A Hierarchy Of Employee Benefits

A Hierarchy Of Employee Benefits

You’re an employer who has been through the pain of start-up. You now have an established core of clients that, hitherto, have been used to having you as the face of your business. Things are now moving on, however. The business is growing, new clients are coming on board and it simply isn’t possible for you to be in 6 places at once.

You recognise that you now need to start recruiting staff to service these new clients and, equally importantly, represent the business you have built in the best possible light. Getting these staff can only be achieved by paying salaries at or above the market rate. And, undoubtedly, these potential new employees will be expecting a benefit package to run alongside the salary. So, what are your options?


Every employer now has to have a pension scheme and minimum contribution rates are set in law. Unless you are prepared to pay pension contributions significantly above the statutory minimum, it is difficult to differentiate yourself in this area.

This leaves the voluntary areas. And in spite of the title of this blog, there is no set hierarchy. No laws exist that say what benefits, other than the workplace pension, you must give your employees. The benefits you do consider, and ultimately choose, will depend on a combination of cost and employee perception.

These benefits will fall into two general categories. The traditional and the non-traditional. So, in keeping with what I can only describe as tradition, let’s have a look at the traditional ones first.

Group Life Assurance

Also referred to as Death In Service, this is an insurance policy taken out by and paid for by the employer that pays out either a fixed sum or, more commonly, a multiple of salary to the family of an employee who dies in service. Death does not have to be work related.

Group Life is simple to understand, the lowest cost of the traditional benefits to the employer and does not have any tax consequences for the employee. In the vast majority of situations, employees are automatically included irrespective of their health.

For companies above a certain size, Group Life is a given. That is to say, it is far more unusual to find established companies who do not offer it than do, and prospective employees simply expect it to be available.

Group Income Protection

A more expensive benefit than Group Life, Group Income Protection ensures continuation of an employee’s income despite them being absent from work for a prolonged period due to illness or accident.

There is a waiting period initially before the benefit kicks in and this should be aligned to the employer’s sick pay policy. Once the waiting period is over, income will be paid to the employee at a percentage (always less than 100%) of their normal working salary until they either return to work, once the benefit period has elapsed e.g. 5 years or until they reach State Pension Age.

Group Income Protection is the most undervalued of the traditional benefits but is extremely important to those unfortunate enough to need to claim it. It also alleviates the extremely tricky moral position employers can find themselves in of whether to terminate the employment of somebody off on long term sick.

Private Medical Insurance

Undoubtedly the favourite of employees, Private Medical Insurance allows those covered (can be all staff or just a select band) to access private medical care for non-urgent medical conditions. NHS waiting lists are sidestepped and treatment can be arranged at a time and place to suit the employee.

The more generous employers will not only cover the employee but extend cover to include the employee’s family (usually at the employee’s cost but can be paid for by the employer) and may even offer dental benefits as well.

From an employer’s point of view, Private Medical Insurance attracts and retains staff but it does so at a cost. It is easily the most expensive of the traditional benefits at outset and annual increases are almost inevitable at rates far in excess of normal inflation. Add in a few claims (employees can tend to think that claiming is a right they must exercise) and employer contributions can easily go up by 20% and above a year.

So that’s the traditional benefits. What about the non-traditional ones? You’ll be glad to hear I’m not going to go into these in detail. Listed below are just a few that employers are now looking at. They tend to fall into the general area of “instant gratification” as, unlike the traditional benefits, they are accessible by all and do not require a potentially catastrophic situation to occur to show their true value.

Non- traditional benefits

  • Retail discount schemes
  • Cycle To Work
  • Discounted Gym Memberships
  • On-site healthcare
  • Professional Fees

Delivery to Staff

One of the biggest problems we see in many employee benefit arrangements is a failure to communicate. Employers, with the best of intentions, install employee benefit schemes but fail to put in place measures to ensure staff are aware of them. The result is the employer spends with little or no resulting increase in employee recognition of value.

Staff handbooks are largely unread and joining packs with all the details are filed away never again to see the light of day. Because of this, we have developed the Richmond House Corporate Services Employee Portal, an “always on” system that employees can access at any time to engage with their benefits, seeing what the employer actually provides and giving access to a range of non-traditional benefits

Employee benefits can be a difficult road to travel and effective communication is a necessary part of the process. For a free consultation on potential employee benefit schemes and a demonstration of the Employee Portal, do not hesitate to contact us on 0333 241 3350 and we’ll help you tailor a package and delivery system suitable to your pocket and your workforce.