Which Employee Benefits Are Mandatory In The UK?

Today there are a wealth of employee benefits that you can offer your staff. Some are voluntary, whereas others are mandatory. This means as an employer you have to provide them to your staff.

But what benefits fall in to this category? Our complete guide to ‘Mandatory Employee Benefits’ answers just this. As well as providing ideas on how you can go beyond your legal obligations and really enhance your rewards package. Read on to find out more…

What Are Mandatory Benefits?

Within the UK, as an employer you are legally required to offer certain benefits. This is to protect the rights and well-being of staff and ensure fair labour practices.

Mandatory benefits, as the name suggests, are benefits that you as an employer have to provide by law. For example, holiday and statutory sick pay.

The Importance Of UK Mandatory Benefits

Failure to provide mandatory benefits could result in legal and financial consequences. This could lead to reputational damage.

Although these benefits ensure legal compliance, they can also benefit you as an employer. For example, if implemented well, they can help to:

• Attract and retain top talent
• Boost staff morale and engagement
• Improve business performance.

It’s important to take the time to get the implementation of your mandatory benefits right. Although you need to offer them, there is a lot you can do to enhance these benefits, which can take them from being a necessary benefit to a highly valuable one.

Joseph Toft
Senior Consultant, Employee Benefits

What Mandatory Benefits Do UK Employers Need To Provide?

When we think of employee benefits, the fun, social things come to mind. Company-paid day trips, free lunch in the office or fitness classes with colleagues. But what are the benefits you have to offer?

As a UK employer, regardless of business size or industry, you must provide:

• Workplace pension schemes with minimum contribution limits
• Paternity and Maternity pay
• Holiday pay / Statutory Annual Leave entitlement
• Statutory Sick Pay.

Workplace Auto-Enrolment Pension

One of the most important benefits you need to set up is a workplace pension scheme. By law, you must automatically enrol all eligible employees from the day they begin employment.

Each month, unless staff opt out, you and your employees contribute to the pension scheme. This is to help them save for their retirement.

In total, 8% of an employee’s qualifying earnings must be contributed to a scheme. Employers must contribute at least 3% of this. This is the minimum required by law, although some employers pay in higher amounts. Employees can also pay more if they want to.

Workplace Pension Eligibility

For an employee to be eligible, they must:

• Be aged between 22 and the State Pension Age
• Earn over £10,000 a year
• Typically work in the UK (this includes those who are usually based in the UK but travel abroad for work).

There are strict regulations to follow, as listed by The Pensions Regulator. Failure to comply may lead to fines or penalties.

The annual total earnings for an employee to be auto-enrolled are between £6,240 and £50,270. This is their pre-taxed amount and includes:

• Wages or salary
• Commission and bonuses
• Statutory maternity, paternity and adoption pay
• Statutory Sick Pay (SSP)
• Overtime.

It’s important to note that if staff members earnings increase or they turn 22 and become eligible for a pension, they must be enrolled into the company pension scheme and written to within six weeks of the day they first meet the criteria.

Many employers enhance their workplace pension, taking it from a mandatory benefit to a highly valuable one. 41% of employees said addtional employer pension contributions was the most important benefit to them.

By increasing what you offer by just 1% or setting up your scheme in a tax efficient way through salary sacrifice, you can super charge this benefit and provide something your staff really value.

Joseph Toft
Senior Consultant, Employee Benefits

Holiday Pay

Also known as Statutory Leave Entitlement or Annual Leave, staff who work five days a week get a minimum of 28 days paid annual leave a year. This equals 5.6 weeks’ holiday entitlement.

Employers can choose to include public / bank holidays as part of the paid annual leave amount. Though, you can offer employees more than the statutory minimum benefit. You can also allow staff to buy or sell extra days via Salary Sacrifice.

Adding extra days or allowing your team to trade holiday can make this benefit more engaging. It can also help make your staff happier. For this reason, it’s worth considering.

Maternity, Paternity & Adoption Paid Leave

Paid maternity, paternity, and adoption leave are also mandatory UK employee benefits. Workers who are parents are entitled to these, as well as Shared Parental Leave.

Maternity Leave & Pay

There are three types of maternity leave which employers should be aware of:

• Compulsory Leave
  This covers the two weeks after birth, during which time the woman is not allowed to work (this increases to four weeks for factory workers)
• Statutory Maternity Leave (SML)
  This is the 52 weeks of leave a woman can take. Employers should assume women will take all 52 weeks’ leave unless notified otherwise
• Shared Parental Leave (SPL)
  This can be shared between both parents.

In the UK, mothers are entitled to up to 39 weeks of Statutory Maternity Pay (SMP). For the first six weeks, they are paid 90% of their average weekly earnings. The rest is paid at the lower statutory rate (£172.48) or 90% of the average weekly earnings, whichever is lower.

Paternity Leave & Pay

If a worker’s partner is due to have a baby, they are entitled to a maximum of two weeks Statutory Paternity Leave. This is typically from the baby’s birthdate, a day in the week after the birth, or within 56 days of the birth. Statutory Paternity Pay (SPP) is the same as SMP.

Shared Parental Leave (SPL)

Shared Parental Leave allows mothers to share part of their leave with their partner. Both parents can take time off together to care for their newborn or take it in turns to have time off. The mother must give her employer at least eight weeks’ notice before SPL starts, though.

You can offer Shared Parental Leave to staff who are:

• Having a baby
• Using a surrogate
• Adopting a child
• Fostering a child they plan to adopt.

Parents are able to share up to 50 weeks of leave and up to 37 weeks of pay between them.

Adoption Leave & Pay

An important mandatory benefit introduced more recently is adoption leave and pay. It’s often the same as Statutory Maternity Pay. Employees will receive the same rate for up to 39 weeks.

Staff can take up to 52 weeks adoption leave. But if a couple within your company adopts a child together, only one adoptive parent can take the leave. The other must take paternity leave or shared parental leave, as explained above.

The main or primary adopter is also entitled to paid time off to attend five adoption-related appointments. The other adopter can take unpaid time off to attend up to two adoption-related appointments.

Statutory Sick Pay (SSP)

Employers are legally obliged to provide Statutory Sick Pay to their workforce. This is paid if an employee takes sick leave for at least 4 days in a row. Most businesses pay a higher amount as additional sick leave benefits in the UK.

But every employer is different. Some companies will cover sick leave for two to four weeks at the employee’s full pay, then require them to use SSP. Certain industries are particularly generous with sick pay, while others do not offer any kind of sick pay.

Antenatal Care

Pregnant employees are entitled to paid time off to attend antenatal appointments. Partners who are employees can also take unpaid time off to attend up to two appointments.

They can take up to 6.5 hours per appointment. However, any extra time required will need to be approved by the employer or taken as annual leave.

Employee Benefits In The UK: Beyond Your Mandatory Requirements

After the mandatory benefits, there are many supplementary perks you can offer. These aim to improve the wellbeing of your workforce and help you to attract the best talent.

The best employee benefit packages mix mandatory benefits with those that are voluntary. Voluntary benefits can include those that are company paid-for, as well as those that are free. Here are a few examples of voluntary benefits:

• Group Life Insurance
• Business Health Insurance
• Group Income Protection
• Group Critical Illness Cover
• Electric Car Schemes
• Discount Schemes

Group Life Insurance

Also known as Death in Service Insurance, employers can offer Group Life Assurance if they have more than three workers. This policy pays out a multiple of an employee’s basic salary to their loved ones should they pass away while working for you.

It’s typically a benefit paid for by you, the employer. And it’s actually one of the most affordable insurance policies to offer.

Group Health Insurance

Group Private Medical Insurance is becoming an increasingly popular option for businesses. As the NHS faces challenges due to long waiting lists, lack of funding, and staff shortages, it’s an alternative option to the NHS.

Setting up Company Health Insurance for your team allows them to:

• Skip long NHS waiting lists
• Receive private care when they need it most
• Get access to drugs which aren’t yet available on the NHS.

As their employer, you’ll also benefit from offering this, as it enables staff to recover from eligible conditions faster and return to work quicker.

Business Private Health Insurance costs more than most other benefits. However, it’s highly valuable, as it can help to reduce absenteeism and retain employees.

The good news is, the premiums you pay are an allowable business expense, so it’s exempt from your corporation tax bill. There are also ways you can reduce your premiums.

Joseph Toft
Senior Consultant, Employee Benefits

Group Income Protection

When reviewing a sick pay policy, many employers often consider an insurance option. Group Income Protection can cover up to 80% of an employee’s salary if they are unable to work due to an illness or injury.

This benefit can complement your own policy. You can align the start of the Group Income Protection claim with the end of your company-funded sick pay.

Employers have the option of providing Income Protection for a limited time, such as 2 years. You can also set up more comprehensive cover which protects staff up until State Pension Age.

Policy services now include absence management tools and support alongside the initial benefit. Again, this is a valuable perk, helping to reduce the costs of staff being off work for long periods of time.

Group Critical Illness Insurance

Group Critical Illness Cover provides staff with a lump-sum payment if they develop a critical condition listed on the policy.

Most insurers cover around a dozen critical conditions, although, you can add more to the policy for an additional premium. The top three conditions covered include:

• Cancer
• Stroke
• Heart attack.

One thing to consider is that Critical Illness Cover (CIC) tends to cost more than Group Life Insurance. Most companies, as a result, offer a level of cover between 1-2x their employee’s basic annual salary to lower the cost.

Dental Insurance

Like most areas of the NHS, NHS dental practices are suffering from long waiting lists. Some aren’t accepting new patients at all. As a result, offering Dental Insurance is a great benefit. It allows employees to receive treatment much sooner and at a time that is convenient to them.

Policies are usually relatively simple for employers to set up. In most cases, the minimum criteria is just two UK employees. Policies can be arranged on a company-paid or an employee-paid basis, too.

Corporate Health Cash Plan

A Business Health Cash Plan is a policy that tends to be more affordable for companies than Company Health Insurance. It’s designed to cover all or part of your employees’ everyday healthcare costs, such as:

• Routine dental check ups
• Eye tests
• NHS prescriptions fees
• Therapies, including physiotherapy, chiropody and osteopathy.

For UK employers to set up a policy, they need a minimum of three employees. When it comes to making a claim, the employee covers the cost of their treatment and then claims it back according to the policy limits.

Employee Assistance Programmes And Virtual GPs

Employee Assistance Programmes (EAPs) and virtual GP services are often included for free on many policies. These are designed to support your employees’ physical, mental, and financial health. Access is sometimes extended to the employee’s family, too.

Remote GP services are very popular, enabling staff to skip long NHS GP waiting lists. Such services tend to be available 24/7, so staff can get the medical attention they need when it’s convenient for them.

I recently used a virtual GP service myself, it worked fantastically. The appointment was quick to book, did not feel rushed and all in the comfort of my own home.

Andrew Jenkinson
Director

Discount Schemes

Discount schemes provide employees with big savings on everyday purchases. They make a great benefit, as not only can they help your employees save hundreds if not thousands of pounds, they are easy to set up and cost effective.

Employers pay a monthly fee per employee, this can be as little as £5. Staff then get access to an online portal which allows them to get discounts and cashback on things such as:

• Supermarkets
• Entertainment
• Travel
• Health & fitness
• Bars, restaurants & food delivery.

Salary Sacrifice Electric Car Schemes

Another benefit you can offer is a salary sacrifice electric car scheme. This allows employees to sacrifice part of their gross monthly salary in exchange for a brand new electric vehicle.

As an employer, you don’t have to pay anything to set up a scheme, employees cover the cost of the hire. It’s important to note though, that employers may be liable to pay for early termination fees and end of contract damages.

As payments come from an employees gross salary, there are big tax savings for employees and employers. Due to these savings, employees can save up to 40% on leasing a brand new car.

Free Perks To Offer Alongside Mandatory Benefits

The benefits we talked about above will cost your business to set up. Some are more expensive than others—this depends on the cover you select for the policy.

There is an excellent range of free employee benefits you can put in place. These can improve company culture, attract top talent and encourage stronger employee engagement.

We asked employees about their company benefits in our 2023 UK Employee Benefits survey. They told us they’d like to receive these free perks:

• Flexible working hours (43% of respondents)
• Work from home options (41%)
• Free snacks in the workplace (23%)
• Casual dress (16%)
• Free health & wellbeing apps (11%).

The above are not mandatory, but they have plenty of advantages. Flexible working hours and remote work options are fairly simple to implement.

If you’d like some advice on setting up your employee benefits, get in touch. Drop us a call on 02074425880 or email us help@drewberry.co.uk. One of our advisers will be happy to help!

Nick Nelms
Senior Consultant, Employee Benefits

Compare Employee Benefits Quotes & Get Expert Advice

Knowing what the best employee benefits are for your team can be a daunting task. Don’t worry, that’s where we can help. At Drewberry™, we help businesses of all sizes, in all industries, arrange their benefits package.

Our team of expert advisers has decades of experience. We can do all the heavy lifting for you, so you can focus your time on running your business. If you’d like some advice or guidance on how to get started, call us on 02074425880 or email help@drewberry.co.uk.

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