United Kingdom

[Updated 3/13/24] The UK has a tradition of strong state provision in relation to old age and sickness – both in terms of support and access to healthcare. However, over a period of decades, the cost of such provision has been increasing, and whilst still broad, in real terms, the value of these benefits has been reducing. This has led to an increase in the need for private support to supplement reducing state provision.

Asinta Partner
Anne Terry

Howden Employee Benefits & Wellbeing

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There are very few mandated benefits in the United Kingdom. Employers make choices about benefit provision based on competitive market practice and doing the ‘right’ thing. Surprisingly, the cost of benefits provision is very competitive. Employers providing a full range of relatively competitive benefits would typically be spending about 14% of payroll.

Pension provision is the most important benefit to employees and the biggest expense for employers. Young employees have traditionally shown little interest in saving for the future, which led the government to compel employers to provide pensions through the autoenrollment scheme. Private medical insurance comes in at a close second in importance, with disability following it.

Mandatory employee benefits in the UK include retirement, holiday pay, maternity/paternity pay (companies often exceed the statutory limit as part of a comprehensive benefits offer), and sick pay. Supplementary employee benefits in the UK include employer-sponsored retirement benefits, life assurance, income protection (long-term disability), critical illness insurance, private medical insurance, dental insurance, the health cash plan, employee assistance programs, and virtual GP services. Employee perks include company cars, season ticket loans, childcare vouchers, biking to work, gymnasiums, and workplace canteens.

Mandatory Employee Benefits in the United Kingdom

Workplace Pension

Pensions are a mandatory benefit in the UK and are subject to legislation. Employers must comply with legislation and auto-enroll eligible employees into an appropriate pension. Pensions auto-enrolment means employers are required to provide a minimum level of pension provision for employees. The minimum contribution rate for workplace pension schemes is currently 8% of ‘qualifying earnings’ (as defined in the legislation). At least 3% of this must be paid by the employer. However, pensions are considered a key benefit in the UK, and many employers contribute significantly above the minimum level.

Employees can contribute more, but in the UK, once contributions exceed certain levels, they become less tax-efficient.

When designing a UK pension scheme, care needs to be taken in five main areas:

  1. Contributions – what level of contributions will be competitive and attract the right talent?
  2. Contribution method—The most tax-efficient method of deducting contributions is Salary Exchange (also known as Salary Sacrifice), as it gives the employee and employer maximum relief in terms of tax and national insurance.
  3. Carrier selection – selecting the best supplier based on proposition, delivery, terms, employee engagement support, and financial strength.
  4. Default fund – The pension provider will offer a specific default fund for enrolment which is run under strict governance criteria. However, some employers may prefer to select an alternative default fund for enrolment based on their own considerations and requirements relating to performance, environmental, and social governance.
  5. Employee support – how is the scheme communicated and what specialist support are they provided with?


In the UK, the National Health Service (NHS) is a government-funded healthcare system that everyone living in the UK can use without being asked to pay the full cost of the service. This includes the following:

  • access to a doctor for medical advice, diagnosis, or treatment
  • treatment at a hospital if you are unwell or injured
  • Getting emergency help from healthcare professionals working in the ambulance services if you have serious or life-threatening injuries or health problems – this might include being transported to the hospital

The NHS is ‘publicly funded’, with the cost of provision funded through UK residents paying tax. In light of the current pressures on the NHS and increased waiting times, increasing numbers of employers are now considering private healthcare options to ensure that employees can get fast access to healthcare advice and treatment when they need it most.

Holiday Pay

All workers who work a 5-day week are legally entitled to receive at least 28 days of paid annual leave a year. This is the equivalent of 5.6 weeks of holiday (known as statutory leave entitlement or annual leave). An employer can, and typically will, include public holidays as part of statutory annual leave.

It is common for UK employers to provide greater paid holidays than the statutory minimum. In addition, many employers will offer employees the option of increasing their holiday entitlement by ‘buying’ extra days as part of a flexible benefits arrangement.

Maternity/Paternity Pay

Full rules can be found here.

Sick Pay

The government requires employers to provide a minimum level of Statutory Sick Pay for up to 28 weeks of absence – however, most employers voluntarily top up this minimum benefit by offering contractual sick pay benefits. A common approach here is to pay some sick pay (2 – 4 weeks, for example) at full pay and then reduce payments. Some industries are very generous, whereas other sectors provide no supplemental sick pay.


Supplementary Employee Benefits

Employer-Sponsored Retirement

Implementation periods for retirement plans typically take between 1 and 3 months. This scheme must be available to employees from ‘day one’ of employment, so it must be ready and, for start-ups, in place before the first employee joins. Also, a UK bank account is mandatory for the processing of contributions.

Life Assurance

The most common of the insured employee benefits in the UK. The benefit provides a lump sum payment to surviving beneficiaries in the event of the death of the employee. These plans can be established from 3 employees upwards and need to be set up under an appropriate Trust. Setting up the correct Trust is vital; otherwise, substantial tax charges will apply. Depending upon the type of scheme and trust selected, employers may need to register the scheme with HMRC. If a policy has fewer than, typically, 20 employees covered, the premiums may need to be set on a single rate rather than a unit-rated basis. Otherwise, the cost is on a flat rate basis.

Income Protection (Long-Term Disability)

Income Protection plans can be established from 3 employees upwards and are easier to set up than Life Assurance because no trust is required. Cover will not apply to any employee not actively at work when the policy commences. Claimants typically remain employed so employer’s pension contributions and National Insurance still apply. These elements can be insured, and employers will need to consider whether to include these costs.

Typically, benefits are funded by the employer, but in a flexible environment, they may be topped up by the employee. Salary-sacrificing employee contributions is not tax-efficient, as both premiums and benefits will be taxable.

Critical Illness Insurance (CIC)

This type of insurance provides a lump sum payment upon the diagnosis of a specific condition, such as cancer, heart attack, or stroke. Policies typically cover up to 30 or 40 conditions, although most claims arise from a limited range of conditions. Most commonly, the benefit is provided as a voluntary benefit funded by employees. Some employers provide employer-funded CIC to their most senior employees.

Private Medical Insurance (PMI)

This cover supplements primary care offered by the GP service and support offered by the NHS. It is primarily designed to cover acute illnesses and would not cover chronic or emergency incidents.

With this insurance, smaller schemes might have a restriction applied in respect of covering pre-existing conditions. Generally, insurers will quote on a Medical History Disregarded (MHD) basis for a minimum of 20 employees. However, it is possible that schemes can be set up on this basis from 1 employee upwards. Company-paid premiums are subject to Benefit in Kind (‘P11D’) taxation, and most corporate schemes are “fully insured” with premiums set annually. For larger employers, typically with over 1,000 employees,  the option to use a Trust, or hybrid arrangement, as the funding vehicle will give employers more control over design.

Dental Insurance

These policies are quite straightforward to set up in the UK, and the minimum criteria is normally two employees. Policies can be set up on a company-paid or employee-paid basis, and monthly costs typically range from £10 to £50 per member, depending on the level of cover required.

Health Cash Plan

This is a corporate policy to help cover or contribute to everyday healthcare costs that aren’t always covered by Private Medical Insurance. The employee pays for the cost initially, and then claims back the cost subject to policy cover and limits. The minimum number of lives for a corporate policy is three employees, and monthly costs range from £5 to £50 per member depending on the level of cover required.

Employee Assistance Programs and Virtual GP Services

Many employers offer an EAP as a standalone benefit, which is often now included within other insurance benefits, such as Income Protection. Online virtual GP services have also become increasingly popular as a convenient way for employees to access healthcare advice and support and to shortcut delays in accessing primary care through a general practitioner. This is often provided as a value-added service as part of a PMI and GIP benefit.


Employee Perks

Company cars

Small numbers of employees can be provided with company-financed cars and/or fuel or a car allowance in lieu. Although Company cars have not been as popular in recent years as the government taxes this benefit heavily, the incentives largely remain for eco-friendly vehicles. In addition, larger employers are on the increase in offering access to electric vehicles on an employee-pay basis as part of a flexible benefits program. However, in a work environment where employees travel for business, you may see either company cars provided or car allowance paid.

Season Ticket Loan

Common for commuters. The employer loans the employee money to buy a discounted annual season ticket and reclaims the money every month from salary.

Tax-free Childcare and Childcare Vouchers

The government’s tax-free childcare program replaced Childcare Vouchers in 2018. Vouchers are no longer available unless an employee is already enrolled in it and the employer offers it.

Tax-free childcare offers up to £2,000 a year per child towards childcare costs, including nursery, childminder, and wrap-around care. Learn more

Bike to Work

Another tax-efficient scheme to encourage commuting by bicycle. Employees can save up to 43% tax on the purchase of a new bike. Essentially, the employer buys the bike, and the employee rents it for a specified period with the option to buy it at a heavily reduced rate at the end of the rental term.


There is also an increase in wellbeing allowances that allow employees to do any sports activity rather than just be allowed access to a gym benefit.

Workplace Canteens

Common with larger employers and can be highly valued. Food is provided at a discounted rate. This could include breakfast, lunch, and dinner.


Related Government Websites

Jobcentre Plus of the Department for Work and Pensions

Department of Health


This information about employee benefits in the UK is provided by Howden, Asinta’s employee benefits consulting partner in the UK.

Average Cost

There are very few mandated benefits in the United Kingdom. Employers make choices about benefit provision based on competitive market practice and doing the ‘right’ thing. Surprisingly, the cost of benefits provision is very competitive. Employers providing a full range of relatively competitive benefits would typically be spending about 14% of payroll.


This information about employee benefits in the UK is provided by Howden, Asinta’s employee benefits consulting partner in the UK.


Nothing on this country page is intended to be legal, financial, or tax advice, and readers are advised to consult with their appropriate advisors regarding any legal, financial, or tax implications this information may address.

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