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Employee Benefits Schemes: Definition, Benefits, Examples

7 min read
employee benefits schemes

Employees often have many different job options with similar salary brackets. In a bid to one-up their competition, organisations are adding other elements to the mix in the form of an employee benefits package to try and tip the scales in their favour. As a result, there is now so much more to weigh up when it comes to choosing your next employer.

But employee benefits aren’t just used by organisations to attract talent. They’re also being leveraged to retain the employees already working within a company.

In this article, we take a look at the types of employee benefits organisations are offering to their employees.

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Definition and Purpose of Employee Benefits Schemes

Employee benefits schemes cover a whole host of supplementary perks and incentives that companies provide to their employees beyond the basic pay. These offerings aim to enhance the overall employment experience by addressing various aspects of an employee’s wellbeing, financial security, and work-life balance. The primary purpose of these employee benefit schemes extends beyond mere transactional compensation. Instead, they are strategic tools designed to attract and retain top talent.

At their core, employee benefits schemes are built on reciprocity. Companies invest in their employees’ holistic needs, recognising that a satisfied and engaged workforce translates into increased productivity, lower turnover rates, and a stronger competitive edge. These schemes also play a crucial role in differentiating one employer from another in a highly competitive job market. As job seekers assess potential employers, the range and quality of benefits offered often play a pivotal role in their decision-making process.

A new employee reviews the employee benefits provided by her new employer.

Advantages of Implementing Employee Benefits Schemes

Despite the name, employee benefits don’t just benefit the employees. There are a series of gains for the organisation as a whole, not just the individual. Let’s take a look at just some of the reasons why employers offer a range of employee benefits:

  • Enhanced Employee Recruitment and Retention

An employee benefit scheme is pivotal in attracting top talent to organisations. In a competitive job market, job seekers often evaluate potential employers based on the entirety of the compensation package, including benefits. Companies that offer enticing benefits have a distinct advantage when recruiting skilled professionals. On top of that, these benefits contribute to organisations retaining employees, as employees are more likely to stay with an organisation that invests in their wellbeing and professional growth.

  • Improved Employee Engagement and Morale

Employee benefit packages contribute significantly to building a positive and engaging work environment. When employees feel that their wellbeing is a priority for the organisation, it can motivate employees. The availability of benefits like wellness programmes, flexible work arrangements, and professional development opportunities demonstrates a commitment to employees’ holistic growth, boosting morale and overall job satisfaction.

  • Enhanced Employee Performance and Productivity

Employees with access to benefits that address their physical and mental wellbeing are more likely to be more focused and less stressed. As a result, employee benefits can directly impact their performance and productivity. In fact, happy employees are 13% more productive.

An employee sits on her living room floor as she works from home, flexibly. Another benefit afforded to her by her employer.

Examples of Employee Benefit Schemes

Employee benefits schemes are much more than a good pension and a cycle-to-work scheme. Employers are feeling the pressure to offer increasingly creative and unique benefits to their teams as a way to demonstrate their commitment to not just their happiness whilst at work but also in their personal lives.

Let’s take a look at some of the different benefits employers are offering:

  1. Health And Wellness Benefits

As the importance of physical and mental wellbeing gains widespread recognition, employers are increasingly investing in benefits that promote healthier lifestyles among their workforce.

Here are some examples of health-related employee benefits:

  • Private Health Insurance: Providing health insurance, including hospitalisation, outpatient treatments, and prescription medications, ensures employees and their families have access to quality healthcare without financial stress or the wait times of the NHS.
  • Discounted Gym Memberships: Encouraging a healthy lifestyle, companies often offer gym memberships or wellness programmes that promote physical activity and wellbeing.
  • Wellness App Subscriptions: Many organisations offer free or subsidised memberships to subscription services such as Headspace, which allows employees to take a proactive approach to their mental health. The app provides users with guided meditation and assists in improving other essential life skills for managing mental health.
  • EAPs and Mental Health Support: Access to an employee assistance programme, counselling services and mental health resources demonstrates a commitment to supporting employees’ emotional wellbeing.
  • Preventive Health Initiatives: Offering health screenings, vaccinations, and wellness workshops can also build a culture of proactive health management, which leads to reduced absences due to sickness.
  1. Financial Benefits

Financial stability is a fundamental concern for employees, and organisations should recognise their role in helping their staff achieve it.

Here are some examples of financial benefits in the workplace:

  • Pension Schemes: Providing employees with opportunities to save for retirement through pension schemes ensures financial security in their later years.
  • Employee Assistance Programs (EAPs): As well as mental health support, employee assistance programmes can also offer confidential support for personal and work-related challenges, including legal advice and advice relating to financial issues.
  • Parental Leave Pay: Whilst organisations are only obliged to pay the statutory entitlements to employees taking maternity, paternity, adoption and shared parental leave, many organisations enhance these payments to reduce the financial strain on families with newborns. For instance, instead of statutory maternity pay, some organisations boost this so that new mothers receive full pay for the first six months.
  • Bonuses and Incentives: Bonuses recognise employees’ contributions and provide financial rewards tied to company performance. Other incentives can include employee discount schemes and also offering salary sacrifice options for employees to reduce their tax contributions.Organisations can also offer Christmas bonuses, typically given as a one-time monetary reward. These not only provide employees with a financial boost but also contribute to a sense of camaraderie and festive spirit within the organisation.
    1. Work-Life Balance Benefits

Acknowledging the importance of maintaining a healthy balance between work and personal life, employers are introducing initiatives to promote this.

Here are some of the ways organisations are promoting a work-life balance through benefits:

  • Flexible and Remote Working: Research shows that almost 40% of workers say their mental health has improved since working from home. Working from anywhere and, on top of that, working flexibly gives employees the freedom and autonomy to both complete their work responsibilities and also balance this with commitments at home.
  • Paid Time Off: Although organisations are not necessarily required to do so by law, it is becoming increasingly common for organisations to offer paid time off for things such as domestic emergencies, medical and dental appointments and other personal appointments.
  • Additional Annual Leave: The statutory annual leave entitlement in the UK is 28 days (including bank holidays). Many organisations are now increasing this, acknowledging the importance of time away from work to reduce the chance of burnout. Some organisations are fully pushing the boat out with an unlimited holiday offering.
  • Four Day Week:  We’ve seen many orgnisations in the UK trialling a 4-day working week, allowing for three full days off every week, whilst retaining their full-time salary. This is a growing trend which will likely build momentum in the coming years.
  1. Professional Development Benefits

Employee growth and development are crucial for maintaining a skilled and engaged workforce. Professional development benefits encompass opportunities for skill enhancement, further education, and career advancement.

  • Training and Career Growth: Providing access to workshops, online courses, and skill development programmes helps employees enhance their capabilities and advance their careers.
  • Paid for Qualifications: Many organisations also offer to pay for formal qualifications that align with the individual’s role. This is a great benefit as the employee gains a professional qualification, and sometimes accreditation, which can enhance their job prospects in the future.

An employee reviews her private medical insurance provided by her employer.

Designing an Effective Employee Benefits Scheme

A well-crafted employee benefit scheme requires careful consideration and planning to ensure that it meets the diverse needs and preferences of the workforce. Here are some steps to follow to ensure your employee benefits scheme is aligned with your organisation:

  1. Conducting a Needs Assessment

Before choosing the benefit, organisations should understand what their employees actually want and need.  Employers can do this by conducting a comprehensive needs assessment, which can be accomplished through various methods such as surveys and focus groups. When organisations actively involve employees in the process of deciding which benefit would be the best fit, they build an understanding of which benefits would be worth the financial investment. Analysing employee demographics is equally crucial, as different age groups and life stages often have distinct priorities when it comes to benefits.

  1. Tailoring Benefits to Different Employee Segments

Every organisation comprises a diverse workforce with varying preferences and requirements. Recognising these differences and tailoring benefits to cater to different employee segments is essential for maximising the scheme’s impact. For instance, younger employees might place greater importance on professional development opportunities, while those with families might value childcare support or flexible work arrangements. Organisations can ensure that their benefits scheme is truly inclusive by offering a range of benefits that address these varying needs.

  1. Prioritising Benefits Based On Employee Preferences

Whilst offering every conceivable benefit is impossible, organisations can make informed decisions by prioritising benefits based on employee preferences. This involves considering both the results of the needs assessment and industry best practices. Benefits that align with the preferences of most employees whilst also fulfilling key business objectives should take precedence in the design process. Prioritisation helps organisations allocate resources effectively and create a benefits package that resonates with employees.

  1. Flexible Benefits versus Standard Packages

One of the crucial decisions in designing a benefits package is choosing between offering a standard package of benefits or providing employees with the flexibility to select benefits that suit their individual needs. Standard packages offer consistency and simplicity, whilst flexible benefits allow employees to customise their package according to their circumstances. 

Measuring the Impact of Employee Benefits

Implementing employee benefits schemes is not just about offering perks; it’s also about understanding their impact on both employees and the organisation as a whole. Measuring this impact is essential for fine-tuning benefits offerings, making informed decisions, and ensuring that the investment in these schemes delivers tangible returns.

Here are some ways in which organisations can measure the success of any employee benefits schemes they introduce:

  • Employee Satisfaction and Engagement

Regularly gauging employee satisfaction and engagement levels can provide valuable insights into how well the benefits scheme is meeting employee needs. Surveys, feedback sessions, and anonymous suggestions enable organisations to identify areas of improvement and make necessary adjustments to benefits offerings.

  • HR Metrics 

Monitoring HR metrics, such as employee retention and turnover rates and also absence levels, can help organisations assess the effectiveness of their benefits.

A decline in turnover rates following the implementation of new benefits could indicate that employees are more likely to stay with the company due to the enhanced benefits they receive. Organisations should also drill down into this data through the use of effective exit interviews to really get under the skin of the reasons for leaving.

For health-related benefits, monitoring metrics such as absenteeism rates and participation in wellness programmes can provide a clearer picture of the impact of health and wellness initiatives on employees’ physical and mental wellbeing. Managers can also capture qualitative data in one-to-ones with their team members to understand the impact wellbeing-related benefits are having on individuals. 

  • Cost-Benefit Analysis

Conducting a cost-benefit analysis allows organisations to assess whether the financial investment in benefits is justified by the positive outcomes. Comparing the costs of providing benefits with the value gained in terms of employee satisfaction, retention, and overall performance helps organisations evaluate the efficiency of their benefits schemes.


Amy is a knowledgeable People professional with over a decade of experience across a variety of private and public sector organisations. With a particular interest in employee engagement, Amy is an advocate for employee-centric approaches in all areas of HR which is reflected in her writing. Before a career in HR, Amy read English and Creative Writing at university and later studied for her CIPD, HR Management.

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