Are Your Employee Benefits Fit For Purpose

It’s no secret that an attractive and flexible employee benefits package is good for employee recruitment, retention and all-round employee wellbeing.

However, whilst administering your employee benefits is usually the domain of your HR team, it’s important to work closely with your legal team to ensure your employee benefit offering is fit for purpose.

Your employee benefits audit

The law and the employment landscape change frequently and a regular review and audit of your benefits package is essential.

The first thing your legal team will do is check that you are meeting the minimum legal requirements of mandatory benefit provision. This generally includes:

• National Minimum Wage
• Employee or occupational pensions
• Healthcare and or NIC
• Statutory Sick Pay – in 2024, £116.75 for up to 28 weeks.
• Holiday Pay – 5.6 weeks of paid annual leave for those who work 5 days a week
• Maternity / Paternity Pay – 52 weeks of leave with 39 weeks of paid maternity leave paid at the rate of 90% of earnings for the first six weeks, and thereafter £184.03 or 90% whichever is the lower for 33 weeks. Up to two consecutive weeks of paternity leave, with Statutory Paternity Pay of either £184.03 a week or 90% of average weekly earnings (whichever is lower).

Many employers will of course offer an enhanced level of these mandatory benefits.

What additional benefits do you offer?

There is a wide variety of additional but non-mandatory benefits you may be offering or want to consider, such as:

• Company car
• Death in service benefits
• Health screening
• Private medical insurance
• Critical illness insurance
• Childcare and dependent care benefits

In addition to these more standard non-mandatory benefits, there is a raft of more bespoke style benefits which include anything from pet leave, duvet days, skills development, lunch and refreshment provision, share and stock options, electric vehicles and bike schemes, gym membership, flexible working and relocation packages.

Your audit should include a review of what you’re offering and whether it still meets the needs of your workforce or the workforce you wish to attract. Is there a good take up of what’s on offer? Do the benefits you offer provide good value for money for you as an employer? Are the benefits achieving what you need or want them to achieve such as good employee retention and lower absence rates?

Choose the right benefits for your business

If you’re now considering a change on benefits, it’s important to identify what you’re trying to achieve with your benefits package, both from an employment perspective but also a financial one.

That gives you the framework within which to start planning the best approach, taking into account employee views and feedback, costs, legal and tax implications and the management of any package/s.

You should also take into account your other business aims, ambitions and values. By way of simple example, if you’re trying to operate more sustainably, a cycle-to-work scheme may be more suitable than offering a large company car.

In particular, you may need legal advice when it comes to:

• Share and stock options
• HMRC-recognised life assurance and medical fee schemes and tax-efficient delivery of benefits
• Advice about the use of trusts, whether that’s setting up or managing trusts

Other considerations are whether you want to offer a fixed package, a choice of fixed packages or a more flexible approach.

More specific areas where you will need to take legal advice are:

Employment contracts

You need to review what your employment contracts say about the provision of benefits. Consider whether you want to retain the right to withdraw a benefit by specifying that it is discretionary. This is not always possible to achieve as employees may be able to claim it’s a contractual entitlement if they have enjoyed a benefit consistently over a period of time.

Similarly, if you do wish to withdraw a benefit, albeit for good reason, you will need to follow the correct procedures for changing the employment contract. Or be at risk of breach of contract. You will also need to take into account the impact of any changes on any third-party agreements and the tax implications of withdrawing a benefit.

Equal pay and discrimination

If you have made changes to your employee benefit package over time, it is important to keep a close eye on the overall effects of this amongst employees.

For example, a particular and generous benefit recently introduced may mean that you have inadvertently created a situation of unequal pay between colleagues. Or if you offer your female staff additional maternity leave but not male staff in a same-sex relationship who wish to claim similar maternity leave, this may amount to discrimination.

Communication

Communication often gets overlooked but is critical to the success of employee benefits. You should review all your communications whether that’s with HR and your recruitment team or your employees. The purpose and value of benefit/s should be clearly explained to employees both during recruitment and onboarding and at annual reviews, as well as in employee handbooks and platforms. This in turn may necessitate a review and or update of your employee collateral.

This isn’t just about ensuring take-up of benefits but helps embed your commitment to employee wellbeing. The importance and potential of employee benefits should not be underestimated but it is absolutely essential that they are implemented and maintained in both a strategic and effective manner.

If you would like advice and assistance in relation to any of the above matters, please get in touch with Nighat.

The legal content provided by RSW Law Limited is for information purposes only and should not be relied on in any specific case without legal or other professional advice.

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