The complete guide to offering employee benefits in the UK

Expanding your business or hiring employees in the UK can be a huge opportunity—provided you’re able to navigate the maze of regulations, especially when it comes to employee benefits. And what if the key to attracting top-tier talent and ensuring legal compliance is hidden in understanding the UK's unique benefits landscape? This isn’t just about ticking boxes for statutory requirements; it's about crafting an employee benefits package that accurately represents your company’s culture and values.

In this guide, we’ll unravel the complexities of mandatory benefits—plus, cover some optional ones—to help you design a UK benefits package that not only meets legal obligations, but also elevates your organisation’s standing in a competitive job market. Whether you're a seasoned international employer or making your first hire in the United Kingdom, this is your roadmap to offering employee benefits that make a real difference.

The importance of offering a strong employee benefits package in the UK

In the competitive landscape of the UK job market, a robust employee benefits package not only ensures compliance with UK employment laws, but also plays a pivotal role in the overall success of your business. Here's why investing in a strong benefits package is essential:

It improves employee engagement

When employees feel valued and supported through meaningful benefits, their engagement levels soar. 

Employee benefits like health insurance, wellness programs, and flexible working arrangements show that the company cares about its workforce’s well-being. Engaged employees are more likely to be enthusiastic about their work, contribute positively to the company culture, and go the extra mile to achieve business goals.

It attracts and retains top talent

A competitive employee benefits package can be a deciding factor for candidates evaluating multiple job offers. In a market where top talent has numerous options, offering superior benefits can set your company apart. 

Additionally, retaining skilled employees becomes easier when they feel like their needs are met. This reduces turnover rates, which spares costs from recruiting and training new workers.

It enhances productivity and performance 

Employees who have access to comprehensive benefits are generally more productive. Health benefits give them access to medical care when they need it, reducing absenteeism. Professional development opportunities help them acquire new skills, directly benefiting their performance. 

In other words, when employees' personal and professional needs are met, they can focus more effectively on their work.

It boosts your company’s reputation

Companies known for excellent employee benefits often enjoy a stronger reputation in the industry. This can not only attract potential employees, but can also impress clients and investors. A positive reputation can be a significant competitive advantage, leading to new business opportunities and partnerships.

By prioritising a strong employee benefits package, you're investing in the people who drive your business forward. It's a strategic move that can lead to increased engagement, talent attraction, enhanced productivity, and a stellar company reputation in the UK market—all wins that can help your organisation come out ahead.

What employee benefits are mandatory in the UK?

Understanding the mandatory employee benefits in the UK is crucial for compliance—and for fostering a positive, supportive work environment. UK employment law mandates certain benefits that all employers must provide to their eligible employees. Failure to comply can result in legal repercussions and damage to your company's reputation.

It's important to note that while these benefits are mandatory for employees, independent contractors and freelancers are generally not entitled to them. Contractors are responsible for their own provisions, including pensions, paid time off, and other benefits. Additionally, note that statutory entitlements apply to all eligible employees regardless of their position or length of service.

Below are the key mandatory benefits employers must offer to employees in the UK:

Workplace Pension

The Workplace Pension is a way of saving for retirement that’s arranged by employers. There are several benefits to Workplace Pension schemes. For one, employees can often get tax relief on their contributions, allowing them to put away tax-free money for retirement, depending on the scheme and its rules. Employers also contribute to pension schemes, helping employees save more for their retirement years. 

The UK workplace pension scheme goes by several different names, including occupational, company, works, or work-based pensions. Employers are required to automatically enrol eligible employees into a workplace pension scheme, commonly known as "auto-enrolment." 

There are some exceptions. Employers don’t need to automatically enrol employees who are from EU member states or who already have a pension plan that’s worth the lifetime allowance or more. You cannot, however, refuse to allow these employees to join your work-based pension scheme if they wish to.

Here are some other details employers need to know about pension schemes:

Eligibility criteria for employees:

• Aged between 22 and the State Pension age (which is currently 66 but subject to change)
• Classified as a "worker" (this typically includes all employees except self-employed contractors)
• Earning at least £10,000 per year

Pension contribution requirements:

• The minimum total contribution is 8% of the employee's qualifying earnings.
• Employers must contribute at least 3% of this total (but can contribute more).
• Qualifying earnings include salary, wages, bonuses, commissions, and overtime between £6,240 and £50,270 annually (figures for the 2024-2025 tax year). The UK government issues yearly earnings ranges that are subject to change. Be sure to check for the most up-to-date ranges when figuring the correct amount to withhold from an employee’s earnings for their pension scheme contributions.

Pension administration requirements:

• Employers must deduct the employee's contribution from their pay.
• Contributions must be paid into the pension scheme by the 22nd day (19th if not electronic) of the following month.

Employees can typically access their pension funds starting at age 55 (rising to 57 in 2028). Withdrawing pension funds prior to retirement age may incur significant tax penalties, up to 55%.

Statutory Sick Pay (SSP)

When employees are unable to work due to illness, they're entitled to Statutory Sick Pay. Key details include:

• Rate: £116.75 per week (as of April 2024)
• Duration: Up to 28 weeks
• Eligibility: 
• Must be classed as an employee and have done some work
• Earn an average of at least £123 per week
• Have been ill for at least four consecutive days

Employees continue to accrue statutory annual leave while on sick leave.

Statutory maternity leave

Expectant mothers are entitled to substantial leave and pay benefits. Statutory Maternity Leave is a total of 52 weeks—26 weeks of “ordinary maternity leave,” and an additional 26 weeks of “additional maternity leave.” UK law mandates that mothers take two weeks off from work immediately following the birth of their child (four weeks if they work in a factory). 

UK employment law also provides guidance on when statutory maternity leave should begin. Mothers can begin their maternity leave up to 11 weeks before their due date, or, if the baby arrives early, maternity leave begins the day after they give birth.

While on maternity leave, mothers are entitled to Statutory Maternity Pay for 39 weeks. For the first six weeks, employers are required to pay 90% of the employee’s average weekly wages; for the remaining 33 weeks, they’re entitled to either 90% of weekly earnings or £172.48 per week, whichever is lower.

While on maternity leave, female employees continue to accrue annual leave and receive scheduled pay raises. UK employment law also dictates that they have the right to return to work once their leave is over.

Statutory adoption leave

Employees adopting a child or having a child through a surrogacy arrangement are entitled to similar benefits to statutory maternity leave. 

These employees are entitled to 52 weeks of statutory adoption leave—26 weeks of ordinary leave and 26 weeks of additional leave.

Also similar to statutory maternity leave, employees who take adoption leave are entitled to 39 weeks of paid leave. The first six weeks, the employee is entitled to 90% of their average weekly earnings. For the remaining 33 weeks, the employee is entitled to £184.03 per week or 90% of average weekly earnings (whichever is lower).

Either parent can take adoption leave, but not both. The partner who does not take adoption leave may be eligible for paternity leave.

Statutory paternity leave

UK fathers are also entitled to leave when they become parents. 

When their partner gives birth (or when they adopt or have a child via a surrogate), eligible male employees are entitled to one or two weeks of paid paternity leave, at a rate of £184.03 per week or 90% of average weekly earnings (whichever is lower).

To be eligible for statutory paternity leave, they must be an employee, have worked for you continuously for at least 26 weeks up to the 15th week before the baby is due, and be responsible for the child's upbringing.

Similar to their female counterparts, men who are on paternity leave still accrue annual leave, receive scheduled pay raises, and have the right to return to work after leave under UK employment law.

Shared paternity leave

Shared Parental Leave offers flexibility for parents to share time off and figure out a schedule that works for them when they have a new child in the home.

Parents can share up to 50 weeks of parental leave between them, with up to 37 weeks of paid leave. However, the law doesn’t require employers to pay both employees—the government treats both parents as a single unit—so parents often need to share the pay if they choose to use shared paternity leave.

Other eligibility requirements include:

• Both parents must meet work and earnings criteria
• Can be taken in blocks or all at once
• Must be taken before the child's first birthday or within one year of adoption

Annual holiday leave

Employees are entitled to paid time off to rest and recharge; the UK requires employers to provide employees with 5.6 weeks of statutory holiday entitlement each year. 

This is equivalent to 28 days for a full-time employee working five days a week. The schedule typically includes the UK’s bank holidays, which are listed each year on the UK government website.

For part-time employees, annual leave is pro-rated based on the number of hours worked. Annual leave accrual begins from the first day of employment.

Statutory Redundancy Pay

Under UK law, employers are required to provide pay to employees who lost their jobs because they were made redundant (or “no longer needed”) if they meet certain eligibility criteria:

• At least one year of service in Northern Ireland
• At least two years of service in England, Scotland, and Wales

The amount of statutory redundancy pay an employee receives depends on their age and the length of service. Here’s how it’s calculated:

• Age 18-21: Half a week's pay for each full year of service
• Age 22-40: One week's pay for each full year of service
• Age 41 and over: One and a half week's pay for each full year of service

The weekly pay cap is £700 as of April 2024, and under UK law, up to 20 years of service can be counted when calculating a redundancy payment.

Employees who were fired are not eligible for statutory redundancy pay.

What employee benefits are optional in the UK?

While meeting mandatory employee benefits is crucial for compliance, offering additional, optional benefits can help boost employee engagement and contribute to a better work environment. These extra perks and entitlements help set you apart in a competitive job market, too, helping to attract high-calibre candidates.

Here are some of the most impactful optional employee benefits you might consider:

Private healthcare and dental care plans

Although the National Health Service (NHS) provides comprehensive healthcare to all UK residents, the system can sometimes be strained, leading to longer wait times for certain treatments. By offering private medical insurance, you can help your employees gain quicker access to medical specialists, elective procedures, and private hospital facilities. This can include:

• Private Medical Insurance (PMI): Private medical insurance provides a range of medical services not always readily available through the NHS, such as advanced diagnostics and specialist consultations.
• Critical illness insurance (CIC): Also known as critical illness cover or CIC, critical illness insurance provides a lump sum payment if an employee is diagnosed with a serious health condition listed in the policy, like cancer or heart disease.
• Dental insurance: Dental insurance helps cover the cost of routine check-ups, treatments, and emergency dental work, which may not be fully covered by the NHS.

Offering private medical insurance benefits demonstrates a commitment to your employees’ well-being. It can also help reduce stress related to healthcare concerns—and even potentially decrease absenteeism due to health issues.

Additional paid time off

Providing more than the UK’s statutory minimum of 5.6 weeks of annual leave can boost employee satisfaction and help your workplace stand out from its competition when recruiting top talent. This could include:

• Extra vacation days: An additional allotment of days off for personal use
• Buy or sell holiday schemes: Allowing employees to purchase extra leave or sell back unused days for additional pay
• Sabbaticals: Extended periods of leave for personal development, travel, or rest

Extra paid time off contributes to a healthier work-life balance, reduces burnout, and can lead to increased productivity and loyalty.

Life assurance plans

Life assurance, commonly known as "death-in-service" benefit, provides financial security to an employee's beneficiaries in the event of their death while employed by your company. Key aspects to consider include:

• Coverage duration: Unlike term life insurance, life assurance covers the employee for as long as they are employed by your company.
• Benefit amount: Typically a multiple of the employee's salary, paid out as a lump sum to their nominated beneficiaries

Including life assurance in your employee benefits package offers peace of mind to employees, showing that you care about their family's future and financial stability.

4 additional benefits to attract top talent in the UK

Some of the best employee benefits in the UK are the ones that aren’t mandatory, because offering more than the statutory requirements can make your organisation stand out and help you attract higher quality, more qualified employees. Beyond the standard offerings, consider these four additional benefits to make your organisation more appealing:

Flexible working hours

Work-life balance has become a significant factor for many employees. By offering flexible working hours, you provide your employees with the autonomy to manage their personal and professional lives effectively. This can include:

• Remote work options: Allowing employees to work from home or other locations
• Flexible scheduling: Letting employees choose their start and end times within core business hours
• Compressed workweeks: Enabling employees to work longer hours over fewer days

Bonuses and share equity

Financial incentives beyond a regular salary can motivate employees and improve retention. Consider offering performance bonuses, profit-sharing plans, Employee Stock Ownership Plans (ESOPs), and other rewards based on individual or team achievements. These types of benefits align employee interests with company performance, encouraging them to contribute to the organisation's success.

Learning and development

Investing in your employees' growth not only enhances their skills but also benefits your company—and a strong focus on learning and development can improve employee retention and position your company as a leader in talent development. Consider offering opportunities like:

• Professional training: Funding courses, certifications, or workshops relevant to their role
• Educational assistance: Providing tuition reimbursement for higher education
• Mentorship programs: Pairing less experienced employees with seasoned professionals for guidance and knowledge sharing

Meal vouchers

Providing meal vouchers is a practical perk that can enhance employee satisfaction. This benefit can take several forms, like lunch subsidies, allowances for meals during work hours, an on-site cafeteria, or employee discounts at nearby restaurants through local partnerships. Meal vouchers not only support employees' well-being but also foster a positive company culture by encouraging team lunches and social interaction.

Tax implications of employee benefits in the UK

Putting together your employee benefit program is only the first step—understanding the tax implications of your benefits offerings is also crucial. Benefits can affect income tax and National Insurance contributions, and improper reporting can lead to penalties from HM Revenue & Customs (HMRC).

Taxable benefits

Some benefits are considered "benefits in kind" and are subject to taxation. Common taxable benefits include:

• Company cars: Personal use of a company-provided car is taxable. The tax amount depends on factors like the car's value and CO2 emissions.
• Private health insurance: Employer-sponsored premiums for private medical or dental insurance are taxable as they provide a personal benefit.
• Accommodations: If you provide living accommodations to employees, it's generally considered a taxable benefit unless it's necessary for the job.
• Interest-free loans: Loans over £10,000 provided to employees are taxable.

Employers must report these benefits to HMRC using form P11D and pay Class 1A National Insurance contributions on the value of the benefits.

Tax-free benefits

Certain benefits are tax-exempt, offering cost-effective perks for employees. Examples include:

• Pension contributions: Employer contributions to approved pension schemes are tax-free and don't count toward the employee's taxable income.
• Childcare vouchers: While the Childcare Voucher scheme closed to new applicants in 2018, existing members can still receive up to £55 per week tax-free.
• Cycle to work scheme: Providing bicycles and equipment for commuting is tax-exempt, because it promotes healthy living and reduces environmental impact.
• Workplace parking: Free or discounted parking provided at or near the workplace is generally tax-free.
• Mobile phones: One mobile phone provided for business and private use is exempt from tax.

Employer responsibilities

As an employer, you are responsible for accurately reporting all taxable benefits to HMRC. You also must make National Insurance Contributions, paying any required Class 1A National Insurance on taxable benefits to avoid penalties and interest. Lastly, you’re responsible for communicating with your employees about their benefits and the tax implications that come with them. By carefully managing the tax aspects of employee benefits, you can provide valuable perks while maintaining compliance with UK tax laws.

How much do employee benefits cost in the UK?

The cost of providing employee benefits in the UK varies based on several factors:

Factors influencing benefits costs

• Company size: Larger companies may have more negotiating power with benefit providers, potentially reducing costs per employee.
• Industry standards: Certain industries, like technology or finance, may offer more extensive benefits to stay competitive.
• Location: Operating in regions with a higher cost of living may require more generous benefits to attract talent.
• Customization level: Tailored benefits packages that cater to individual employee preferences can increase administrative complexity and costs.
• Benefit types: Offering premium benefits like private health insurance or substantial pension contributions will naturally be more expensive.

How Rippling can help manage benefit costs

Rippling partners with brokers and insurance carriers around the world to give UK employees access to big business benefits at affordable prices—from private health insurance to registered retirement savings plans and more.

Where can I get quotes for UK employee benefits?

Here are several avenues employers can explore to secure accurate and comprehensive quotes for employee benefits in the UK:

Work with employee benefits brokers and consultants

Employee benefits brokers and consultants specialise in navigating the complex landscape of benefits offerings. They can provide expert advice, negotiate on your behalf, and present options from multiple providers.

A professional will take steps to understand your company's size, industry, and specific requirements so they can source competitive quotes for various benefits such as private health insurance, pension schemes, and life assurance policies, depending on the plan you want to build. Engaging a broker can save you time and help you find the most suitable benefits at the best prices.

Directly contact benefits providers

Reaching out directly to insurance companies, pension providers, and other benefit suppliers allows you to request quotes tailored to your needs. Many providers have dedicated business teams that can work with you to design custom benefits packages. This approach gives you direct control over the negotiation process and can sometimes result in better rates or more flexible terms. However, it may be time-consuming if you need to contact multiple providers individually.

Use online tools

Several online platforms offer comparison tools that let you evaluate quotes from different benefit providers quickly.

Online tools can often provide instant estimates for standard benefits like private health insurance or group life assurance. While convenient, online quotes may not capture all the nuances of your specific requirements, so you’ll need to follow up with providers to confirm details and make sure the quotes are accurate and the plans meet your company's needs.

Leverage benefits administration software

A provider like Rippling provides access to a marketplace of benefit options, allowing you to compare quotes and select plans that fit your budget and employee needs.

Rippling also simplifies administration by handling enrolments, compliance, and communication with providers, saving you time and reducing your administrative burden.

How to hire employees in the UK and offer them affordable benefits in minutes—with Rippling

Rippling brings your entire employee benefits administration experience—from plan selection to broker partners, payroll, and HRIS—into one seamlessly integrated system that automates all of your benefits busy work. 

Onboard your UK employees directly in Rippling, and then quote, compare, and enrol in affordable benefits plans across all insurance providers in the United Kingdom—in minutes. Whenever you onboard new joiners, Rippling immediately invites them to enrol in benefits, and makes sure that they only see the plans they are eligible for. With Rippling, enrolment really is that easy—for employers and employees.

FAQs on employee benefits in the UK

What are examples of employee benefits programs?

Employee benefits programs in the UK vary widely and often include a diverse range of offerings designed to support and enhance employees’ well-being. Employee benefits examples in the UK encompass health and wellness benefits like private medical and dental insurance, mental health support services, and gym memberships or wellness programs. Financial benefits might involve pension schemes, bonuses, profit-sharing plans, and life assurance policies. To promote work-life balance, companies often provide flexible working arrangements, additional paid time off, and comprehensive parental leave policies.

Can part-time employees in the UK receive full benefits?

Yes, part-time employees in the UK are entitled to benefits similar to those of full-time employees, adjusted on a pro-rata basis. Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, employers are required to offer part-time workers proportional benefits, including annual leave, pensions, and bonuses, adjusted based on the number of hours worked. While there may be exceptions if differences can be objectively justified, employers should strive to provide fair access to benefits for employees in the UK, whether they work full- or part-time, to comply with the law and promote workplace equality.

How do you implement an employee benefits program?

Design the benefits package to include a mix of mandatory benefits and attractive optional perks that align with your company's culture and values. Select reputable benefit providers for UK employee insurance, pensions, and other services, negotiating terms to get the best value. Communicate clearly with employees about the benefits offered and how to access them, providing materials or sessions to educate them about the value of their benefits.

This blog is based on information available to Rippling as of November 22, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.