Dani Novick, director of print and packaging recruitment specialist Mercury Search & Selection, says: “Historically, the print industry has not been particularly imaginative or generous with benefits, the majority of which have been either limited to senior staff or have been specific to certain roles, such as company cars for sales staff. Although the few larger groups have typically offered a limited range of benefits, the majority of employers within the industry are SMEs and micro businesses, often with limited HR support.”

Nevertheless, some relatively inexpensive benefits can comfortably pay for themselves by increasing employee engagement and, in some cases, reducing absenteeism. As well as being Corporation Tax deductible, they can involve other tax advantages for employers and employees. For example, many can be used in conjunction with ‘salary sacrifice’ to reduce tax and National Insurance (NI) contributions from employers and employees by the employee agreeing to reduce their gross earnings in exchange for the employer paying for the benefit. 

But there are many grey areas with tax and NI, so it is important for employers to check the implications of any benefits they are intending to offer with HMRC. Consult its online booklet 480 Expenses and Benefits – A Tax Guide. 

A common rule of thumb bandied about by pay experts is that the cost of an SME recruiting and training a new member of staff tends to amount to around half their annual salary. In this context, it certainly makes sense to spend a little extra to improve retention rates. And providing highly valued employee benefits can be a far more effective method of doing this than giving very small pay rises – which often have a negative impact by making employees gripe they should have received more. 

Party perks

Some of the best value benefits include Christmas parties and other seasonal gifts. These are commonly referred to by pay experts as ‘non-financial benefits’ along with offerings such as discounted gym memberships, shopping vouchers or will writing services and free coffee, biscuits and bowls of fruit.

Stuart Hyland, UK head of reward consulting at global management consulting company Hay Group, says “A lot of research proves that many of these things are important in engaging and motivating employees, and when someone leaves, it is far more likely to be because something is wrong with the non-financial package rather than the financial one. Non-financial benefits help to build relationships within the company that act as the glue that binds people together. 

“The so-called ‘war for talent’ is set to return now that the economy is starting to pick up, and one of the biggest factors that makes people stay with an employer is a sense of loyalty to their colleagues. That’s where I feel an SME-type business actually has an advantage over many larger companies, so cutting back on the Christmas party or removing free coffee and biscuits is a very false economy.”

Most vouchers, however small their value, are considered to be benefits in kind – meaning that they normally trigger a P11D liability to Income Tax for the employee and a liability for NI contributions for the employer. But modest Christmas parties are not normally considered benefits in kind, nor are inexpensive gifts such as Christmas turkeys, bottles of whisky or boxes of chocolates.  There is, however, much to be said for ensuring that Christmas gifts other than parties remain surprises. Not giving exactly the same ones each year, ensures employees don’t take them for granted. 

It is also important for employers who hold Christmas parties to realise that, because employer-sponsored events are considered extensions to the workplace, they could in theory be held liable to harassment or discrimination claims if employees behave inappropriately. But, in practice, issuing a circular beforehand reminding employees of the content of relevant workplace policies can greatly reduce these risks. 

Government-backed benefits such as childcare vouchers and cycle to work schemes can also be very attractive for small employers to offer. The former can create savings for both employers and employees by enabling up to £55 a week of childcare costs to be offset against tax and NI. The latter, which effectively lets employees rent cycles from employers, typically enables employees to save on income tax and NI and employers to save on NI and VAT. 

Cycle to work schemes have obvious health and environmental benefits but a potential downside is that, because the company owns the bike for a 12 month period, it can get stuck with it if the employee leaves – unless the employee wants to buy it at its notional value. 

Additionally, small printers that offer some form of low-cost healthcare benefits can enjoy reduced absenteeism as well as improved recruitment and retention rates. 

Health screenings, which some budget providers will now do on site for under £100 per employee, are not normally considered benefits in kind. By spotting potentially serious conditions early they can benefit both employer and employee because prompt medical interventions tend to result in shorter recuperation times and to require less comprehensive treatments. 

Of potentially even greater perceived value is dental insurance, which can help refund the costs of both NHS and private dental treatment and check-ups, and cash plans – which make payments towards a range of minor medical costs such as dental, optometric, complementary therapies and private consultations. 

Worthwhile levels of cover can be obtained for around £10 a month for dental insurance and around £5 a month for cash plans. The key attraction of both is that employees know they will be making at least some use of them, even if only for routine check-ups. Both are normally considered benefits in kind when schemes are company-paid, although some local tax offices provide cash plans with a dispensation from this. 

Chris Cannon, business development manager at Jelf Employee Benefits, says “Health cash plans seem to be the best all-round benefits at the moment and we are seeing a lot of employers introducing low-cost schemes as part of a pay review instead of giving pay rises. There is very much a trend towards company-paid schemes, and I have come across many cases where companies receive more in claims than they pay out in premiums from day one, and usage escalates in year two and three through word of mouth.”

Life cover and income protection, which pays a regular income to employees who are unable to work due to long-term health problems, can also be obtained inexpensively in small amounts or budget versions. Life cover of £10,000 can cost as little as £17 a year per employee and limited-term income protection that covers 50% of salary for two years can cost around 0.2% of salary. 

Because claims are rare, both products must be actively communicated to be fully appreciated by employees but neither are considered benefits in kind. Furthermore, even the lowest-cost income protection plans still offer free added-value features like employee assistance programmes – providing counselling services – and in some cases second medical opinion services and helplines providing HR, legal and other information. 

Pension pressure

All these employee benefits are becoming increasingly relevant in the era of pensions auto-enrolment because, although some printers currently pride themselves on offering a pension scheme, this will be something all businesses will be required to do by 2017. Those wishing to stand out from the crowd will therefore need to offer broader benefits packages, and preparing for auto-enrolment represents an ideal opportunity do this. 

Sean McSweeney, principal consultant at employee benefit consultants Chase de Vere, says “We say to all SMEs that auto-enrolment is not a compliance issue but it’s about how you pay your people, and other options can be more cost-effective than pension provision. Some of these benefits can be far more important than paying an extra £10 a month into a pension.”

However, private medical insurance (PMI) is one benefit that may be too costly for many small employers. The product, which provides the ability to secure private treatment at a time convenient to the employee, can easily cost an average of £50 per month per employee – and is considered a benefit in kind when company-paid. 

But its ability to reduce absenteeism and the fact that it’s highly valued by employees can still make it attractive to medium-sized and larger printers. Specialist intermediary Lorica Employee Benefits manages schemes for three printer clients – with between 80 and 800 employees each – but acknowledges that the fact that PMI premiums tend to be subject to double-digit annual increases provides a real challenge. All three have put in excesses of £100 or £250 and the smallest scheme has also been looking at reducing cover benefits. 

Most in print, then, will be best-advised to look to smaller benefits to perk up employees’ days. What they decide to offer will ultimately be the result of a balance between what will be most highly valued by the employee, and what the company can afford both in terms of initial outlay and tax contributions. Year-round, functional benefits such as childcare vouchers and cycle to work schemes, can have a profound impact on employee loyalty. But employers also shouldn’t underestimate the power of smaller seasonal treats; a party or gift say. ’Tis the season of giving after all.  

GUIDE TO STAFF BENEFITS 

Top tips for choosing benefits to offer

Remember:

• Research has shown that some benefits are more highly valued by employees than small pay rises (which often just serve to dissatisfy employees that they’ve not received more).
• Little, or fairly large, added extras will become increasingly important as pension auto-enrolment comes in and employers have to try harder to stand out from the crowd.
• Consider benefits eligible to be used in conjunction with ‘salary sacrifice’ schemes which reduce tax and National Insurance (NI) contributions from employers and employees by the employee agreeing to reduce their gross earnings in exchange for the employer paying the benefit.
• Health cash plans are most popular at present. This is where the local tax office provides cash plans with a dispensation from paying tax on company-provided health and/or dental insurance. Life cover can cost as little as £17 a year and dental as little as £5.
• The benefits of these forms of cover must be actively communicated to employees though as, with claims rare, it’s easy for staff to overlook their value.
• Cycle to work schemes are popular. But remember that, because the company owns the bike, it can get stuck with it if the employee leaves.

Taxable benefits

• According to 480 Expenses and Benefits – A Tax Guide (available at www.hmrc.gov.uk/guidance/480.pdf) taxable benefits, or ‘benefits in kind’, include:
• The provision of living or other accommodation, including payment of energy bills.
• The use of any asset provided by the employer or another person acting on the employer’s behalf, for example, the use of a motorcycle, an aircraft or yacht, or of furniture or a TV set. 
• The provision of fuel for private motoring in a provided car. 
• Gifts of assets to the employee, or the sale to the employee of assets at less than their market value (this applies not only to assets such as a car or a house, but also to goods such as clothes, TV sets, wines or groceries).
• Any expenses incurred by the employee and paid direct by the employer, for example, hotel or restaurant bills, whether paid direct or through a credit card company.
• Scholarships awarded to students by reason of their parents’ employment. 
• Any other benefits or facilities of any kind, for example, hotel accommodation and restaurant facilities arranged by the employer, holidays, childcare (some forms of childcare are however exempt).
• Shooting, fishing and other sporting facilities (though some sporting facilities are exempt).
• Work carried out at the employee’s residence.

Non-taxable benefits

According to 480 Expenses and Benefits – A Tax Guide, not normally taxable are:

• Annual parties at Christmas or alternative functions of a similar nature, such as an annual dinner dance or summer party, which are open to staff generally and which cost no more than £150 per head. Where there is more than one annual function and their total cost per head exceeds £150, only the functions that total £150 or less will not be taxed.
• Employees with a disability are not taxable on the benefit of the private use of equipment or services provided by their employer to enable them to take up or to continue work. But where equipment is also used extensively outside of work, the exemption does not apply.
• A maximum of one health-screening assessment and one medical check-up in any year. (‘Health-screening assessment’ means an assessment to identify employees who might be at particular risk of ill-health. ‘Medical check-up’ means a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health.)
• Life cover and income protection, paying a regular income to employees in the event of being unable to work due to long-term health problems. 
• Where an employee is provided with a taxi for a journey from work to home, so long as the employee is required to work later than usual and until at least 9pm, such late-night working occurs irregularly, by the time the employee stops work either public transport has ceased or it would not be reasonable to expect the employee to use it, and the number of journeys is no more than 60 a year.
• Long-service awards made to directors and employees where the relevant period of service is not less than 20 years, no similar award has been made to the recipient within the previous 10 years, and where the cost to the employer does not exceed £50 per year of service.
• Free meals and food vouchers where these are on a reasonable scale, and either all employees may obtain free or subsidised meals or the employer provides free or subsidised meal vouchers for staff for whom meals are not provided. This exemption doesn’t apply where free or subsidised meals are provided as part of salary sacrifice or flexible remuneration arrangements.
• The provision of a car or motorcycle parking space, or facilities for parking bicycles at or near the employee’s place of work.
• Sports facilities generally available to employees and members of their families and households. This does not apply to facilities available to the general public, consisting of or provided in association with overnight or holiday accommodation, provided on domestic premises, or consisting of mechanically propelled vehicles or vessels such as cars, motor-boats and aeroplanes.
• Strictly all benefits are subject to tax and NICs, unless there is a specific exemption. However, sensible practical administration of the tax system determines that benefits of a trivial nature (for example, a seasonal gift of a turkey or an ordinary bottle or two of wine) should not be charged as a benefit.
• The benefit of welfare counselling made available to all employees on similar terms. This sort of counselling does not include any medical treatment, advice on finance or tax (other than debt counselling), advice on leisure or recreation or legal advice.
• While the provision of work-related training is non-taxable, if the training has the intention of rewarding the employee or encouraging them to take up a new job, or could be classed as recreation or entertainment – think a day’s circus training – then it will be taxable.

Any queries can be raised via HMRC’s employer helpline: 0300 200 3200.