The cost of employee benefits depends largely on what you want to offer. Employee benefits are actually very broad, with many options under this umbrella. For example, it includes:
With all this to consider, it’s no wonder it’s hard to put a price on employee benefits! It’s even harder when you consider the price will depend on the makeup of your workforce.
While there’s no simple formula to calculate how much employee benefits will cost, we’ve used our experience to give a rough idea. You can read more in this guide below.
The cost of insurance-based employee benefits depends on factors such as the size of your company and how much cover you want.
Group Life Insurance—also known as Death in Service Cover—pays out a lump sum if an employee dies while working for you. They don’t have to die during work hours or in the workplace to be eligible for a payout.
This lump sum is usually a multiple of an employee’s earnings and usually goes to their family. Although it can also be paid to a charity of their choice.
For employers, HMRC usually allows premiums as a tax-deductible business expense.
The cost of group life insurance depends on both your employees’ personal factors and the coverage you want to offer.
Details that affect the cost of group life cover include:
In the table below, we provide group life insurance premiums per employee for different companies. Each company also offers a different benefit with a different cease age.
Compare Group Life Insurance quotes from the top UK insurers ⟶
Employees | Benefit | Cost per Employee | Private Healthcare Provider |
|---|---|---|
3,000 | 1 x salary to age 75 | £3.16 per month | Grocery Delivery Service |
700 | 4 x salary to age 65 / state pension age | £5.18 per month | Education Provider |
340 | 4 x salary to age 75 | £8.82 per month | Solicitors Firm |
185 | 3 x salary to age 75 | £3.45 per month | Knitwear Manufacturer |
80 | 2 x salary to age 65 / state pension age | £9.22 per month | Golf Club |
20 | 2 x salary to age 75 | £5.46 per month | Tourism Board |
10 | 3.5 x salary to state pension age | £15.72 per month | Engineering Firm |
5 | 4 x salary to state pension age | £13.11 per month |
As you’ll see, the cost of group life insurance is relatively low. One company offers a four times salary benefit up to age 75 for less than £10 per month per employee, making it one of the cheapest employee benefits available.
That’s why it’s usually the first insurance benefit our clients introduce.
Group Income Protection — sometimes called Group Sick Pay Insurance — pays a monthly benefit if an employee is off sick. The benefit is a percentage of their gross income.
This is an extension of your company’s sick pay policy. It covers any accident or sickness that stops an employee working for longer than the policy’s deferred period.
HMRC typically deems group income protection premiums as a business expense for employers. However, the insurer pays claims to the company and you distribute it to the employee (as you do their salary). At that point, the income is taxable for the employee.
As with group life, the cost of group income protection depends on your employees’ circumstances and the benefit you want to offer.
The following impact the cost of cover:
The table below features group income protection premiums for companies of various sizes in various industries. Each company also has slightly different policy options that impact the cost of cover.
Compare Group Income Protection quotes from the top UK insurers ⟶
Private Education Provider (300 Employees) | |
|---|---|
Benefit | 75% of salary |
Cease Age | 65 / state pension age |
Deferred Period | 26 weeks |
Payment Period | To cease age | Cost per Employee | £19.41 per month | Education Business (100 Employees) |
Benefit | 75% of earnings |
Cease Age | 65 / state pension age |
Deferred Period | 8 weeks |
Payment Period | 2 years | Cost per Employee | £8.63 per month | Software Developer (55 Employees) |
Benefit |
|
Cease Age | 65 / state pension age |
Deferred Period | 26 weeks |
Payment Period | To cease age | Cost per Employee | £31.31 per month | Computer Equipment Manufacturer (25 Employees) |
Benefit |
|
Cease Age | 65 / state pension age |
Deferred Period | 13 weeks |
Payment Period | To cease age | Cost per Employee | £39.86 per month | Consultancy Firm (10 Employees) |
Benefit | 75% of salary |
Cease Age | 65 / state pension age |
Deferred Period | 13 weeks |
Payment Period | To cease age | Cost per Employee | £59.66 per month |
As you can see the level of cover and the deferred period both have a significant impact on the cost. If you would like to compare quotes specific to your business, please do not hesitate to enquire below.
Group Critical Illness Insurance pays a lump sum if a worker suffers a critical illness. This lump sum is either a multiple of their earnings or a fixed amount of your choice.
The most common claims on group critical illness cover are for cancer, heart attacks, and strokes.
In most cases, group critical illness premiums are a tax-deductible business expense for employers.
As with all employee insurance benefits, the cost depends on staff personal factors and the level of cover.
The following impact the cost of premiums:
The table below offers example group critical illness insurance premiums for companies of various sizes with slightly different policy options.
Compare Group Critical Illness Cover quotes tailored to your company ⟶
Education Provider (100 Employees) | |
|---|---|
Benefit | 2 x earnings in last 12 month |
Coverage | Extended: Core + Additional Illnesses |
Cease Age | 65 / state pension age | Cost per Employee | £10.63 per month | Storage Company (40 Employees) |
Benefit | 1 x annual salary |
Coverage | Standard: Core conditions only |
Cease Age | 65 / state pension age | Cost per Employee | £7.44 per month | Business Services Firm (10 Employees) |
Benefit | 2 x annual salary |
Coverage | Extended: Core + Additional Illnesses |
Cease Age | 65 / state pension age | Cost per Employee | £42.23 per month |
As cancer is a common illness, many employers offer critical illness cover to provide financial support to staff.
If you would like to compare quotes from all the leading UK group critical illness providers don’t hesitate to enquire below.
There are a few types of health and wellbeing employee benefits. The most common are Business Health Insurance and Corporate Health Cash Plans.
However, other options are increasingly appearing to offer popular benefits, including digital GP appointments or access to counselling, as standalone benefits.
Meanwhile, you may also find other health benefits, like virtual GPs and mental health services, as free extras.
Business Health Insurance pays for your employees to have private healthcare. They bypass NHS waiting lists, getting the care they need exactly when they need it.
This employee benefit not only improves staff health and wellbeing, but also has a positive business impact. It provides fast access to treatment, helps reduce time off sick, and increases productivity.
For employers, the insurance costs are typically a business expense not liable for corporation tax.
Premiums vary depending on your company, your employees and the level of cover you want. To price a business health insurance plan, insurers look at:
The examples below are for different sized companies, each wanting business health insurance. Every company has chosen different policy options, which affect the price of cover.
Compare Group Health Insurance quotes for your business here ⟶
Digital Financial Services Firm (110 Employees) | |
|---|---|
Benefits | Full cover for:
|
Excess | £0 |
Underwriting | Medical history disregarded |
Add-Ons | Dental and optical cover | Cost per Employee | £69.69 per month | Management Consultancy (55 Employees) |
Benefits |
|
Excess | £100 |
Underwriting | Full medical underwriting |
Add-Ons |
| Cost per Employee | £57.04 per month | Healthcare Investment Trust (25 Employees) |
Benefits |
|
Excess | £100 |
Underwriting | Moratorium |
Add-Ons | ❌
| Cost per Employee | £79.34 per month | Management Consultancy (10 Employees) |
Benefits | Full cover for:
|
Excess | £0 |
Underwriting | Full medical underwriting |
Add-Ons | ❌
| Cost per Employee | £150.15 per month | Energy Trading Firm (5 Employees) |
Benefits | Full cover for:
|
Excess | £0 |
Underwriting | Moratorium |
Add-Ons | Dental and optical cover | Cost per Employee | £166.52 per month |
The cost of company health insurance could vary significantly depending on your location and your staff demographic.
If you want to understand the specific costs of implementing group health insurance, please enquire below.
A Corporate Health Cash Plan is a more affordable way to provide some health benefits rather than a full business health policy.
Rather than paying for private medical treatment, a health cash plan reimburses money towards everyday medical expenses, such as routine dental and optical care. It might also pay towards other treatments / procedures such as:
As corporate health cash plans aren’t as complicated as group health policies, there are fewer options to consider.
The main factors behind the cost of premiums are the number of workers you have and the level of cover. The level of cover impacts how much reimbursement workers get. Higher cover means greater reimbursements and therefore higher premiums.
HMRC typically allows corporate health cash plan premiums as a business expense.
The premiums in the table below are for companies of different sizes, each looking for a corporate health cash plan. This only offers a rough idea of cover. It could be different for your company.
Compare Corporate Health Cash Plan quotes from the best UK insurers ⟶
Benefits | Cost per Employee | Employees: 125 |
|---|---|
Cash back for treatment such as:
| £4.62 per month | Employees: 55 |
Cash back for treatment such as:
| £6.37 per month | Employees: 10 |
Cash back for treatment such as:
| £6.19 per month |
Since the introduction of auto-enrolment, every business must provide staff with a defined contribution workplace pension, at least. Workplace pensions are mandatory schemes which you must implement for employees who are:
Employees are automatically enrolled in a pension. They can opt out if they wish. Although, staff will be re-enrolled after 3 years if they’ve opted out.
As an employer, your pension contributions are a percentage of employees’ earnings. The cost of a scheme depends on how many staff you have, their earnings, and your contributions.
Under auto-enrolment, employers pay a minimum of 3% of ‘qualifying earnings’.
While this is the absolute maximum employers pay by law, many companies pay higher contributions or offer to match staff contributions up to a set percentage. In a competitive labour market, it helps you stand out.
Nick Nelms
Senior Consultant, Employee Benefits
Qualifying earnings are all earnings between £6,240 and £50,270 you pay an employee. They include:
£50,270 is the cut off for qualifying earnings. You don’t have to pay 3% on anything above this.
For example, if an employee earns £50,270, your contribution as an employer is £1,320.90 per year / £110.08 per month. You calculate this as follows:
Qualifying Earnings |
|---|
£50,270 – £6,240 = £44,030 | Employer Contributions |
£44,030 x 3% = £1,320.90 per year / £110.08 per month |
But if an employee earns more, say £55,000, the 3% employer contribution is still only on earnings between £6,240 and £50,270. Your total contribution under auto-enrolment is therefore £1,320.90 per year per employee.
With the cost of living crisis, more employers are offering employee discounts schemes to help staff through these difficult times.
An employee discount platform gives employees access to a variety of discounts. They can get money back on everything including groceries, clothes, technology, travel and fitness.
For only a few pounds per month an employer can provide a discount scheme. This enables employees to save hundreds of pounds a month.
Below is a list of some of the discounts an employee will have access to through our discount platform.
If you’d like to provide retail discounts to your employees, please don’t hesitate to pop us a call on 02074425880 or email help@drewberry.co.uk.
The cost of training is a business expense if the training is for the purpose of improving your employee’s skills.
You can typically claim tax relief on the cost as long as training benefits the business. The company may also be able to reclaim costs related to that training and development. For example, allowable expenditure in this area includes:
But if the training takes place at an employee’s usual workplace, travel expenses to that location are not allowable.
By upskilling your staff, HMRC lets you deduct the cost of it when calculating your taxable business profits.
The cost of training and development will depend on your industry and the skills your business needs. You can check prices of training and education courses with professional bodies for your industry.
The government once offered Childcare Vouchers schemes to help with employees’ childcare costs.
Employers managed this via salary sacrifice. Employees would then get vouchers for childcare in return for some of their gross salary. Some employers did offer childcare vouchers on top of gross earnings.
But the government stopped childcare vouchers for new entrants in October 4th 2018.
Only parents receiving childcare vouchers on or before this date and who remain with the same employer can still get them. This is only while they and their child meet eligibility criteria.
The government replaced childcare vouchers with tax-free childcare. This has no employer involvement at all. The government manages it via National Savings & Investments. They top up eligible parents’ contributions to a childcare account with the equivalent of basic-rate tax relief.
Since October 2018, the only way for employers to support childcare is to set up and fund their own nursery or childcare facility.
This must meet the same criteria and standards as any other childcare provider. It must also:
The facility doesn’t have to be in the workplace. It could be off-site, but not in a private residence. Obviously, setting up a childcare facility would be costly and something that would only viable for a bigger company with many employees needing childcare.
The government introduced Cycle to Work schemes in 2011 to reduce traffic congestion and encourage physical activity.
Any sized employer can run a cycle to work scheme. It lets you offer staff a bike and relevant safety equipment as part of a consumer hire agreement. To be eligible, the bike must be mainly for commuting and business travel.
Employees pay for this hire from their gross earnings through salary sacrifice. Employers will make National Insurance savings on the proportion of the salary an employee sacrifices.
At no point must employees get an option to buy the bike / safety equipment alongside, or as part of, the initial hire agreement. This changes it to a hire-purchase agreement, which requires different regulatory permissions. It would also not be eligible for tax exemption.
At the end of the scheme, employees can:
There’s a £1,000 cap on the cost of the bike / equipment you can hire to the employees. But if you get the required authorisation from the Financial Conduct Authority (FCA), you can become authorised to hire bikes and safety equipment worth more than £1,000.
With many employee benefits, the cost depends on so many factors that it can be hard to know where to start!
If it’s all getting a bit much, you can always ask us to lend a hand. We provide regulated fee-free advice to businesses from start-ups to large corporates across the UK.
For help and fee-free advice on your employee benefits package, don’t hesitate to get in touch. Just pick up the phone — our team of experts is available on 02074425880. Or, if you prefer, drop us an email at help@drewberry.co.uk.
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.