
The cost of employee benefits depends largely on the package you want to offer. The term employee benefits is actually very broad, with multiple 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 made even more difficult by the fact that, often, the price of various benefits depends on the makeup of your workforce.
While there’s no simple formula to calculate how much employee benefits will cost your business, we’ve used our experience to pull together a rough idea. You can read more in this guide below.
With insurance benefits, the cost of premiums comes down to various factors such as the size of your company and how much cover you want to offer.
Group Life Insurance — also known as Death in Service Cover — pays out a lump sum if an employee passes away 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 personal factors about your employees and the level of coverage you want your scheme 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 companies of various different sizes in various different industries. 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 has a benefit of four times salary 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. This benefit is a percentage of their gross income.
It’s essentially an extension of your company’s sick pay policy, covering any accident or sickness that stops an employee working for longer than the policy’s deferred period.
HMRC typically deems Group Income Protection premiums a business expense for employers. However, the insurer pays claims to the company and you distribute it to the employee (typically as you do their salary). At that point, the income is taxable for the employee.
As with Group Life Insurance, the cost of Group Income Protection depends both on personal factors about your employees and the benefit you want to offer.
The following points 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 Insurance premiums are a tax-deductible business expense for employers.
As with all employee insurance benefits, Group Critical Illness Insurance premiums depend on both personal factors about your staff and the level of cover you offer.
The following points 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 |
With suffering cancer being so common many employers turn to group critical illness insurance to provide the necessary financial support for their staff during such difficult times.
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 employee health and wellbeing benefits. The two most common are Business Health Insurance and Corporate Health Cash plans.
However, other options are increasingly appearing offering popular benefits, including digital GP appointments or access to counselling, as standalone benefits.
Meanwhile, you may also find some health and wellbeing benefits, including virtual GP appointments and mental health support, as free additional benefits with employee insurance policies such as Group Life Insurance.
Business Health Insurance pays for your employees to have private medical treatment. They bypass NHS waiting lists, getting the care they need exactly when they need it.
Not only does this improve employees’ health and wellbeing, but it can also have a positive impact on the business. For example, workers with health conditions may be off sick or working in a reduced capacity while on an NHS waiting list.
Private healthcare gets them fast access to treatment, reducing time off sick and often therefore the productivity of your workforce.
For employers, premiums are typically a business expense not liable to corporation tax.
Premiums vary depending on your company, your employees and the level of cover you want to offer. To price a Business Health Insurance scheme, insurers look at:
The premiums in the table below are for companies of a range of different sizes, each seeking Business Health Insurance. Every company has chosen different policy options, which ultimately affects 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 the demographic of your staff.
If you want to understand the specific costs you may incur implementing a group health insurance policy please enquire below.
A Corporate Health Cash Plan is a more affordable way to provide some health and wellbeing benefits than full blown Business Health Insurance.
Rather than paying for private medical treatment, a Health Cash Plan reimburses money towards everyday medical expenses, such as routine dental and optical care. The plan might also pay towards other treatments / procedures such as:
As Corporate Health Cash Plans aren’t as complicated as Group Health Insurance 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 workers get back for their treatment, with higher levels meaning 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 a range of different sizes, each looking for a Corporate Health Cash Plan. However, 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, almost every business with employees must provide them with at least a defined contribution workplace pension. You must do so for every employee who is:
Employees are automatically enrolled in a pension, which means they have to actively opt out. Even if they do, they are automatically re-enrolled after 3 years.
As an employer, your pension contributions are a percentage of employees’ earnings. The cost of pensions therefore depends on how many staff you have, their earnings and how generous your contributions are.
Under auto-enrolment, the minimum you must contribution to an employee’s pension is 3% of ‘qualifying earnings’.
While this is the absolute maximum you have to pay in 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.
Jonathan Cooper
Senior Paraplanner at Drewberry
Qualifying earnings are all earnings between £6,240 and £50,000 you pay an employee. They include:
£50,000 is the cut off for qualifying earnings. You don’t have to pay 3% of anything your employees earn above this.
So, for example, if an employee earns £50,000, your contribution as an employer is £1,312.80 per year / £109.40 per month. You calculate this as follows:
Qualifying Earnings |
---|
£50,000 – £6,240 = £43,760 | Employer Contributions |
£43,760 x 3% = £1,312.80 per year / £109.40 per month |
However, if an employee earns more, say £55,000, the 3% employer contribution is still only on earnings between £6,240 and £50,000. Your total maximum contribution under auto-enrolment is therefore £1,312.80 per year per employee.
Where a company pays for training and education for employees that improves their skills wholly and exclusively for the benefit of the business, the cost of training is usually a business expense.
You can therefore typically claim tax relief on the cost of that training providing it’s aimed at improving skills the business needs.
The company may also be able to reclaim costs related to that allowable training and development. For example, allowable expenditure in this area includes:
However, if the training takes place at an employee’s usual place of work, travel expenses to that location are not allowable.
Essentially, providing the training purely upskills your workforce to meet the needs of the business, HMRC generally lets you deduct the cost of it when calculating your taxable business profits.
The cost of training and development will vary depending on your industry and the skills you need within the business. You can check prices of training and education courses with professional bodies for your industry.
The government used to back a Childcare Vouchers scheme to help with employees’ childcare costs.
Employers managed this, usually via salary sacrifice, where employees got vouchers for childcare in place of some of their gross salary. Some employers did offer Childcare Vouchers on top of gross earnings.
However, the government closed childcare Vouchers to new entrants from October 4th 2018.
Only parents receiving Childcare Vouchers on or before October 4th 2018 and who remain with the same employer offering them prior to this 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, topping up eligible parents’ contributions to a childcare account with the equivalent of basic-rate tax relief.
Since 4th of October 2018, the only way for employers to pay for childcare for their workers is to set up and fund their own nursery / 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 a Cycle to Work scheme in 2011 to reduce traffic congestion and encourage physical activity.
Any employer, of any size, can run a Cycle to Work scheme. It lets you offer employees 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 using salary sacrifice. Employers therefore make National Insurance savings at 13.8% on the proportion of the salary an employee has chosen to sacrifice.
At no point must employees get an option to buy the bike / safety equipment alongside, or as part of, the initial hire agreement. This is because that would be a hire-purchase agreement, which requires different regulatory permissions. It would also not be eligible for tax exemption.
However, at the end of the scheme, employees have three options:
There’s a £1,000 cap on the cost of the bike / equipment you can hire to the employees. However, 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.
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.
For help and fee-free advice on employee benefits, 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.
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