Types of benefit package on offer
The complexity of benefits packages has led to a myriad of definitions. Our research is based on the following:
Core package: the traditional package of employer-paid benefits that may allow some flexibility within individual benefits, but staff can’t opt out of or switch between perks.
Flexible benefits package: flexible package of employer-paid benefits which allows employees to trade between two or more benefits, or between employer-paid benefits and cash.
Voluntary benefits: products and services on which the employer has negotiated a discount with suppliers, but the employee pays for the benefit out of net pay.
Salary sacrifice: tax-efficient benefits that employees select and for which they sacrifice some pay in order for their employer to buy the benefits on their behalf.
Proportion of employers offering benefits to some or all staff
|†||For all staff||For some staff|
|Counselling/employee assistance programmes (EAPs)||51%||7%|
|Extra holidays for long service||44%||14%|
|Private medical insurance (PMI)||28%||38%|
|Season-ticket travel loan||28%||10%|
|Income protection/permanent health insurance||26%||24%|
|Personal accident insurance||26%||10%|
|Group personal pension||24%||11%|
|Optical care/vouchers (above statutory minimum)||20%||5%|
|Organisation’s own products for staff||20%||4%|
|Defined benefit (final salary) pension||19%||33%|
|Defined contribution (money purchase) pension||18%||21%|
|Save-as-you-earn (SAYE)/sharesave plan||12%||3%|
|Critical illness insurance||10%||11%|
|Share incentive plan (Sip)||9%||5%|
|Healthcare/hospital cash plan||8%||8%|
|Other share or option plans||4%||16%|
|Company share option plan (CSOP)||3%||11%|
|Fuel for private use||2%||30%|
|Company car through contract hire||1%||39%|
|Company car through outright purchase||1%||14%|
|Long-term incentive plan (L-tip)||1%||23%|
|†||†||Sample: all respondents|
Commentary on table of core benefits
The increasing complexity of benefits packages means that employers tend to offer perks through many methods, sometimes combining a core package with voluntary benefits or incorporating core benefits into a flexible benefits system and allowing staff to flex them up or down. Then there is the added complexity of tax-efficient benefits, such as childcare vouchers and bicycle loans, which tend to be offered through salary sacrifice as a voluntary benefit or as part of flex. As a result, there is significant confusion over the definitions of different types of packages. We have used specific definitions for the purposes of this survey (see below).
Core benefits are those that form part of the traditional package where the employer pays for all of the benefits, and not employees. Some 57% of employers claim to offer a core package to all their employees, while 21% do so to some staff. The last time we conducted research into UK employers’ benefits strategies, in 2004, 37% of employers said they offered a core package with a further 31% combining it with voluntary benefits.
As to what benefits they offer, the list is endless. We asked employers to specify whether the benefits they offer are provided to all staff or just a few so that status benefits such as company cars (and car allowances) and private medical insurance could be identified.
Among employers, the most popular core benefit offered to all staff is life assurance, the same as three years ago. Other benefits such as income protection, extra holidays for long service, and private medical insurance remain popular.
Car parking is one benefit that appears to have increased in popularity among employers. This is perhaps because employers now consider free car parking on site to be a benefit.
Employee assistance programmes (EAPs), which employers often regard as a means of safeguarding themselves against stress claims, have significantly increased in popularity. In 2004, 30% of employers offered the benefit to all staff, while 51% now do so. This rise could in part be due to more attractive prices being offered by providers as they face increased competition. EAPs are most popular among employers with between 501 and 5,000 staff (more than 60% offer them to all) and in the public sector where 61% of employers offer them to all.
While defined benefit (DB) pension plans remain as popular as they were back in 2004, they have now been overtaken by group personal pensions (GPPs) offered by 24% of employers to all staff. It is no great surprise that 66% of employers in the public sector offer a DB pension to all staff, while only 10% of publicly-quoted companies, 7% of private firms, and 24% of voluntary sector employers do the same. Less than 10% of employers with 500 or fewer staff offer DB pensions, compared with over 20% for larger organisations. On the other hand, GPPs are offered to all staff mainly by organisations with fewer than 500 staff and in privately-owned firms.
Smaller employers with fewer than 100 staff are the most likely to offer critical illness cover (25%) and private medical insurance to all staff (50%). Many directors of small companies have cover and their advisers will often recommend group deals.