Employee benefits vary from the statutory requirements to discretional benefits offered for the purposes of recruitment and retention. Discretionary items will vary by employee age, experience, level of seniority and industry. This section provides an introduction to the main types of benefit questions that arise with our client base.
Statutory benefits are in the main covered by compulsory social tax charges (known as National Insurance), which are currently applied at 13.8% of all payments made to an employee. This allows for health care provision at the state level and potential welfare benefits. Employer pension contributions are now compulsory although the rates are low compared to traditional employer based contributions. 401k plans do not exist in quite the same way as the US but are comparable. Commonly pension provision from an employer is in excess of the statutory rates.
Typically, but with lots of exceptions, benefit costs provided by the employer are tax deductible for Corporation Tax, but attract the social tax charge for the employer and employee.
Private health cover paid for by the employer varies by industry. It works rather differently from the US most markedly in terms of cost. As a general rule the more senior an employee is in an organisation the more likely they are to receive health care costs from the employer.
Dental cover is more rarely provided, the taxable treatment is the same as health care.
Car allowance is taxed in the same way as salaries, these have largely replaced quite outdated company car schemes that carry onerous tax treatment on the employer and employee.
Stock options, the rules and regulations are too complex to summarise here, though there are certain HMRC accepted tax minimisation strategies available.
There are literally dozens of other discretionary benefits which are posed to employers albeit on a more piecemeal basis than those listed above.