Employee benefits: a simple guide
Employee benefits are often part of an employee’s total reward package. They are offered (and often paid for) by employers. It’s a broad spectrum, potentially including anything from basic benefits and legal requirements such as paid holiday and pensions all the way to insurance policies covering employees, company cars or wellbeing support.
Employee benefits matter to most employees. They play a big part in the desire to join the company (recruitment) and stay at their current employer (retention). Indeed, Unum UK’s autumn 2022 survey of UK workers1 found nearly a fifth of employees (equivalent to 5.4 million people)2 expected to look for a job with better benefits or a higher salary in 2023.
Meanwhile, a separate Unum UK survey of the country’s SME workers3 found:
Clearly, the right mix of benefits that meet your employees’ needs is important. Here’s a quick overview of some of the most common types available.
Most Group Risk products are typically sold via an adviser or broker to ensure your business gets the best cover for you.
There are three main Group Risk products on the market today:
At its core, GIP provides a financial benefit to an insured employee if they’re off work for a specified period due to illness or injury. The benefit is equivalent to a percentage of the employee’s salary before their absence. In 2021, 2.9 million people were insured by their employer’s GIP policy.
Many providers also offer additional services alongside GIP, such as absence management and wellbeing support. Absence management helps not only employees signed off work sick but also those at work but struggling and at risk of absence. If and when the time is right, it can also help employees and employers put measures in place to assist an employee’s return to work after absence at their own pace.
If you’re thinking about GIP for your business, our article covers 10 questions you may want to ask when considering a GIP provider.Find out more
Group Life (also called Death in Service Insurance) is the most common Group Risk product by insured employees. In 2021, 10.3 million employees were covered by a Group Life policy. It pays out a benefit to the family of an employee who dies equivalent to either a multiple of salary (typically up to 12x annual salary) or a fixed level of cover for all employees.
Companies generally set up a trust or join their insurer’s master trust when arranging Group Life Insurance. This ensures that, in most cases, whoever the employee chooses to receive the benefit receives it free from tax (up to the dead employee’s available pension lifetime allowance).
In the Spring 2023 Budget, the Chancellor abolished the pension lifetime allowance charge from April 6th 2023. HMRC has since confirmed that it will approach affected beneficiaries who have received benefits in excess of the LTA following the end of the 2023/24 tax year. This will be in line with the existing process but with a marginal rate charge instead of the LTA charge.Find out more
Group Critical Illness provides an employee and usually their children with a tax-free lump sum if they develop a critical illness listed in the policy and survive 14 days after diagnosis. Illnesses include cancer, heart attacks and strokes. Most policies give employees the option of adding their spouse/partner at extra cost.
In 2021, Group Critical Illness Insurance covered almost 700,000 employees.Find out more
Plans vary, but typically there are multiple tiers of cover for employees to choose from. Often, they can also add their dependants at additional cost. The policy then pays out a set amount per policy year per type of treatment when the employee submits a receipt for dentist and optician visits/treatments.
For Dental, this might involve check-ups, treatments such as fillings and crowns or hygienist visits. For Optical, a policy might cover the cost of visiting an optician as well as paying towards prescription eyewear such as glasses or contact lenses.
Health and wellbeing support comes in various forms. Often, Group Risk products such as GIP offer employees access to at least some health and wellbeing services. This might be an app that connects insured employees with medical services such as a 24/7 remote GP, mental health support, physiotherapy and more.
An example of this is Help@hand,4 our health and wellbeing app, which is available to employees covered by a Unum Group Risk policy.
Depending on the policy and provider you choose, other health and wellbeing support may be available.
For instance, Unum’s GIP offers a suite of services from our in-house Claims & Rehabilitation Team. These are designed to ensure employees can stay healthy and well at work where possible, as well as supporting those signed off sick to return to work where possible at their own pace.
Employee Assistance Programmes (EAPs) vary from provider to provider in terms of the support available. Some include 24/7 helplines for emotional and practical support, while others might provide legal and financial guidance.
EAPs also typically have a variety of resources to support general employee wellbeing. Meanwhile, employers may get access to advice surrounding employment law.
As well as the above employee benefits, many of which are insurance-based or associated with insurance policies, other benefits are available such as those below.
Under a traditional company car scheme, a company car is a vehicle an employer provides to an employee for business and private use (private use includes commuting). As the employer pays for the company car on top of an employee’s wages, employees pay tax on the car’s value.
The tax due depends on factors such as the cost of the car, the type of fuel it uses and its carbon dioxide equivalent (CO2e) emissions/whether it’s a zero emissions vehicle (e.g. an electric car). Speak to your finance team or accountant for more information on company car tax.
Other types of car scheme involve salary sacrifice. Here, an employer rolls out an initiative through which employees can opt to exchange part of their gross (pre-tax) salary each month to cover the cost of a brand-new vehicle. There is a tax and National Insurance saving as a result.
Unum UK offers an electric vehicle salary sacrifice scheme to our staff as part of our efforts to be a Responsible Business, making it more affordable for our employees to purchase an electric, zero emissions vehicle.
Cycle to work schemes are another example of salary sacrifice. They form a key part of the government’s ambition to make walking and cycling the natural choice for shorter journeys as a way to reduce pollution/congestion and lower NHS costs from ill health related to physical inactivity.
The employee gives up a portion of their pre-tax salary in exchange for a benefit from their employer. In the case of Unum’s cycle to work scheme, the benefit is a bicycle voucher worth up to £3,000 to spend on a bicycle and/or accessories, such as safety equipment. There is a tax and National Insurance saving as a result.
The best employee benefits for your business and the ones your employees will value most depend on your specific needs as a company, as well as factors such as your industry and size.
Flexibility with benefits is important — for instance, benefits that might suit someone 55–64 and approaching retirement may not work for a 20-something new graduate. Letting employees pick and choose from a range of benefits can therefore make your benefits strategy more inclusive.
As for the benefits employees value most, one benefit not discussed above, but often easier to implement, is remote/hybrid working. This remains incredibly popular post-pandemic — especially among younger workers. In our autumn 2022 survey, more than half (54%) of employees aged 18–34 said they’d likely quit if their employer stopped offering remote/hybrid working.
In a Unum survey,1 we found workers expected the following issues to negatively impact their productivity at work during 2023:
This would suggest that the best benefits for employees in 2023 — as well as their employers given supporting with these concerns could positively impact productivity — will likely be those that help manage employees’ emotional, physical and financial health and wellbeing.
1 Unum commissioned Censuswide survey 30th September 2022 – 4th October 2022 amongst a nationally representative sample of 3,005 employed people
2 Estimate based on 28.3 million employed workers in the 3 months to August 2022, Office for National Statistics
3 Unum commissioned Opinium research 28th September – 1st October 2021 amongst a nationally representative sample of 2,000 UK adults
4 Help@hand is provided to Unum Group customers by Square Health. It offers access to services designed to manage the health and wellbeing of employees and their families. Help@hand is entirely separate from any Unum insurance policy. Help@hand is not part of the insurance contract, is provided by Unum for no additional cost to its customers, and Unum can withdraw or change the service in the future. Help@hand is available to UK residents only. Unum offers access to the Help@hand services provided by third parties. Square Health Limited, registered in England and Wales Number 07054181. Crown House, William Street, Windsor SL4 1AT.
5 Unum commissioned Opinium survey 28th September 2021 – 1st October 2021 amongst a nationally representative sample of 2,000 UK adults