April 7th 2020 / BY: Wisteria

Benefits in Kind

Benefits in Kind: What Are the Most Popular Benefits and Which Are the Most Tax Efficient?

People are at the heart of every successful enterprise, and if you’re running your own business you’ll understand just how important it is to ensure that your staff are properly looked after. It’s your duty to protect the health, safety and welfare of your employees, provide them with a comfortable working environment, and of course make sure they’re properly remunerated. But, increasingly, companies are going a step further, doling out perks such as company cars, childcare and medical insurance. These are what’s known as benefits in kind, and they’re a great, tax-efficient way to reward your staff.

What Are Benefits in Kind?

Benefits in kind (or BiKs) are any items or services that an employer provides to their staff that are not put through the payroll — things like cars, private health insurance and interest-free loans. Alongside a commensurate salary, benefits in kind are a good way to repay your staff for their loyalty, hard work and dedication. With the right incentives, you’ll be able to create a positive, productive working environment, improve morale, reduce staff turnover and attract a better quality of candidate to fill vacant roles. But some benefits are more attractive than others, and if you really want to get the most out of your employees, you need to choose wisely.

Which Benefits Are the Most Popular With Employees?

By supplementing their wages with an attractive benefits package, you can make your staff feel valued, keep them incentivised and engender a hardworking, optimistic culture. But exactly which benefits should you be providing? Here are some of the most popular BiKs among UK workers, according to a recent government survey:

• Childcare – with nearly 80% of parents in the UK in full-time employment, it’s no surprise that childcare is high on the list. Finding good, affordable help can often be stressful and difficult. By providing free childcare, you can help your staff strike a better work-life balance, alleviate their stress and create a happier, more focused workforce.
• Private pension – one of the best ways to make your staff feel valued is to actively invest in their future. Providing your employees with a lucrative pension pot is a simple way to improve loyalty and morale and reduce staff turnover.
• Healthcare – not only does private medical insurance help to keep your staff healthy and get them back to work faster and fitter, it also demonstrates your commitment to their health and wellbeing.
• Flexible working – while employers are required by law to offer their staff some flexibility in their working hours, few companies take full advantage. By allowing your staff the freedom to structure their working day around outside responsibilities, you’ll engender an open and honest working environment and create a happier, more productive workforce. The prospect of flexible working is also a big pull for jobseekers, so it could help you add to your talent pool.

In the same survey, workers were asked which benefits they valued the least. Almost unanimously, these were items and services that they saw as essential to doing their job — things like parking facilities and mobile phones. Worth keeping in mind if you’re looking to put together an attractive benefits package for one of your employees.

What Are the Tax Consequences of Benefits in Kind?

We’ve explored some of the less tangible advantages associated with BiKs, such as staff retention and workplace morale. But how does the provision of benefits affect an employer’s bottom line? In some instances BiKs are actually cheaper and more tax-efficient than providing a simple pay rise. Indeed, by offering benefits in kind in lieu of a rise, you could be saving yourself and your employee thousands of pounds in taxes. And here’s the good news — in many cases, the perks that employees value the most are often the most tax efficient. Here’s a list of some of the fringe benefits you can provide to your employees completely tax free:

• Pension contributions
• Qualifying childcare
• Cheap or free canteen meals
• Bicycles and cycling safety equipment to help your employees get to and from work
• Reasonable removal expenses if an employee has to relocate due to work
• Workplace parking
• Flexible working hours
• In-house gyms or sports facilities
• Business mileage payments
• Electric cars and charging facilities (from April 6th 2020)

But, it’s important to remember that there are a lot of benefits in kind that do incur charges. And, with some of the most popular, such as company cars and private health insurance, you’ll be shelling out at least the same in tax as you would for a commensurate pay increase. But, as we’ve seen, providing your employees with an attractive benefits package can have advantages far beyond simple cost savings. You’ll reap long-term benefits, such as staff retention, fewer sick days, and a more motivated and dedicated workforce. So, in the end, even the BiKs that are taxable are often much more valuable to employers and employees than a simple injection of cash.

For more information about the tax implications of benefits in kind, get in touch today and speak to one of our specialist tax advisers.