Voluntary benefits
March 7, 2009
Many employers are currently reviewing their employee benefits packages in light of the recession, and a few have started to reduce spending on benefits - for example reducing or ceasing employer contributions to company pension schemes – in order to make financial cuts, often in order to avoid redundancies. However there are opportunities to maintain some employee benefits with little or no cost to the company; through the provision of voluntary benefits.
Voluntary benefits are those that employees can purchase through their own salary, either before or after tax and NI deductions are taken, depending on the scheme. By purchasing the product or service this way, the employee gains a discount and therefore a ‘benefit’. Voluntary benefits that are purchased out of an employee’s pre-tax salary payment are called ‘salary sacrifice’ benefits and include childcare vouchers – which are a great way for parents to save a lot of money on their childcare, provided it is through a registered childminder, nursery, after school club etc. (For more information on childcare vouchers see my post ‘Help staff benefit from cheaper childcare’ (April 17th, 2008)). Another good option is the cycle to work scheme – a government initiative to encourage more people to travel to work via a more environmentally friendly and healthy method. This benefits the employee in two ways: firstly, the bike is bought out of the employee’s gross salary, meaning that less tax and NI is deducted on the remaining amount; secondly, there are larger providers of this scheme so they usually provide a discounted price for the bike in the first place. Both the childcare vouchers and cycle to work schemes are really easy to set up and don’t cost anything to run.
There is a massive range of discounted voluntary benefits that can be purchased out of an employee’s net salary – including healthcare options such as medical or life insurance, gym membership, discount vouchers for retail outlets or supermarkets (good if you know you spend a couple of hundred pounds a month on food in one particular store), season ticket loans for public transport (this works by the company purchasing an annual ticket – which is cheaper than shorter tickets – and then the employee pays the company back over a year), and loads of others. Very large companies often run their own scheme and use their size to negotiate really good discounts from leading outlets, and this way they can tailor their scheme to the exact needs and desires of their workforce. Smaller companies however will not have this kind of leverage and will often have to join generic schemes that are run by larger outsourced benefit providers, which there are many of.
There are other potential issues with voluntary benefits schemes, such as monitoring the quality of discounts and services provided (as a poor experience of an organisation that an employee gained through the benefits scheme could reflect badly on the employer), however in these difficult economic times voluntary benefits could offer a valuable alternative to costly existing schemes whilst maintaining some kind of benefit to employees.
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