Nowadays, there’s a lot more to consider than just salary when assessing your overall rewards package. Many employers offer a range of benefits and bonuses as a cost-effective ways to motivate employees on top of their take-home pay.
If you’re sizing up a new job offer, understanding the benefits could help you negotiate the best deal
Even if you’re not planning on securing a new job right now, you can see what you might be missing out on and use it to your advantage when it’s time for the annual performance and pay review.
This is a type of scheme rather than an individual benefit, which helps you adjust your pay and benefits package to suit your specific needs. It may include salary sacrifice options (where deductions paying for benefits are taken from your salary before tax, saving you income tax and national insurance contributions) or allow you to choose cash equivalents.
They’re not to be confused with voluntary benefit schemes, which enable you to choose from a range of benefits that you then pay for out of your own (net) income, usually at discounted prices.
What different types of benefits are there?
The main categories of benefits are pensions, share schemes, ‘group risk’ benefits and health-related benefits.
Pensions: These are a key benefit; by 2012 UK employers must automatically enrol all workers into a pension (or use the National Savings Pension Scheme, also known as personal accounts). A company pension plan should offer you a tax break on contributions. Final salary pensions used to be popular, but now stakeholder, group personal pensions and money purchase schemes are more usual.
Most employers’ schemes will now offer a pensions advisory service so you can discuss in more detail the different options open to you. It’s well worth taking this up in any case but especially so if your scheme allows you to select a different degree of risk you’d like to take with your investment.
Share schemes : With employee share schemes you’re given a genuine stake in the business to motivate you to help improve performance. You may have to stay with the company for a certain period to qualify.
Group risk benefits: These insure you in the event of long-term illness or death. They include life assurance (a type of death-in-service benefit), accident insurance, income protection and critical illness cover.
Health-related benefits : These can include gym membership, healthcare cash plans (where you claim back the cost of medical treatment, including dentist and optician visits), private medical insurance and employee assistance programmes (advice and info on health issues, including stress).
Many jobs, especially sales roles, still offer a company car, traditionally as a cash allowance to lease, purchase or hire a vehicle. It’s worth noting that some employers now use a car or transport allowance as, effectively, a way of topping up salary to attract talented staff, while keeping their basic pay within the defined boundaries of the company’s salary bands.
Increasingly companies are offering help with childcare, either with an onsite crèche or payment vouchers. You might get reward vouchers: old-style luncheon vouchers or ones for use at high street shops.
A more modern take is an online account or reward card, where you can spend the cash at certain outlets. Or you might be offered loans for travel expenses, membership of social clubs or a subsidised canteen or refreshments.
Bonuses normally come in the form of performance-related pay, team incentives and other variable rewards for good work. Traditional piecework and work-measured schemes that reward according to how much work you’ve done are less common now than all-round performance-based schemes.
Others are market-based pay (where pay is linked to what's available outside your company) and competency/skills-based pay that rewards additional skills you learn.
Regular bonus schemes based on individual performance, such as weekly or monthly goals or commission on sales, are normally short-term incentives. They may include previously-agreed payments or rewards like holidays or other gifts. While they act as good motivators, they are also a benefit and shouldn’t be taken for granted, no matter how small – even if it is only a £10 Amazon voucher or a box of biscuits at the end of a good month.
This is linked to individual, group or company performance and includes profit-related pay, gain sharing and straightforward bonuses. Your overall salary might be set using performance evaluations or appraisals, or you might get a performance-related bonus instead of (or as well as) an annual bonus.
It’s important to get a full understanding and mutual agreement from the outset as to the exact structure of any performance-related pay scheme. You’re entitled to ask for indicators of average rewards for staff in recent times – a scheme that promises a bonus of “up to 30% of your basic salary” is all well and good, but it’s not guaranteed; it might be the case that only a select few have ever hit that 30% and the average is more like 10%.