Employee Benefit - United Kingdom

United Kingdom

In the UK, Employee Benefits are categorised by three terms: Flexible Benefits (Flex) and Flexible Benefits Packages, Voluntary Benefits and Core Benefits.

Core Benefits is the term given to benefits which all staff enjoy, such as pension, life insurance, income protection, and holiday.

Flexible benefits, often called a "flex scheme", is where employees are allowed to choose how a proportion of their remuneration is paid or they are given a benefits budget by their employer to spend. Currently around a third of UK employers operate such a scheme. How flexible benefits schemes are structured has remained fairly consistent over the years, although the definition of flex has changed quite a lot since it first arrived in the UK in the 1980s. When flex first emerged, it was run as a formal scheme for a set contract period, through which employees could opt in and out of a selection of employer-paid benefits, select employee-paid benefits, or take the cash. In recent years increasing numbers of UK companies have used the tax and national insurance savings gained through the implementation of salary sacrifice benefits to fund the implementation of flexible benefits. In a salary sacrifice arrangement an employee gives up the right to part of the cash remuneration due under their contract of employment. Usually the sacrifice is made in return for the employer's agreement to provide them with some form of non-cash benefit. The most popular types of salary sacrifice benefits include childcare vouchers and pensions.

A number of external consultancies exist that enable organizations to manage Flex packages and they centre around the provision of an Intranet or Extranet website where employees can view their current flexible benefit status and make changes to their package. Adoption of flexible benefits has grown considerably over the five years to 2008, with The Chartered Institute of Personnel and Development. This has coincided with increased employee access to the internet and studies suggesting that employee engagement can be boosted by their successful adoption.

Voluntary Benefits is the name given to a collection of benefits that employees choose to opt-in for and pay for personally, although, as with flex plans, many employers make use of salary sacrifice schemes where the employee reduces their salary in exchange for the employer paying for the perq. These tend to include benefits such as the government-backed (and therefore tax-efficient) cycle to work, pension contributions and childcare vouchers (Accor Services, Busybees, Sodexho, Fideliti, KiddiVouchers, Co-operative Employee Benefits, Early Years Vouchers Ltd) and also specially arranged discounts on retail and leisure vouchers, gym membership and discounts at local shops and restaurants. They can be run in-house or arranged by an external employee benefits consultant.