Employee benefits Employee benefits are those parts of the remuneration package that are not cash pay. Smith (2000) estimated that employee benefits can comprise up to half the cost of the total remuneration package for some staff. There is an absence of theory and research on the effects of benefits on employee motivation and performance.

Main types of benefit Extra-statutory sick pay Pensions Holidays with pay Private heath insurance Life assurance Maternity leave Paternity leave Parental leave Long-term disability/ permanent health insurance Extra-statutory redundancy pay Career breaks/sabbaticals Training and education fees Company discounts Assisted travel to work (season ticket, cycle loans) Sports or social clubs Subsidised catering Company car/mileage allowance Health screening Free or subsidised accommodation Company loans and mortgage assistance

Benefits policies Who should be protected or benefited? How much choice should employees have? How should benefits be financed? Are there legal minimum requirements (eg leave, sick pay)? To what extent should the benefits be harmonised for all employees?

Major trends in benefits Increasing concern about the cost of benefits to employers (especially retirement benefits) Increasing legal minimum requirements Increasing ‘family-friendly’ benefits (eg paid maternity leave, paternity leave, the right to request flexible working) Increased use of flexible or ‘cafeteria’ benefits

Legal minima for UK benefits Annual leave Sick pay Paid maternity leave Paternity leave Right to request flexible working Redundancy pay

Flexible benefits A system whereby employers provide a degree of employee choice in the benefits received One in ten UK employers allows some flexibility in benefits (CIPD, 2007) Two forms identified: 1) ‘within benefit’ flexibility, whereby workers can take more or less of a particular benefit; and 2) ‘across benefit’ flexibility, whereby an employee is given an individual budget and points to select the benefits they desire from a menu (Heery and Noon, 2001).

The pros and cons of flexible benefits Advantages Employees can choose the benefits they want and value. If a budget system is adopted, employers can control the cost of benefits. Employers and employees share responsibility and design of the reward package. Benefits can be changed to suit lifestyle. The system avoids duplica- tion for dual-career couples. The employer is seen as flexible. Disadvantages The system can be complex and difficult to administer. Employees need good financial counselling to ensure that the right choices are made. Discounts on some benefits may be lost if coverage ceases to be blanket. Employees may feel that the budget system limits the value of what is on offer and can be seen as a reduction in entitlement.

Voluntary benefits Voluntary benefits are not funded by the employer. Instead, the employer arranges preferential rates on a variety of benefits and services. Voluntary benefits on offer can include financial products, health products, motoring services, home and garden products, entertainment and gifts. HMRC allows ‘salary sacrifice’ systems, whereby employees can give up part of taxable pay in return for a non-cash benefit that is treated in a more beneficial manner for tax and/or National Insurance. IDS (2004)