When starting a business, employee benefits is probably the last thing on a founders mind, but as soon as there are employees, there are some benefits that have to be introduced by law.  As the business grows, it is easy to continue to ignore this issue, but a well-constructed benefits package can contribute positively to business performance and affect an organisations ability to compete for key talent.  Not only can a benefits package attract employees and contribute towards positive employee attitudes, but it can also help to reduce staff costs.  Jim Crawley, a principal at Towers Perrin explains: “The people angle on cost control is making sure you have got the best people and in particular making sure they do not leave again because the cost of staff turnover is disproportionately high. If you can do clever things with benefits to make sure that you can bring people in, and in particular that you can persuade them not to leave again then, that keeps your costs down.”

What are your objectives?

When implementing any strategy, the first thing is to set objectives.  A benefit strategy could be introduced for many reasons, for example to support existing business goals such as improving sales or productivity; to recruit and retain high performers, or to achieve market competitiveness.  It is important to define exactly what the strategy is expected to achieve.  It may also be necessary to consider what other organisations in the area or sector do to help decide whether the organisation wants to match or beat its competitors. When setting the objectives, it is also essential to consider the constraints that will be placed on the benefit package design.  Issues such as money and time are likely to be the biggest factors for any small company.  However, a small budget does not have to mean any benefits; it just means that some creativity may be required in its design and communication.

Choice of benefits

When designing a scheme, there are a range of benefits available from which to choose.  There are the basic forms of protection such as life assurance and health care both of which appeared in the top 10 list of popular benefits reported in the Chartered Institute of Personnel and Development’s Reward 2007 survey.    Although some can also offer protection for employers by helping to control absence, they can be expensive and harder to source for small companies.  Pensions came at the top of the list and are often seen as an “essential” on a potential employee’s wish list.  Small businesses do not need more than a lowcost stakeholder pension scheme which if well communicated can project the image of a professional and responsible employer.  Additionally, similar tax-efficient benefits which take advantage of employees making salary sacrifices can lead to National Insurance savings for both the employee and employer.  Benefits such as childcare vouchers, bicycle loans and mobile phone purchases can all be offered in this way.

Flexible benefits

One way of offering a range of interesting and innovative benefits is to establish a flexible benefits scheme.  In the past, this has only been available to large organisations due to cost.  However, with the development of IT and the entrance of some innovative providers to the market, they are now available for employers with as few as 15 employees. Under flexible benefits schemes, employees can choose their own benefits from a range. Often they can choose to upgrade certain benefits in exchange for others.  Staff either spend their money or are given a budget that they use to ‘buy’ the benefits they want.  Flexible benefits schemes usually maximise the use of tax-efficient benefits and may also include voluntary benefits.  Voluntary benefits are a selection of discounted products or services which are made available through an employer but are paid for by staff out of their taxed income. The employees benefit by each pound of their salary buying more than a pound’s worth of goods or services hence making their salary stretch further.  Flexible benefits schemes are particularly attractive as they enable an employer to offer a wider range of benefits and tailor them to employee needs, whilst still managing the cost.


In order to select the type of benefits to include in a package, it is worth not only looking at what other companies offer but also asking current employees what they would value.  This can be done through an employee opinion survey or focus groups.  Care should be taken however, not to promise something that cannot be delivered within the constraints and objectives of the proposed scheme.

For all companies, irrespective of size and budget, if objectives are set and creativity is used, an effective benefits strategy is achievable.

For information and advice on setting up and administering a range of employee benefits please contact Anita Wynne at Beststart HR on awynne@beststarthr.com or Tel: 01438 747 747.