Employee benefits: how to create an employee benefits package
Employee benefits have become increasingly important for organisations looking to attract and retain talent. Discover how to create a benefits package that stands out in a competitive landscape.
Employee benefits are an essential part of a competitive compensation package, with our research showing that 44% of workers are willing to go without a pay rise to secure their most desired benefit. As a result, a benefits package for employees that connects with jobseeker needs and expectations can help employers gain an edge in the hiring landscape.
In this guide, we cover the key aspects of employee benefits and look at how employers can create a benefits package that aligns with candidate expectations and appeals to top talent.
What are employee benefits?
So, what are employee benefits? In simple terms:
Employee benefits encompass the tangible and intangible incentives employers provide that supplement basic salaries
An employee benefits package therefore forms an employer’s compensation offering to staff and prospective candidates outside of their salary. While a benefits package might include components employers are legally required to offer, such as paid holidays, sick pay and pension contributions, it is additional, value-added components that help organisations stand out from the crowd.
Why do employee benefits matter?
An attractive benefits package can be the deciding factor when candidates consider a job offer, particularly for those with offers from multiple employers. As a result, the key advantages of offering enticing benefit packages for employers include:
- Talent attraction: An effective benefits package helps employers attract top-tier candidates by demonstrating that their organisation is keeping pace with candidate expectations. It also contributes to a well-rounded employer brand that differentiates employers in a more cost-effective manner than just offering higher salaries.
- Improved job satisfaction: Workers value an organisation that shows an understanding of the importance of employee happiness by taking active steps to support their employers, both in their work and personal lives. In response, staff feel more motivated, which can result in higher productivity.
- Enhanced employee retention: As high living costs put pressure on workers, we’ve found that 30% will look for a job elsewhere if their employer is unable to provide a pay rise in line with their expectations. However, for employers unable to offer higher salaries, comprehensive benefit packages can help to motivate and retain valuable workers in the long term.
Types of employee benefits
When it comes to building a comprehensive employee benefits package, there are various types of benefits employers can offer to entice jobseekers to apply for roles. Let’s take a look at the four main categories of benefits employers can choose from.
Health and wellbeing
Benefits focused on the physical and mental wellbeing of staff can help support the overall wellbeing of the work workforce and enable employers to meet their duty of care. Remember, employee performance is more likely to remain steady if teams have access to the resources they need to thrive.
Health and wellbeing benefits include any area that supports the physical or mental health of employees, such as:
- Subsidised gym memberships
- Dental insurance
- Eye care vouchers
Of the health benefits that employers can offer, private medical insurance is one of the most popular. In fact, our research found that a third of workers would be willing to skip a pay in order to obtain access to a benefit package that includes insurance of this kind.
Financial
Performance bonuses, linked either to individuals or organisational goals, are perhaps the most well-known financial perks offered by employers, providing employees with the potential for a higher salary when a pay rise isn’t an option.
However, financial employee benefits don’t always have to be reward-based. They can also come in the form of financial support or discount schemes. For example, our research shows that pension contributions above what’s legally required are currently the second most attractive benefits to candidates.
Furthermore, data from the Organization for Economic Cooperation and Development (OECD) shows that UK workers face the highest childcare costs as a percentage of the average wage, while our own research found that 85% of parents face financial challenges from balancing childcare responsibilities with work. Given these factors, financial assistance for childcare costs has become a desirable form of support among working parents, and one employers are increasingly beginning to offer.
Educational
Offering educational benefits provides employers with an opportunity to demonstrate to their workforce their investment in their future career prospects, simultaneously filling skills gaps to help drive improved performance.
For example, organisations can position their learning and development strategy as a component of the benefits offered to employees by:
- Providing access to online learning providers
- Setting training budgets per employee
- Starting mentorship schemes
Work-life balance
With two-thirds of UK workers valuing work-life balance above an increase in pay, benefit schemes that make this a reality have become increasingly popular.
There are a wide variety of benefits employers can offer to support the work-life balance of their workforce, including:
- Allowing employers to work from home with hybrid and remote working policies
- Additional paid time off based on length of employment
Perks of this nature also provide employers with an opportunity to support working parents and benefit from the skills and experience they bring to the workplace, with 91% saying that family-friendly practices, such as extended paid parental leave, are key when deciding on a job offer.
Most popular employee benefits
With candidate and jobseeker priorities continually evolving, employers looking to attract and retain top talent should be aware of the benefits most in demand across the workforce and tailor their offerings accordingly. Let’s dive into the top 5 most attractive benefits we uncovered in our research.
Flexible hours
The impact of the pandemic is still being felt in the workplace, not least in where and when people work. Favoured by 35% of UK workers, flexible working hours give employees the flexibility to start work earlier or later depending on what suits them best. For example, some might want to avoid the morning commute into the office, while others want to take time out during the day for the school run.
Pension
While every employer in the UK is required to provide a workplace pension as part of its benefits package, potential increases to the state pension age are making more and more employees consider their retirement plans.
With 27% of candidates attracted to roles that come with pension contributions above the legal requirement, employers that offer this can demonstrate their commitment to employee wellbeing and stand out to top talent.
Bonuses
According to our findings, bonuses are sought after by 26% of UK workers. By providing bonus opportunities, employers allow employees to increase their overall compensation without offering pay rises across the board.
Bonuses can come in various forms, both contractual and discretionary, the most common of which include:
- Sales commission
- Rewards for individual performance
- Organisational performance-related incentives
Extra paid leave
In addition to flexible working arrangements, extra annual leave is another great way employers can support employee demand for improved work-life balance, and is something over a quarter of candidates want as part of a benefits package.
In the UK, almost all people who are classed as workers are legally entitled to 28 days paid annual leave, the equivalent of 5.6 weeks of holiday. However, by choosing to offer higher allowances to staff, or increasing employee entitlement in line with their length of service, employers can boost loyalty and retention across the workforce.
Private health insurance
According to our findings, around 24% of UK workers see private health insurance as an attractive benefit, allowing them to access high-quality care without long waiting lists. This can cover:
- Appointments
- Surgery
- Routine medical care
Employers can opt to pay health care insurance premiums or make their schemes voluntary, inviting employees to pay their premiums, with group premiums often costing less than individual policies.
How to build a competitive benefits package
When it comes to putting together an attractive benefits package that appeals to top talent and optimises the retention of existing members of staff, there are several best practices that employers should keep in mind. Below we’ve outlined some of the key steps to consider when formulating an effective benefits package for employees.
Define the benefits structure and level of personalisation
At the outset, employees need to determine if they want to offer all of their employees a standard benefits package, or if they will provide different offerings to their workforce based on job level, location or length of service.
Alternatively, employees can structure their package without a blanket approach, allowing staff to opt into benefits as and when they need them or unlock extra perks as a reward for loyalty. This approach can diversify a benefit package and allow staff to tailor their package to their individual needs.
Determine employee benefits guidelines
Any core package will need to include legally required benefits, while opt-in or value-added perks can include a variety of options such as salary sacrifice schemes, discounts for streaming services, or wellness apps, to name a few.
Guidelines may include:
- Eligibility criteria: Employers should establish the boundaries for budget purposes. For instance, a C-Suite level employee can only access a company car if they live a certain number of miles from their nearest office.
- Enrolment process: Determine which benefits staff automatically enrolled to, which are voluntary, and which have set times of the year when employees can sign up. For example, a new starter might be given one month to confirm their employee pension contribution for the year.
- External factors: Outline if and how external factors will trigger changes to benefit packages. This could include one-off cash payments to support employees faced with high inflation and rising living costs.
Communicate the details to staff
Research suggests that almost one in five (18%) of UK workers feel that there isn’t enough information readily available to them about to benefits package on offer from their employer. As a result, employers can look to increase the uptake of the benefits they offer by implementing a comprehensive program of communication.
This could include:
- A central online hub or intranet where employees can search for and view benefits
- Employee profiles where staff can see both the benefits they already have access to and their opt-in options
- Proactive reminders of timeframes related to benefits, for example the cut-off point when staff can buy and sell annual leave
- HR-led sessions whenever a new benefit is introduced to increase awareness
- FAQ documents related to benefits and clear terms and conditions
Track take-up and invite feedback
At times there can be a mismatch between what an employer thinks their staff want from a benefits package and the reality. As a result, it can be useful to track the uptake of different benefits and, if this is low, consider the reasons why, such as:
- Staff not being aware of what’s available
- Overly long and complex opt-in processes
- Packages not matching employee expectations
Gathering information on benefit usage may require gathering data from third parties or exploring how many purchases have been made using an organisation’s unique voucher code. Furthermore, surveying staff to see what they want more or less of and what could make their working and personal lives better can help employers feel confident that their benefits packages add real value.