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Employee benefits
What employee benefits are, the main types with examples and how to choose a benefits package your team actually values
What are employee benefits?
Employee benefits are the perks and advantages an employee receives from the company on top of their salary: health insurance, paid training, extra days off, gym or meal allowances and more. Together with pay and bonuses, benefits make up an employee's total compensation, where they count as indirect compensation.
Types of employee benefits
| Type | Examples |
|---|---|
| Health | private medical insurance, dental cover, mental health support, wellness programmes |
| Financial | bonuses, pension contributions, low-interest loans, childbirth payments |
| Time and flexibility | extra holiday, a birthday off, flexible hours, remote work |
| Development | courses, conferences, language lessons, books, mentoring |
| Lifestyle | meals at the office, gym allowance, travel support, home office equipment |
| Family | parental support, childcare vouchers, family health cover |
Statutory and voluntary benefits
Some benefits are required by law, such as paid holiday, sick pay and pension auto-enrolment in the UK. Everything above that is a voluntary benefit chosen by the employer. These are what set a company apart in the job market and strengthen its employee value proposition.
Why benefits matter
- Hiring: a strong benefits package helps win candidates when salary offers are similar.
- Retention: benefits people actually use raise employee satisfaction and reduce turnover.
- Health and productivity: health and wellness programmes reduce sick leave and the risk of burnout.
- Employer brand: thoughtful benefits show that the company cares about its people.
How to choose benefits for your team
- Ask your people. A short survey shows what really matters to them.
- Set a budget. Work out the annual cost per person and the tax treatment of each benefit.
- Offer choice. A flexible benefits scheme, where employees pick benefits within an allowance, suits different generations and lifestyles.
- Write clear rules. State who gets which benefits and when, for example after the probationary period.
- Track usage. If nobody uses a benefit, replace it. Regular benefits administration keeps you from paying for what does not work.
Benefits and tax in the UK
In the UK, many benefits are treated as benefits in kind, so their value is taxable for the employee and the employer pays Class 1A National Insurance on it. Some benefits are tax-free, such as employer pension contributions and certain workplace facilities. Salary sacrifice schemes, where employees give up part of their pay in exchange for a benefit like extra pension or a cycle-to-work bike, can reduce tax and National Insurance for both sides.
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