Pensions, death in service, childcare, PMI, cars, shares - employee benefits - by independent financial adviser John Bramwell

Employee Benefits

What are the best employee benefits?

This is very much dependent on the individual employee. For someone with a young family to support, death in service (life insurance), childcare vouchers and private medical insurance might be the most valued. For someone with no dependents, an executive company car or a good pension scheme could be more important.

Increasingly employers are selecting flexible benefit packages that allow the employee to choose which benefits they require. This not only keeps costs down for the employer but also ensures greater employee satisfaction with the overall benefits package.

Death in service - Usually this inexpensive life cover is at a level equivalent to two or three times annual salary.

Childcare vouchers - Childcare vouchers are a new tax-efficient way of putting an extra £75 per month in your employee's pockets while, at the same time, saving you money. Simply exchange part of their salary for the vouchers. Neither you nor your employee pays any tax or National Insurance on the portion of salary exchanged. Your employees use the vouchers to pay for their childcare with any registered provider.

There are a number of companies that can set up and run voucher schemes for you, such as the Bury St Edmunds-based Parentbond Limited.

Private medical insurance (PMI) - Many levels of cover are available. Schemes including an employee's family members are most well-thought of, as they show the employer's commitment to the general well being of the whole family rather than just to getting the employee back to work as quickly as possible. See also private medical insurance.

Pension - For businesses with five or more employees pensions have to be available by law. Many small businesses have complied with the law and set up stakeholder schemes but with no employer contributions being made. However, employees often construe these nil contribution schemes as meaning their employer may not be interested in their long term future. The pensions most favoured by employees are final salary schemes, though they have become too much of a liability for most employers. In the future employers are more likely to use group SIPPs to reward their better paid employees.

Company car - These used to be one of the best benefits available, primarily as a status symbol. However taxation rules have eroded the benefit so much that many employees now prefer to have the option to be paid an increased salary.

Company share scheme - These are popular with large companies as they are tax-efficient and employees can benefit from the general well-being of the company. This can also promote staff loyalty, although if the company is not doing well this might be arguable.