Employee Benefits – Are they worth it?

The new world experience of having to reduce costs and tighten our belts is no different for employers, as it is for household economies.

One area which we have experienced employers aiming to reduce costs is to look at the existing employee benefits package they have. Employers are now sensibly ‘shopping around’ for the most competitive terms, whilst still providing their staff with benefits to ensure that they remain a content and productive workforce, importantly feeling (and being) cared for by their employer. 

Annual Review

I wholeheartedly agree with this review process (usually annually), aiming to ensure that the benefits (and providers) are reviewed regularly to ensure that costs are kept to a minimum, whilst still providing valuable terms. I have commented further on this at the end of this blog. 

Legislative change

I believe that one of the key reasons why employers are starting to investigate the range, and providers, of their employee benefits is due to the legislative changes taking place around workplace pensions. We have noted these changes, known as Auto-Enrolment, many times in previous blogs / articles. These changes mean every eligible jobholder will be automatically enrolled into a workplace pension over the next few years. Unless the individual “opts-out”, the employee, the employer and the government (in the form of tax relief) will all contribute into the individuals’ retirement fund once enrolled. 

Often legislation changes around taxation can have both a positive and a negative impact on benefits packages.

Taxation

Depending on the structure and type of employee benefit, the cost could be treated as a legitimate business expense and therefore tax deductible for corporation tax. Alternatively, the benefit provided could be classified as a benefit-in-kind (such as Private Medical Insurance/PMI) and taxable the hands of the employee. 

These are important points and you may want to check these with your company Accountant before proceeding. 

Cost Benefit of Employee Retainer

This change in pension legislation has prompted many employers to revisit the scope of the employee benefits they offer. Examples might be life cover, private medical insurance, travel insurance, income protection, dental or eye care and obviously pensions. This is only a small range of benefits which are at the disposal of an employer to offer their workforce. Staff attrition and high turnover rates can be a large business cost and significant time burden. If an employer can retain a satisfied and productive workforce through the offering of the appropriate employee benefits, then, in our communications with the businesses we work with, cost benefits usually follow. 

Professional Advice

Whenever employee benefits are considered for introduction, or amendment, careful consideration should be taken for many reasons.

The most obvious, and easily calculable, is cost both on the employer and the employee. A more difficult issue to contemplate could be the political impact within the workforce if an unfair action is taken, e.g. the removal / reduction of a particular benefit. There are many instances where a contractual right to a particular benefit is included in an Employment contract. 

I believe that a carefully designed, planned and implemented employee benefits package can be a useful method in attracting and retaining a quality workforce, whilst allowing a business to grow. I recommend professional independent financial advice should be used to assist the employer through the structure and agreed implementation of an appropriate employee benefits package to meet their individual requirements and budget. 

No individual advice has been provided during the course of this blog. Employee Benefits should be planned for carefully and if you would like to receive individual advice on this subject, then please contact the team at Chapters Financial Limited on 01483 578800.

We look forward to working with businesses and partnerships across the South East & London.

Simon Hewitt BSc (Hons) Dip PFS
Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Services Authority, number 402899. The Financial Services Authority does not regulate Tax advice.