Managing Pay and Employee Benefits 

17 December 2020

A well-defined pay strategy can revolutionise your business. An effective strategy will increase employee happiness. It will also help to attract top talent and reduce staff turnover.

Your pay and benefits strategy doesn’t just mean paying staff a higher salary. It means being transparent about wages and ensuring staff are properly compensated for their hard work.

Defining a competitive salary

Before introducing employee benefits, it’s important to make sure you’re paying staff a fair wage.

Salary benchmarking helps you to establish the market rate for certain roles and offer a competitive salary.

This will help to prevent employees attempting salary negotiations or moving on to better paid roles. It can also attract new staff by meeting their salary expectations.

This salary needs to meet the minimum wage rate and also comply with equal pay laws.

National minimum wage

The National Minimum Wage is the minimum salary for UK employees from school leaving age to age 25.

The minimum for ages 25 and over is the National Living Wage.

Find out the current entitlements for all ages in our National Minimum Wage guide.

Equal pay

The Equal Pay Act was first introduced in 1970 and came into force in 1975. This legislation required equal treatment for men and women in the same work environment.

This means that people doing ‘equal work’ must receive equal pay, as well as equal terms in their employment contracts. Our   covers the complete list of requirements.

Organisations with 250 or more employees must also publish figures on their gender pay gap.

Pay and work rights required by law

You can provide compensation and benefits to employees in a number of ways, but first you need to know what is and isn’t required by law.

All employers in the UK must meet minimum legislative requirements. These are:

Family leave and parental pay

Shared parental pay is either a minimum of £151.20, rising to £151.97 from April 2021, or 90% of an employee’s average weekly income, whichever is lower.

However, the employee will only receive 39 weeks pay. They can choose to take the remaining leave but it will be unpaid.

Additionally, parents have the right to take unpaid time off to look after children up to the age of 18. They can take up to 18 weeks per child with a maximum of four weeks of parental leave each year.

Pensions

All employers must offer a workplace pension scheme by law. And employees should be automatically enrolled into the pension unless they choose to opt out.

Not everyone is eligible for auto-enrolment, however all employees can request to join the scheme and the employer can’t refuse.

Read the full details on eligibility and requirements here.

Statutory sick pay

Employers must pay £95.85 per week in Statutory Sick Pay (SSP) for any employee that is too ill to work.

Companies can create a sick pay scheme to provide more than this, but they can’t pay less.

The employer pays sick pay for up to 28 weeks in a three-year period.

Holiday pay

Full-time employees receive a minimum of 5.6 weeks of paid holiday each year. A pro-rata allowance is available for part-time employees.

There is no right to pay for unused annual leave during the year. Workers should receive payment for any unused holidays in the event of an employment contract termination.

Overtime pay

Employers aren’t required to pay workers for overtime. However, the average  hourly rate must not fall below the National Minimum Wage.

If you do offer overtime pay, the details of rates and how they’re worked out should be a part of their employment contract.

Different types of employee pay and benefits

You have more flexibility with your overall pay structure, as long as you meet the legal requirements.

Some employee benefits are only applicable to certain types of businesses. Or, to certain roles within an organisation.

This list details a variety of pay benefits to consider:

Performance related pay

Performance related pay (PRP) is a way of rewarding staff for hard work in their role. Many employers use PRP instead of increasing salaries based on length of employment.

This encourages employees to meet objectives and can help with career progression.

Incentives and bonus schemes

Similarly to PRP, employee incentives and bonus schemes offer extra income for strong performing staff members.

Unlikely PRP, bonuses can be a more ad hoc way to praise employees for their work. This can be for meeting a particular target or as a commission on sales agreed.

Company Cars 

Although not applicable to employees, providing a company car can be important. It can be a significant draw when recruiting talent to roles where travel is essential.

Providing a company car means employees have access to a new vehicle without the worries of financial contracts. Fiscal concerns also include paying for servicing and maintenance or losing money when it’s time to sell the car.

Covering Employee Expenses  

Your employees will have expenses related to their job and these can add up. These expenses can include commuting costs, paying for lunches or childcare.

Employers can consider these costs when proposing the weekly wage or annual salary for a job.

Alternatively, you can encourage better employee satisfaction by helping with these costs. These extras include subsidised travel costs or staff lunches as a perk instead.

Share Schemes 

Employees can experience the financial benefits of their work, by becoming employee shareholders.

This is when employers offer staff the opportunity to purchase shares in the company. This can be a good opportunity for employees to earn additional money and take advantage of tax breaks.

Employers can give staff up to £3,600 of free shares each year.

More recently, employee ownership trusts (EOT) have become popular. This is a formal agreement where at least 50% of the share capital goes into a trust that benefits employees.

Establish the best pay structure for your business

Our expert consultants can guide you through the process of:

  • Salary benchmarking and analysing market rates.
  • Evaluating the value of different roles within your organisation.
  • Compiling gender pay gap data and actions to achieve wage equality

Find out more about our reward and recognition services by clicking the link or call us on 0800 028 2420

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