United Kingdom

The most important benefit to employees and the biggest expense for employers is pension provision. Young employees have traditionally shown little interest in saving for the future. This led the government to compel  employers to provide pensions through the Auto Enrolment scheme. Private medical insurance comes in at a close second in importance, with Medical and Disability following it.

Asinta Partner
John Dean

Howden Employee Benefits & Wellbeing

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Country Insight

Grab your bag of fish and chips and take a seat on the Thames river bank overlooking the Houses of Parliament and the London Eye. Perhaps even go on the London Eye for an even better view of London.

There is increasing awareness that the state-provided pension is not sufficient to survive on and with increasing life expectancy, individuals will be living longer on a low income.

As for private medical insurance, there is increasing awareness from employees that the National Health Service is creaking under the strain.  You will still receive treatment but this may involve a long wait.

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The United Kingdom introduced Pension Auto Enrolment which is now being rolled out to the smallest employers, so it will be the number one priority for start-ups. Healthcare costs continue to rise with medical inflation being much higher than other measures of inflation. From November 2015, the government increased the Insurance Policy Tax.  For larger employers offering healthcare benefits, they will be looking at funding levels and the method of benefit provision. For group income protection (disability) benefits, beyond the 28 weeks’ statutory provision, the state is gradually reducing provision.  This puts increasing pressure on employers to fill the gap.

Average Cost For Employer Sponsored Benefits

Benefits tend to be better for senior staff than for junior staff and in professional industries as opposed to manufacturing and retail. So managers and employees in the legal, financial, and insurance sectors would typically have private healthcare, life assurance and long-term disability cover. Those in manufacturing or retail might typically receive life insurance at a lower level.

With the introduction of Pension Auto Enrolment, all employers will provide some level of pension cover. The minimum employer contribution is currently 1% but will rise to 3%. In the professional services sector, employer pension costs are likely to be nearer 5-10% of salary.

Costs are clearly dependent on levels of cover but a typical annual single rate for healthcare would be £700. The cost varies according to geographical location with cover significantly higher in London and the South East than elsewhere. Life assurance cover of 4 x salary will typically cost £150 per employee per annum, whilst long-term disability costs will be about £300 per employee per annum.

Advice

Undertake research beforehand to understand about local practice. The United Kingdom is a market where employers have a great deal of freedom around what and how they offer benefits. Whilst you should understand your global view of benefit provision, if the benefits you provide in the United Kingdom are not consistent with local practice it will impact your business.

Surprising Fact

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.

It’s also important to note that the employment rate in 2015 was 73.6%, the highest since 1971.

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