms offer benefits packages, including new companies and startups.

There are a variety of reasons behind this. Many small companies feel a keen sense of responsibility to their workers and want to make sure everyone is taken care of.

Also, in a small business, it’s particularly important to keep employees engaged and well. Smaller companies tend to find it harder to spread out the workload of an employee on sick leave, for example, because they may not have sufficient people power.

However, perhaps the biggest factor is that buying cover through your business, even if you’re small, is tax-efficient. For this reason, a Death in Service policy is much more cost-effective than if your workers had to buy a personal policy. This is partly because premiums are typically a tax-deductible business expense for you as an employer.

Similarly, you also have the option to buy Health Insurance through your limited company. Group Health policies typically require at least two workers — a barrier to entry for solo company directors. However, directors in this position can buy a policy through their business. Due to the potential tax savings on premiums, this may work out cheaper than paying for a policy personally.

How do I set up employee benefits?

This depends on the benefits you’re looking to implement. One of the most popular benefits is flexible working. This includes letting workers set their own hours outside the traditional 9-5 providing they meet their contractual hours, or giving them the opportunity to work from home.

Not only does this come at very little cost for employers, but it’s also incredibly easy to set up with a simple update of your HR policies.

For more complex options, however, you may want to think about outside help from an adviser. This is especially true with insurances, whether they’re for a group of employees or just for yourself. This is because there are important tax rules to consider and multiple potential providers to choose from.

Getting independent advice

An independent adviser can make setting up employee benefits far easier than attempting to do it yourself.

Step 1: Establish your needs

• What benefits are you thinking of offering?
• How many employees are you looking to insure?
• What level of cover do you want to provide?

Step 2: Get quotes from across the market

Once they understand the above factors, an independent adviser will search for quotes from every major insurance provider so you, your workers and your business get the best deal.

Step 3: Discussing taxation

• Are premiums a tax-deductible business expense?
• Will your employees have to pay tax on the premiums or the benefit?
• Do you need to set up any kind of employer trust?

Step 4:  Dotting the ‘I’s and crossing the ‘T’s

Your adviser takes care of all the paperwork, including arranging any trust necessary, so your new policy can go live.

Not only does advice make the process easier, it also offers an extra layer of security over setting up employee benefits by yourself. Using an adviser means they are responsible for setting up the policy and ensuring it’s suitable. When you go it alone, you’re solely responsible should anything be unsuitable or incorrect.

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