Many companies offer their team a myriad of benefits, not only to keep them happy but to reward them for their hard work.

These can range from team lunches to extra holiday days and beyond. If done correctly, these benefits can also be tax-efficient for your business.

This article gives you an overview of everything you need to know.

Why you should offer staff benefits

Offering a decent salary is a good start when you want to keep your team motivated and happy, but adding additional benefits gives them a reason to come to work in the morning.

Not only will you retain your current team, but you’ll easily attract new people to your business by offering things other companies may not. The happier the team, the lower the staff turnover and the higher the company’s efficiency.

Providing benefits isn’t just beneficial for your team but also for yourself. In business, reputation is everything, so showing that you invest in the people you employ will show you in a very positive light.

People like to feel looked after, especially when they spend half their waking hours at work.

Examples of benefits

As mentioned, there is a vast array of benefits you can offer as a company.

Health and wellbeing benefits are arguably the most important benefits to offer. This can be anything from a Bupa plan for private medical cover to a free or discounted gym membership.

Plans such as the Hospital Saturday fund (https://www.hsf.co.uk) can help subsidise dentist, opticians and physio costs amongst other benefits for employees and is an attractive tax-efficient offer, especially when it can be expensive just to have a quick checkup.

Similarly, holiday trading allows staff to buy and sell leave days if they decide they want a little extra time off or money in lieu.

Sometimes there’s nothing better than a relaxed team drink or meal, so organising social events for your staff could give employees a bonding experience in a less-formal setting.

Even something as simple as providing your office with fresh fruit and vegetables can go a long way which, as long as they are provided for all employees, is a tax-free benefit.

Taxes on benefits

Certain benefits you provide your employees with are taxable and will need to be reported to HMRC as such. Others don’t need to be reported at all, so it’s important to know how different benefits are treated.

For instance, the cost of a staff party is tax deductible for corporation tax and doesn’t qualify as an employee benefit if it costs less than £150 per head. Make sure you factor that into your party planning.

This figure covers all party-related costs per employee, including travel, food and entertainment. As this is an exemption, not an allowance, you’ll need to spend this amount for it to be tax-deductible.

For benefits like a gym membership or private healthcare, this must be declared on a HMRC form (P11D), and employees will pay tax and national insurance on the value, and a company will pay class 1a national insurance on the value.

Alternatively, a company can get a PSA (PAYE settlement agreement) in place with HMRC and pay the tax on certain benefits on behalf of employees to save any cost being passed on to employees.

Don’t forget you can also provide a tax-free ‘trivial benefit’ as long as the benefit is below £50 in value, isn’t a reward for work and isn’t cash or a cash voucher. A birthday gift is a good example of when to use a trivial benefit.

As you know, a happy team means a happy workplace. Not only for your staff but for you as an employer.

Like you, we’re about people, so contact us today for some friendly advice.