Paying employees a decent salary is normally a good starting point, but you might also offer other perks to add value to their overall ‘package’ or as part of your overall company culture to be a good employer.
What are the benefits of giving perks to employees?
Happy employees tend to stay put, reducing the risk of them taking their knowledge, talent, and skills somewhere else. Creating a more comfortable and rewarding environment for your staff can have a huge impact on morale and productivity.
It not only shows that you appreciate the work they put in, but it also means you have a better chance of holding on to valuable employees and finding the best people. Recruitment can be competitive (and expensive), so the value-added perks you offer might help you to attract the best candidates, and keep them.
What sort of staff perks are there?
Unlike more formal performance-related bonus schemes, staff perks aren’t normally a contractual right. This means you can be as flexible and creative as you like, providing benefits to help staff feel more satisfied and appreciated, such as:
- Free or subsidised meals
- Staff social events
- An extra day off on their birthday
- Travel passes or free parking
- Gym membership (or well-equipped facilities on-site)
- Flexible working hours, or working from home
Company cars
Company cars are a popular perk, especially if employees need transportation to carry out their job. The other good thing about company cars is you can add things like branding, company web addresses and phone numbers to them. Perfect for a bit of promotion! You can also choose the car brand you want or go greener with a fleet of electric cars.
Car allowance
Instead of offering a company car, you could consider providing a car allowance instead. It’s often a lot less hassle because you don’t need to go hunting for a suitable vehicle, pay the up-front cost, or pay for maintenance and servicing. Bear in mind though that you do have a legal responsibility to make sure your staff member’s car is MOT’d, taxed and in road-worthy condition.
Share schemes
Company share schemes can be used as a way to ‘share’ some of the benefits of being a shareholder with your employees. Owning shares can be quite attractive for employees because it usually means they’re entitled to dividends from the profits that their work helps to generate. You can even set up different types of shares, so you don’t have to pay the same rate of dividends to everybody.
Some employee share schemes come with tax advantages for those in them, although there are additional reporting requirements if you go down this route.
You can learn more about Employment Related Securities schemes in our blog.
Do company perks affect tax?
Yes, some do, so it’s worth double checking that the perk you’re offering doesn’t have tax implications for your employee (and National Insurance for you as their employer)!
Known as Benefits in Kind, employees will generally need to pay tax on the value of some perks they receive, such as company cars or medical insurance (although there might still benefits to paying your own medical insurance through your limited company). As their employer, you’ll need to make National Insurance contributions on these too.
You can either report these to HMRC through your normal payroll (imaginatively known as ‘payrolling’) or by submitting a P11D Form at the end of the year. From April 2027, the option to submit a P11D will be removed except for employment related loans and accommodation.
What tax-free benefits could I offer my employees?
Providing non-taxable benefits to your staff means you won’t need to pay employer’s National Insurance contributions on their value, and your employee won’t need to pay tax on them. As ever with anything tax-related, the rules around what you can offer as a tax-free perk are rather strict, so we’ll explain the conditions you’ll need to meet.
Childcare: Vouchers or a workplace nursery
This is a tricky one because the rules changed in 2018, so you can continue providing childcare vouchers to staff already receiving them before the change, but can’t add new people to the scheme.
Employees might instead be able to get tax free childcare or free childcare depending on where they live, the age of the child, and how many hours they work.
Cycle-to-work scheme
This is classed as a salary sacrifice scheme, where employees ‘sacrifice’ part of their earnings in exchange for buying a bike or cycling equipment. Because your employee is putting up some of their salary before tax, there’s less income to actually pay tax on (which also means less employer NICs for you to pay – bonus).
Trivial benefits (including a good old Christmas party!)
Trivial benefits are basically small ‘token gifts’. They come in various shapes and forms such as bottles of wine or beer, homemade goods, tins of biscuits, or team lunches.
When December rolls around there are also lots of reasons (including tax ones) why throwing a Christmas party for your staff is a good idea after a long year.
You can put on a bit-of-a-do for your staff without it costing them anything in tax – and you’ll be able to claim tax relief on the party’s expense too, but only if it:
- Is open to all members of staff
- Is an annual event, like the Christmas do or a summer barbecue
- Costs less than £150 per person (for the tax year)
Health: Wellbeing and check-ups
Helping your employees take care of their health and emotional wellbeing can also be a tax-free benefit. Examples would be optical, hearing or dental care or mental health support.
This could be access to a counselling service which is available to all staff – although this doesn’t include advice or treatment. You can also provide up to one health screening assessment and one medical check-up each year. The rules around paying for medical treatment are a bit more complicated, so have a chat with your accountant if you’re not sure.
Meals: Free or subsidised meals for staff
You can provide employees with free (or subsidised) food, or use a ticketing system which allows staff to get them, but only if:
- Meals are provided on your business’s premises or in the staff canteen
- They’re available to all staff
Take the quiz to see if your food and drink expenses are allowable for tax relief.
Mobile phones
You can provide an employee with one tax-free mobile phone or SIM card as long as the contract is between you and the supplier. You can provide additional phones but these won’t be exempt from tax (although you can choose which one). Just be aware that this doesn’t include other devices such as tablets.
Rewards: Long service awards and suggestion schemes
That employee who’s worked for you so long that they’re part of the furniture can receive a tax-free award for their loyalty as long as they’ve worked for you for at least 20 years and haven’t received a long-service award in the last 10 years. The value of the award is capped at £50 per year of service.
You can also reward employees for good suggestions, special effort, or ideas which improve the efficiency and effectiveness of your business. Again, the rules and amounts are a bit complicated, so chat with your accountant or double-check with HMRC.
Vouchers
Each employee can receive up to £50 in vouchers each tax year, as long as the voucher can’t be swapped or sold for cash.
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