Employee Benefits in the UK: All You Need to Know

UK employees discussing employee benefits while walking

By Kenny Lam, Assistant Manager, Internal HR/Benefits, GoGlobal

Recent data from the Office for National Statistics (ONS) reveals that one-third of UK businesses are grappling with labor shortages, highlighting the ongoing Race for Talent. In this highly competitive landscape, offering attractive employee benefits has become more critical than ever.

Employee benefits in the UK are a vital part of the compensation package that employers offer. They extend beyond basic salary to include various perks designed to enhance employees’ well-being, satisfaction and financial security.

In this blog post, we explore statutory, supplemental and lifestyle benefits available to UK employees, along with important tax considerations. Understanding these benefits is essential for employers aiming to attract and retain top talent in a tight labor market.

Statutory benefits in the UK

The following benefits are mandatory for employees in the UK:

Statutory Benefit  Description 
Healthcare All citizens and qualifying residents can enjoy medical care provided by National Health Service (NHS), funded by National Insurance (NI). Employer and employee are required to contribute 0-13.8% and 0-8.0% of the salary respectively.
Holiday In general, there are eight annual public holidays in England and Wales. Scotland and Northern Ireland may additionally have local public holidays.
Maternity leave Employees are entitled to up to 52 weeks of maternity leave. This is divided into two parts: Ordinary Maternity Leave (first 26 weeks) and Additional Maternity Leave (the following 26 weeks).
Paternity leave Paternity leave is shorter than maternity leave, up to 2 weeks.
Pension Employers are required to contribute a minimum of 3% of workers’ salary into a pension scheme. The employee minimum contribution is 5% of their salary.
Sick leave Employees are entitled up to 28 weeks of statutory sick pay. 

Supplemental benefits in the UK

The following are supplemental or optional benefits that employers often incorporate into benefits packages in the UK:

Supplemental Benefit Description
Private Healthcare One of the primary advantages of private healthcare is quicker access to medical treatment and consultations. This can significantly reduce waiting times for appointments with specialists, diagnostic tests and elective surgeries compared to the NHS.
Life Insurance Employers may provide life insurance policy as part of the benefits plans. This aims to provide a financial safety net for employees’ families in the event of unmatured death.

Lifestyle benefits in the UK

The following benefits are intended to enhance the lifestyle of the workforce:

Lifestyle Benefit Description
Cycle to Work  This scheme is introduced by the Government’s Green Transport Plan. The employee agrees to give up part of the pre-tax salary in exchange for cycling equipment from the employer. As the payment is made before deductions, the employee will not pay tax on that portion of the salary. He or she will save on income tax and National Insurance.
Flexible working hours Following new regulations implemented in 2024, UK employees request flexible working within certain conditions set by the employer. The goal is to achieve a better work-life balance. 
Wellness fund Providing allowances for wellness expenses, including gym memberships and equipment, aims to improve well-being and job satisfaction. This promotes a healthier lifestyle and increases productivity. 

Tax considerations and benefits in kind

Each benefit is taxed differently, according to what category of benefits it fits into. For instance, private healthcare is considered a benefit in kind by HM Revenue & Customs in the UK.

To mitigate these tax obligations, some employers use payroll deductions or salary sacrifice arrangements. Employees give up a portion of their pre-tax salary in exchange for company benefits. This strategy reduces taxable income and National Insurance contributions (NIC) for both the employee and the company.

Offering employee benefits

Offering these benefits not only helps in attracting and retaining talent but also addresses the overall needs of the workforce. It’s crucial for employers to comprehend and clearly convey these benefits. Benefits aid in staying competitive in the UK job market and can deliver well-rounded compensation packages that match employees’ expectations.

Curating an attractive employee benefits package in the UK can seem overwhelming. An Employer of Record (EOR) can help you administer statutory benefits, safeguard compliance and design supplemental benefits that match market expectations. An EOR provider also assists with other employment processes such as payroll and compliance, ensuring smooth operations.

Let our local experts support your company in these aspects, ensuring your UK team receives exceptional benefits to drive talent attraction and retention.

Check out our ‘What is an EOR?’ guide or contact us to talk with an international HR expert about how global benefits can enhance your talent management strategy.