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June 8, 2023

20+ Employee Benefits UK Employers Should Offer in 2024

UK labour laws require employers to offer certain mandatory and supplementary employee benefits. Explore these benefits, their importance, and their costs.

Aine Kavanagh

Article written by

Aine Kavanagh

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Employee benefits in the UK are non-salary perks and services employers, or the State provide.

What do these include?

Mandatory UK employee benefits include pensions, social security, holidays, sick leave, and healthcare. Employers also offer extras like medical insurance, life assurance, retirement contributions, and work-from-home expenses.

We’ll give you a complete breakdown of these employee benefits in the UK.

Further Reading

Who Qualifies for Employee Benefits in the UK?

UK employee benefits are usually available to individuals classified as 'workers. 

This includes:

  • Agency employees

  • Employees with irregular working hours

  • Employees working on zero-hours contracts

Some organisations may restrict certain perks to full-time team members and offer lesser packages to part-time employees.

To comply with UK labour laws, a UK employer must offer certain mandatory benefits to employees, regardless of their employment status (full-time or part-time).

We’ll explore these next.

24 Key Employee Benefits UK Teams Expect From Their Employers

UK employers offer three main types of employee benefits. They are:

  • Mandatory Benefits

  • Supplementary Benefits

  • Employee Perks

Let’s check out each one in detail.

A. What Are the Mandatory Employee Benefits in the UK?

UK law requires employers to provide employees with statutory benefits like health or disability insurance, social security, access to pensions, and other benefits.

1. Workplace Pension

The UK State Pension supports retirees in the UK, but it may be insufficient for most people, making additional retirement savings crucial.

This is where workplace pension comes in.

Employers in the UK must offer and contribute to private workplace pensions under the auto-enrolment scheme.

Employers must contribute at least 3% of each eligible employee's salary to a pension plan, while employees must contribute at least 5%.

An employee is eligible for a workplace pension plan if they:

  • Earn £10,000 a year or more

  • Are based in the UK

  • Are between 22 and the State Pension age

There are two main types of private pension schemes in the UK:

  • Defined Contribution: Employee and employer contributions are invested in stocks, bonds, etc., and the pension amount depends on the investment performance.

  • Defined Benefit: The pension amount is fixed based on factors like salary and employment duration, regardless of contributions.

How do you set up a compliant workplace pension in the UK?

Meet Kota.

Effortlessly Manage Pensions for Your Team Using Kota

Kota is a powerful digital benefits platform offering seamless retirement solutions for your UK workforce.

Kota has partnered with Smart Pension, a reputable pension provider in the UK, to offer employees extensive pension coverage and retirement benefits. 

It allows employers to:

  • Easily administer a defined contribution workplace pension scheme regardless of where your company is based or whether you have a UK bank account.

  • Make a minimum contribution of 3% towards the employees' pension fund — in compliance with the UK's auto-enrolment law.

  • Integrate your existing human resources (HR) & payroll tools for a unified system.

  • Manage pension postponements for one or more eligible employees at a time, including postponement letters to notify them.

2. Healthcare

The National Health Service (NHS) offers free healthcare to UK residents. 

The problem?

It faces challenges, including long waiting times and strain on the system. 

To bridge this gap, many employers in the UK provide private medical insurance (PMI) plans to their UK employees. 

PMI is not a mandatory benefit; we’ll cover it in detail later in the article — under supplementary employee benefits.

3. Holiday Pay

Holiday entitlement is a mandatory benefit offered to all UK workers.

Employees are entitled to a week's salary for each week of annual leave they take.

How does this employee benefit work?

Employees who work at least five days a week are entitled to a maximum of 28 days (5.6 weeks) of paid annual leave. 

They can use their annual leave for vacations, personal time off, etc.

This workers' compensation can differ according to their employment type, such as part-time and shift work:

  • Part-time workers in the UK are entitled to 5.6 weeks of paid holiday leave, pro-rated according to their usual working days per week.  For example, if they work 4 days a week, they must get at least 22.6 days (4 x 5.6) of paid annual leave.

  • Employees working irregular or flexible hours (shift workers) accrue paid time off for every working hour.

Public and bank holidays in the UK are not automatically part of the paid leave entitlement. However, employers can include bank holidays as part of an employee's statutory annual paid leave.

The maximum statutory paid leave is only 28 days. So even if employees work six days a week, they are entitled to only 28 days of paid leave — not 33.6 days.

UK employers can offer more paid holidays than the minimum legal requirement as an incentive.

They can set conditions like completing one year of employment for those extra days.

Employers may also allow employees to 'buy' additional annual leave days through salary sacrifice schemes at regular or discounted rates - a flexible benefit for work-life balance.

4. Maternity, Paternity and Adoption Pay

Employers in the UK must offer paid parental leave to their employees in the form of paternity, maternity, and adoption leave.

All female employees on maternity or adoptive leave get up to 52 weeks of leave and are eligible to receive a payment for 39 weeks.

The 52 week leave is divided into:

  • Ordinary Maternity Leave (OML) - for the first 26 weeks

  • Additional Maternity Leave (AML) - for the last 26 weeks

The same leave structure applies to adoptive leave as well.

During OML, the employer must allow the employee to return to their previous job role. During AML, they must offer a similar role if the original one is no longer feasible.

From April 2024, employees on maternity or adoption leave will receive:

  • 90% of their average weekly earnings (before tax deductions) for the first six weeks, and,

  • £184.03 or 90% of their average weekly earnings (whichever is the lesser) for the remaining 33 weeks.

Employed fathers or partners, including same-sex partners, of the mother or adopter can take paternity leave.

Employees who qualify for statutory paternity leave and pay can either take one week off or go on leave for two consecutive weeks.

As of April 2024, paternity allowance is £184.03 per week or 90% of your average weekly earnings (whichever is less).

UK couples can share up to 50 weeks of parental leave and 37 weeks of pay. The parent receiving maternity pay takes less than the maximum and shares the remainder with their partner. 

5. Sick Pay

As of April 2024, employees are entitled to a minimum Statutory Sick Pay (SSP) of £116.75 per week for up to 28 weeks.

How does the payment work?

The payment for this mandatory benefit starts on the fourth day of an employee's sick leave. 

So, an employee will get sick pay for all days they are off from work due to illness, except for the first three.

B. What Are the Supplementary UK Employee Benefits?

Some additional benefits employers offer employees include medical, retirement, and health insurance coverage. These supplementary benefits can enhance employee satisfaction, attract top talent, and even help reduce turnover costs.

Companies partner with insurance/benefits providers to offer these benefits effortlessly.

Let’s check out some popular benefits:

1. Private Medical Insurance (PMI)

Private Medical Insurance (PMI) ensures:

  • Swift access to top-tier clinics and healthcare providers.

  • Comprehensive coverage for medical treatments, including

  • Exceptional quality of health services.

It provides a range of different services, which cover:

  • The cost of hospitalisation 

  • Diagnostic tests like MRI (Magnetic Resonance Imaging) and CT (Computed Tomography) scans  

  • Surgeries

  • Doctor's consultation 

  • Nursing care

  • Cancer treatments

Companies can partner with PMI providers to offer a range of plans to employees. You can bear the plan's full cost or share the premium with employees.

Employees can also decide the coverage level they need and choose a basic plan to save money.

What’s the best way to offer PMI to your UK employees?

It’s Kota!

Kota offers cost-effective private health insurance plans through its partnership with Vitality, a leading UK health insurer, ensuring top-quality care for your employees.

2. Life Assurance

Life assurance, or whole-of-life insurance, provides a lump-sum payout to the employee's family or dependents upon death.

Unlike general life insurance with a set pay period, life assurance covers the employees for their whole life. No surprises there!

There is no fixed payout for life assurance. Based on their situation, employees can choose the amount they wish to receive.

Life assurance premiums are typically not tax-deductible for the employer, and the payout to beneficiaries is usually tax-free. 

Employers typically cap their contribution at a certain amount — and if the employee wants a larger coverage, they'll have to bear a portion of the insurance premium.

Life assurance is a personal product and depends on your employee's:

  • Age

  • Health problems

  • General lifestyle options, and,

  • Amount of coverage required

To offer life assurance benefits to your employees, you can partner with a provider that complies with the Financial Conduct Authority (FCA) 's regulatory standards.

3. Income Protection (Long-Term Disability)

Income protection, also known as Group Income Protection (GIP) or permanent health insurance, offers a monthly income to employees unable to work due to illness or disability, whether temporarily or permanently.

The employees receive around 50-60% of the payment from the insurance providers, while employers usually pay between 1.25-1.5% of the payroll.

The income employees can claim must be half or two-thirds of what they earned before they stopped working due to disability.

What's the catch?

Employees must wait at least four weeks after applying for GIP for the pay period to start.

While four weeks is the minimum waiting period, in some cases, income protection compensation can start two years after the employee has stopped working due to disability. This is because the employee will continue receiving their employer's sick pay.

4. Critical Illness Cover (CIC)

Critical illness insurance grants a lump sum payment to employees diagnosed with specific illnesses or disabilities such as: 

  • Stroke

  • Loss of arms or legs

  • Heart attack

  • Multiple sclerosis

  • Parkinson's disease

  • Cancer

How do employees avail of CIC?

When they apply, they must be residents of the UK. The maximum age for applying for Critical Illness Cover varies by provider, with some providers extending coverage up to 70 years.

5. Dental Insurance

Dental care insurance provides all kinds of dental coverage to your employees. 

This can range from routine procedures like extractions, dentures, and root canals to emergency services.

There are two types of dental insurance plans available in the UK:

  • Dental insurance coverage: This involves paying the dentist for the treatment and then claiming the amount back from the insurer.

  • Dental payment plans: They are also known as 'capitation' insurance plans, which spread the cost of treatment over a defined length of time with a regular monthly payment from your employer.

The cost of dental insurance plans can range from £65 to £300 a year, but this amount can vary between insurers and insurance policies.

As an employer, you can include dental insurance as a part of your employee benefits package or through private medical insurance plans.

6. Health Cash Plan

Health cash plans require employees to pay a monthly charge to their insurance providers in exchange for covering their usual medical and dental expenses up to a certain limit.

For example, employees could pay £10 per month for a plan that covers up to £200 in dental expenditures, £100 in physiotherapy, and £100 in optical costs.

But how does a health cash plan differ from health insurance?

Health insurance covers treatment for diseases that arise after employees enrol in the plan, while a health plan is used to pay for ongoing and routine treatments.

Your employees can also avail of health insurance and health cash plans simultaneously.

7. Employee Assistance Programmes (EAP) and Virtual GP (General Practitioner) Services

An employee assistance programme aims to improve employee well-being and productivity while minimising absences.

It includes face-to-face, phone, or online counselling sessions to provide professional help to employees with personal and work-related concerns.

Most employers provide an employee assistance programme (EAP) as a separate benefit or as part of the Income Protection package.

Online virtual GP services have also grown in popularity and are offered as a value-added service as part of a PMI or GIP benefit. 

Some of these services may include:

  • Scheduling and cancelling appointments

  • Re-ordering prescriptions

  • Viewing a patient's medical records (containing information on allergies, immunisations, diagnosis, medications, and test results).

8. Employer-Financed Retirement Benefit Scheme

Want to offer retirement benefits to your senior executives?

Set up an employer-financed retirement benefit scheme!

An employer-financed retirement benefits scheme offers senior employees a lump sum, gratuity, or other cash and non-monetary benefits.

Retirees can receive retirement benefit payments: 

  • On/after their retirement or death in connection with the service;

  • In case of any change in the nature of their service; or

  • Due to a pension-sharing order or provision.

Pension arrangements, like registered government pension schemes, and benefits, like on-job injuries or accidental death, aren't included in the employer-sponsored retirement benefit framework.

C. What Are Popular Employee Perks in the UK?

An employee perk, also known as a ‘fringe benefit’, is a non-monetary compensation you can offer your employees in addition to their regular wages or salaries. 

This can include:

1. Company Cars

Employers can offer company cars to employees or pay their car allowance when they travel to or from work for business purposes.

You can also decide to rent the cars for your team members who receive them as employment benefits, which lowers your tax liability compared to owning them. 

2. Tax-Free Childcare 

The tax-free childcare program offers financial support to working parents in the UK, helping them cover childcare costs and manage expenses more easily.

Working parents can receive up to £500 every three months (up to £2,000 a year) for each child. If the child is disabled, the amount goes up to £1,000 every three months (up to £4,000 a year).

An employee’s eligibility for the program is determined by their:

  • Work status: Whether they're employed, self-employed, or a director at a company.

  • Income: It takes into account the total income of the employee and their partner (if any).

  • Child's age and condition: It considers the child’s age and health conditions to assess if they require additional support.

  • Immigration status: This check is for employees who live outside the UK — and verifies if they have a National Insurance number and fulfil other eligibility criteria.

The tax-free childcare program can be used to pay for nurseries, childminders, nannies, after-school clubs, etc.

When someone qualifies for tax-free childcare, they must create an online account for their child and add money. For every £8 they put in, the government adds £2, which can be used to pay the childcare providers.

As of April 2024, the UK government is expanding childcare support in phases. Working parents of 2-year-olds can now access 15 hours of free childcare weekly. Starting in September 2024, this support will include parents of children aged 9 months to 3 years. Furthermore, starting September 2025, eligible parents of children from 9 months up to school age will receive 30 hours of childcare support per week.

3. Bike to Work

Offer a ‘bike to work scheme’ to make daily commuting easier for your employees. 

In this work scheme, you purchase the bike for your workers and let them rent it for a set period. Once the rental period ends, the employees can buy the bike at a reduced price.

This way, employees can save up to 42% of the taxes they would have had to pay to purchase a new bike.

4. Gym Membership

With the COVID-19 pandemic, many people prioritised their physical fitness and mental well-being.

Based on these trends, employers offer employees benefits like free membership to gyms and sports clubs.

You can also pay for your employees to access sporting and recreational facilities.

A wellbeing benefit can include access to sporting activities like cricket, football, basketball, etc., or recreational facilities like taking them for trips, hiking, camping, etc.

Remember: Improving employees' physical well-being and mental health can increase productivity and employee satisfaction and reduce absenteeism.

5. Workplace Canteens 

If you offer free or subsidised meals to your employees at workplace canteens or offer vouchers that cover the cost of these meals, you're exempt from paying tax and National Insurance on the expenditure.

The exemption applies:

  • To meals served in any canteen — it doesn't have to be on the employer's premises or limited to employees of a single employer.

  • If everyone is given a free lunch.

A lunch provided by a third party to an employee while the employee is working on the third party's premises is also exempt from taxes.

National Insurance Contributions (NIC) are taxes British employees pay to fund government benefit initiatives such as the State Pension. These contributions are made through payroll deductions.

6. Travel and Subsistence

If your employees travel for business purposes, you can pay the cost of their trips.

This includes paying for your employees' accommodation, meals, and other subsistence costs.

Subsistence costs include other necessary travelling costs, such as parking charges, tolls, congestion charges, or business phone calls.

7. Business Travel Mileage for Employees' Vehicles

Some employers also reimburse employees for business trips they may take using personal vehicles.

Employers can make tax and National Insurance Contribution (NIC)-free payments to their employees to reimburse these travel expenses.

8. Relocation Costs 

If your employees are relocating to a new location within the UK or moving out of the UK due to an internal work transfer, you can pay for their relocation expenses.

Paying for your employee's relocation costs may include:

  • The cost of buying or selling a home,

  • Moving costs (paying for labour, moving trucks, etc.) 

  • The cost of buying furniture for a new home

  • Availing home loans

9. Training Payments

Employers can offer training or work-related workshops to regular employees to enhance their skills.

The employers incur the full cost of the training, which includes books, travel, course fees, etc.

10. Remote Working Expenses 

If you have remote working employees, there are certain expenses that you may have to cover as an employer to ensure their financial well-being. This includes:

  • The cost of setting up work-from-home office equipment like computers, furniture (desks or chairs), internet connection, and stationery.

  • Additional household expenses like electricity charges.

11. Mobile Phone Costs 

Some companies provide their employees with mobile phones for official purposes only, such as making or answering work calls (local and international).

If you provide work phones, you will have to cover the costs of phone bills.

If you do not offer work phones, you can still reimburse your employees' phone costs for the phone calls they make for official purposes.

In addition to these perks, companies can also have a tailored employee discount scheme to help their team save money on everyday purchases.

Why Must Employers Offer Employee Benefits in the UK?

Missing out on offering mandatory employee benefits schemes can be troublesome. 

Employers who fail to provide statutory benefits to employees can be charged with breach of contract and ordered to appear in civil service courts or at an industrial tribunal. 

Based on the severity of the violation, they may also have to pay fines imposed by the government. Companies can also be asked to stop operating in the UK in extreme situations. 

But that's just for mandatory employee benefits.

Why should you offer supplementary benefits?

Employers offer extra benefits to their employees to:

  • Ensure a smooth working environment  

  • Show that they care about their employees’ physical and mental health

  • Boost the economic stability of the employees

  • Encourage them to maintain a healthy work-life balance

  • Increase employee retention 

  • Strengthen the company's Employee Value Proposition (EVP) to attract potential employees

Did you know a human resources management study found that 46% of job seekers would forego additional compensation in exchange for comprehensive healthcare and life insurance plans?

Offering an employee benefits scheme can also help employers save the cost of regular salary hikes.

How?

While good pay is essential to employees joining your company, they also prioritise additional perks and benefits like private medical insurance, flexible working hours, etc.

This makes employee benefits the top driving factor candidates seek when exploring employment opportunities.

How Much Do UK Employee Benefits Cost Employers?

The cost of offering employees benefits (especially health insurance) may depend on the company culture and the required level of coverage.

A study estimates that around 32% of a company's salary expenses should go towards employee benefits. 

The same study suggests that businesses allocate 20% to 50% of an employee's salary to cover their benefits package.

Company benefit expenses (particularly core benefits like health insurance) vary greatly depending on the size, demographics, claims history, and degree of coverage necessary.

Still confused? 

Try Kota’s free benefits cost calculator to plan your budget better.

Are Employee Benefits in the UK Taxable?

Some employee benefits in the UK are taxable, while others offer tax advantages.

  • Taxable benefits include private medical insurance, company cars, and gym memberships.

  • Tax-advantaged benefits include employer pension contributions and the bike-to-work scheme.

The UK also offers tax exemptions for certain small, non-cash benefits known as "trivial benefits." For a benefit to qualify as trivial and therefore be exempt from tax and National Insurance contributions (NIC), it must meet the following criteria:

  • The benefit must cost £50 or less

  • It cannot be given in cash or as a cash voucher

  • It must not be a reward for work performance

  • It should not be stipulated in the employment contract

To avoid tax implications, some organisations may have payroll deductions or salary sacrifice arrangements that require employees to give up a part of their pre-tax salary.

The company, in return, offers them a benefit.

For example, in a pension salary sacrifice system, the employee gives up a portion of their gross salary in exchange for the employer making an equivalent payment to the pension.

This helps the employee and the company save on income tax and National Insurance contributions.

2 FAQs on Employee Benefits in the UK

Still have questions on UK employee benefits?

We’ve got you covered:

1. How Can Employers Enhance the Employee Benefits They Offer?

As an employer, here are some steps to improve your employee benefit scheme:

  • Focus on employee wellbeing: Ensure employees maintain a healthy work life balance and prioritise their mental health and overall well-being. This can be achieved by encouraging open communication among employees to discuss work-related stress and challenges.

  • Offer flexible and inclusive benefits: Develop an employee benefits package that suits everyone's needs and matches their preferences. Your employee benefits programme should include benefits that improve employee satisfaction and mental, physical, and financial well-being.

  • Improve the office environment: Create a positive work environment that promotes well-being. Consider improving the office lighting, seating arrangements, and break rooms to create a more relaxing and engaging workspace, thereby boosting employees’ professional development.

  • Think beyond regular benefits: Consider innovative employee reward strategies that go beyond monetary incentives, creating a holistic approach to employee recognition and satisfaction.

2. Are Employees Free to Choose Their Benefit Provisions?

Employees can choose their benefits packages by opting for employee discounts and voluntary or flexible benefits plans.

  • Discount and Voluntary benefits: Employee discounts and voluntary benefits allow employees to purchase products or services from their company at discounted prices or use payroll deduction and a salary sacrifice scheme.

  • Flexible Benefits Schemes: It allows employees to tailor their benefits package to meet their needs. This is done by allowing them to retain their current salary while letting them choose from a mix of benefits.

In some cases, employees can also move their salary up or down by taking fewer or more benefits.

3. Should Employers Benchmark Their UK Benefits Offerings?

In today's competitive job market, attractive workplace benefits packages are crucial. 

Benchmarking your UK offerings against similar companies allows you to see if you're keeping pace. 

This can help you attract top talent, improve employee retention, and even identify cost-saving opportunities within your benefits program. 

By understanding what others offer, you can ensure your company stays competitive, and your employees feel valued.

How do you actually benchmark your benefit offerings?

It’s simple — enrol your employee in your benefits program through Kota. This innovative employee benefits platform lets you compare your benefits directly against the market and design a package that meets your UK employees’ expectations.

Offer Employee Benefits in the UK to Support Employee Well-Being

Whether you're a large enterprise, small business, or startup, offering employee benefits in the UK is about more than just complying with legislation.

Companies often offer employee benefits beyond the statutory minimum — from paid leave and healthcare coverage to workplace pension plans and perks like company cars.

These benefits increase employee engagement, boost retention rates, and help attract top talent.

If you’re a UK employer looking to offer your team flexible and affordable retirement and health insurance plans, join Kota. It lets you set up, manage, and scale your pension effortlessly — all in one app.


Aine Kavanagh

Article written by

Aine Kavanagh

👋🏻 Hi I'm Aine, Head of Customer Success at Kota. Whether you're a Kota customer, a Kota user, or you're just browsing, I hope to help educate and empower those who want to know more about owning their own benefits, and building financial autonomy 📚

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