Benefits In Kind – The Company Car

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We recently spoke to Duncan Mitchell of CED Accountancy Services about employer provided cars. The tax and national insurance effects impact the employer as well as an employee or director who has an employer provided car.

Duncan explained “An employer provided car results in a benefit to an employee or director upon which income tax is payable. The employer will suffer a Class 1A National Insurance Contribution (NIC) charge at 13.8% of the amount which is assessed as a benefit on the employee.

The amount of the benefit rises each year and the increases should be considered before a car is purchased by the employer. For most cars, we have got used to the amounts increasing by 1% each year but, from 6 April 2015, the amounts will increase by 2% each year.

Also the current cap on the percentage charge, currently 35%, will increase to 37% in 2015”

We reproduce a table that Duncan gave me illustrating his point:

Example

A car was purchased for use by a director on 6 April 2013. A car is normally kept for four years before it is replaced. The CO² emissions are 130 gm/km and the list price is £30,000. If the car is a petrol car, the benefit on the director (and the income tax cost) and the NIC cost on the company are:

Tax year Benefit Tax Employer

% £ (at 40%) NIC

£ £

2013/14 18 5,400 2,160 745

2014/15 19 5,700 2,280 787

2015/16 21 6,300 2,520 869

2016/17 23 6,900 2,760 952

Duncan explained that “The future increases may affect a decision as to when to replace a car. One of the reasons for the annual increase in the percentages is the work undertaken by car manufacturers to lower the polluting effects of a car which means lower carbon dioxide emissions. So, an equivalent new car purchased after April 2015 may have a lower tax cost if the CO² emissions for that type of car have fallen significantly. Or you may decide that private ownership by an employee of a car would be a better option. Some research on the different types of car may well be worthwhile, Hybrid and electric cars tend to be tax efficient, and even high end marques such as Porsche and BMW have cars which demonstrate attractive tax efficiencies”

Duncan then spoke about the car fuel benefit

“For most businesses and employees it is not beneficial to have private fuel paid for by the employer. The CO² emission percentage is applied to a set figure. The figure for 2014/15 is £21,700.

It is therefore, in many cases, better for the employer to pay only for the business mileage.

There are two ways to achieve this. The employee can claim a mileage allowance from their employer for business travel or the business pays for all the fuel with the employee subsequently making good the whole of the cost of the private fuel provided. Both methods are based on HMRC issued rates although they are different rates and often confused.

The requirement to reimburse in full for private fuel has caught many employers out when HMRC have conducted an Employer Compliance visit”

Duncan Mitchell is a director at CEDAS (www.cedas.co.uk) . You can call him on 01327 358866.

Employer Tips For Driving At Work

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Driving at work is one of the most dangerous activities as a quarter of all vehicle mileage travelled annually on UK roads is for work purposes and a third of all crashes involve a vehicle that is being used for work. Every week around 200 road deaths and serious injuries involve drivers who are at work. Corporate manslaughter law that was implemented in 2008, dictates that an employer can be held responsible for the actions of their employees whilst driving at work. A company can be prosecuted and face huge fines if they have done nothing to reduce liabilities, therefore, there are certain steps that need to be taken and possible financial costs. This week (17-11 November) is Road Safety Week http://www.roadsafetyweek.org.uk/ so in this blog we provide some employer tips for driving at work and managing the HR issues.

Driving at Work Policy

An employer should have a driving at work policy and procedure in place that is well communicated to staff. This should entail the employer explaining all the details either on a 1:1 or group basis and ideally having the employees sign a paper document to show agreement which is then held on file. The policy should contain clauses on licence checking, safety, breakdowns, use of mobile phones, driver breaks, training, maintenance, accidents, fines and disqualifications, smoking and mobile phones. A list of authorised drivers should also be held to include company vehicle drivers and employees who drive their own car on company business.

Check licences

An employer should check the validity of licences on a regular basis by taking a photocopy to be held on the personnel file. How regular that can be is up to the employer’s judgement but ideally at least once a year. If an employee provides a copy of a clean licence, an annual check should suffice. However, if the licence shows quite a few points then an employer may need to check more regularly. It is very easy to rack up additional points particularly with driver who has a careless history. If the employee is disqualified from driving they will not be insured. If they have an accident whilst driving a company vehicle the company is liable and not the insurance company. If a disqualified employee drives their own vehicle on company business and has an accident if a claim is progressed in the civil courts the employer may be pursued. The employer may, therefore, incur financial costs.

It may be quite onerous to check the validity of licences with regular photocoping, however, it is essential for an employer to do so to reduce liability. An alternative to checking and photocopying licences is to use form D888/1 to gain written permission from the employee to contact the DVLA about licence validity and driver entitlement. The form is sent off with a £5 fee – https://www.gov.uk/government/publications/d8881-request-by-a-company-about-driver-entitlement

It is important for employers to take ownership of this process. An employer can not guarantee that an employee will tell them if they have been fined, endorsed or disqualified particularly if their job might be on the line. Whilst the matter may be dealt with using the disciplinary procedure should untoward behaviour come to light, the repercussions for the company are much wider.

For employees that drive their own car on company business copies of MOT, tax and insurance documentation should be photocopies annually and held on file.

Fit and Safe to Drive

Employees should be requested to inform their line manager if they are fined, endorsed or disqualified. Failure to do so should result in use of the disciplinary procedure. They should be fit to drive, wearing prescribed glasses or contact lenses as appropriate. Employers can offer to pay for employees eye tests and contribute to glasses if they are essential drivers. Eye tests can be organised on an annual basis. Employees should take care when taking any prescribed drugs that may affect their ability to drive and should inform their line manager of any medication that may cause them to be at risk.

Company vehicles should be regularly maintained with responsibilities assigned to key members of staff. This should include servicing, MOTs, documentation updating and essential checks for drivers before starting a journey. Employees should be well aware of how to deal with a breakdown and who to contact within the company should this happen.

If an employee is involved in an accident in a company vehicle many employers require the employee to pay the insurance excess. This can be made a contractual obligation. Employees should take responsibility for any fines, traffic offences or other breaches of the law committed when driving.

Driver Training

To reduce liability an employer can provide safety and efficiency training. The Energy Trust holds a list of driver trainers who can deliver often 100% funded sessions on site. If done on an annual basis employees are educated in how to drive safely.

Tool box talks are also another way to educate drivers with short timely sessions that focus the mind on awareness related to speed, braking and motorway safety for example.

Providing training reflects well on a company’s reputation and keeps costs down.

What Are Your Options For Pension Auto Enrolment?

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If you are a small business the countdown will have begun from January 2014 for your staging date. It is therefore very important that you begin thinking about the process as soon as possible. Burying your head in the sand will not help and you will face a fine from the Pensions Regulator for ignoring this statutory process with which you must comply. So, what are your options for pension auto enrolment?

The first thing to do is decide on your pension provider. There are various options out there depending on your budget. NEST was set up by the government as the default option. It does the job if you just want to comply with the law. There will be lots of work involved and lots of reading to ensure you comply. That is unless you draft in someone who can help. Consultants such as myself who have done the process may be invaluable in steering you through the minefield.

If NEST does not appeal you have the NOW pension or the People’s Pension which are low cost alternatives. All three are multi employer pension schemes with a defined contribution – pension pot is built up until retirement. How well the schemes perform is dependent on investment and charges.

National Employment Savings Trust (NEST)

NEST was set up by government to offer a suitable workplace pension scheme for all employers. Here are some key facts about the NEST scheme.

Charges are 0.3% a year + 1.8% on contributions as made.
The recommended investment choice is a target date fund corresponding to the date on which you intend to retire, or you can choose from five other funds if you prefer.
You can carry on contributing to a NEST pension after leaving your job.
self-employed people can also join the NEST pension scheme.
There’s a limit on the amount that can be paid in contributions and you can’t transfer savings from other schemes. Both of these restrictions are due to be lifted in April 2017.
Sharia compliant.

NOW: Pensions

NOW: Pensions is run by ATP – an organisation originally set up by the Danish government to provide pensions in Denmark. Here are some key facts about the NOW: Pensions scheme.

Charges are 0.3% a year + £1.50 per month administration charge. (Until 2018, the administration charge is lower if you earn less than £18,000.)
There is no investment choice, as NOW: Pensions has a single investment strategy.
You cannot carry on contributing to the scheme after leaving your job.
Self-employed people cannot join it.
No limit on the amount that can be paid in contributions (apart from HM Revenue and Custom annual allowance).
You can transfer savings from other pensions at no charge.
Sharia compliant.

The People’s Pension

The People’s Pension is run by B&CE, a not-for-profit organisation. B&CE has been providing pensions for the construction industry for many years and now does so for all sectors. Here are some key facts about the People’s Pension.

A single charge of 0.5% a year.
Investment choice – one of three risk-based profiles, or you can choose your own investments from seven funds.
You can carry on contributing to the scheme after leaving your job.
Self-employed people cannot join it.
There’s no limit on the amount that can be paid in contributions (apart from HM Revenue & Customs annual allowance).
You can transfer savings from other pensions at no charge.
Sharia compliant.

With regard to charges the People’s Pension comes out best over a period of five years, whereas over a period of 30 years NEST comes out best according to the Money Advisory Service.

In addition to these choices there are private pension schemes. Employers must work out the best option for their staff and may do so with the aid of an independent financial adviser with access to a range of pension providers or direct with a chosen private pension scheme provider. Many advisers now give the option of doing all pension enrolment admin for you, but you must ensure that they actually will do what they promise and their efforts are Pension Regulator compliant before you sign on the dotted line.

Overtime Should Count in Holiday Pay

Workers have won a groundbreaking case at the Employment Appeal Tribunal to include overtime in holiday pay.

This means all people working voluntary overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay.

The details of the ruling, particularly on whether claims can be backdated, have yet to be released.

The ruling could be appealed to the Court of Appeal, meaning a final decision may be years away.

The ruling has widespread implications for all companies paying overtime to their staff.

The government estimates that one-sixth of the 30.8 million people in work get paid overtime. This means around five million workers could be entitled to more holiday pay.

The coalition and business groups had argued strongly that overtime should not be included in holiday pay calculations.

If claims can be backdated, businesses stand to lose billions of pounds, some estimates suggest.

“Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to,” said Howard Beckett of Unite.

“This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order.”

Three Ways To Address Sickness Absence Problems

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As an HR consultant one of the hot topics that my clients speak to me about time and time again is sickness absence. This is a big problem across the UK and creates a significant cost to businesses of all sizes. However the type of business that is most affected is one that is in the SME market. Small and medium sized businesses can ill afford the costs that sickness absence brings as they often have little flexibility. According to the latest CIPD research after the public sector and not for profit organisations, the manufacturing and production industry have the highest average of sick days at 6.2 days per year. The main cause of short term sickness absence is minor illness whilst long term absence is linked to heart problems, stroke and cancer. In this blog I discuss three ways to address sickness absence problems.

The first way to address sickness absence is to have a strict reporting procedure in place. There should be a clause in an employee’s contract that states that they should phone in to report sickness to their line manager within one hour of starting work followed by regular communication if the absence is to continue. It should be the employee themselves and not a relative, partner or anyone else. They should phone in and not text or email. The idea behind this is that if an employee knows they will have to speak to their line manager and may not be ill at all, but just seeking a day off, they may think twice about doing so.

The second way is to implement documented return to work interviews. These should be completed on the day the employee comes back to work. This may address the problem of sickness absence because the employee can be scrutinised by their line manager about the situation. If they have been swinging the lead they may appear edgy – body language is key. The interview should include welcoming the employee back, discussing the sickness absence in full – is the employee better now, is there any further treatment, etc. The line manager should then ensure the employee knows their first responsibility is to their employer now they are back at work and should be filled into what has happened with their work since they have been off,

The third way to address sickness absence is to monitor the situation – recording who has been off and why on a spreadsheet or in a human resource information system for a report to be produced. It can be very helpful and illuminating to see the information in black and white. Problematic members of staff can be highlighted and dealt with using a robust sickness absence procedure. Documented meetings will track how an organisation has dealt with an issue. This is really important if ultimately dismissal occurs with a potential employment tribunal claim lurking in the background. An employer needs to show they have been fair and reasonable.

Employers Not Ready for Pension Auto Enrolment

In 2015 1.5 small and micro sized businesses must face implementing pension auto enrolment. It seems according to the media that many employers are not ready for pension auto enrolment. A Pension Regulator report shows that half of micro businesses do not even know when they are meant to be compliant. This is despite the wealth of information out in the public domain. Many small businesses have by now been informed by letter when their staging date will be and are given ample notice to comply.

A recent article in the Independent newspaper http://www.independent.co.uk/news/business/sme/small-talk-many-employers-face-penalties-over-pensions-autoenrolment-9778756.html states that employers are sleepwalking their way past a legally binding deadline. This year 12,000 small businesses with 62-89 employees should have complied by 1 July 2014 but asked for a three month postponement which they are legally entitled to do. However, apparently many have still not complied and will face a fine by the Pension Regulator.

Research done by NOW pensions highlights that many small businesses are approaching advisers very close to their staging date or even after the staging date has passed, which is far too late. Furthermore a survey done by Sage payroll software of IFAs showed that many of their clients don’t see auto enrolment as their top priority and only 1 in 5 businesses are aware of the process. This is despite an extensive government advertising “I am in” campaign using top celebrities such as Theo Paphitis to spread the word.

Auto Enrolment is the Government’s flagship legislation to solve the country’s £28 billion pension black hole. It began in October 2012 initially with very large companies some of whom have struggled despite the resources available to help them comply such as Finance Directors and HR departments. No matter what employers and small businesses think about the process they must put a workplace pension in place or be at risk of huge fines. Unfortunately many do not have the know how, resources or time therefore early intervention is key to falling foul of the Pension Regulator.

The Pension Regulator is policing the system. Once a pension scheme is in place and auto enrolment has been undertaken an employer must confirm via a compliance tick list and submit that to the Pension Regulator within five months. If companies fail to implement the auto enrolment process they will be tracked down and dealt with very harshly. Small businesses with the many costs they face, can ill afford to shell out unnecessarily.

The Pension Regulator recommends starting the process 12 months before the staging date and this is very good advice. There is a lot of work to do – finding a provider whether that is for a private pension or NEST the government run scheme, setting up administrative processes and consulting with employees. My experience is that many small businesses and employers are burying their heads in the sand, but it is the elephant in the room and will not go away.

Fathers and Partners Time Off For Ante Natal Appointments

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From 1 October 2014 fathers and partners are entitled to take time off to attend ante natal appointments if they are in a “qualifying relationship” with a pregnant woman. This new statutory right will be unpaid. Employees and agency workers who are considered to be in a qualifying relationship include:

a pregnant woman’s husband, partner or civil partner, i.e. if she’s in a same-sex relationship
the father of the child
the parent of the child; and
intended parents in a surrogacy situation who meet specified conditions.

Employees may only attend two ante natal appointments and no more than a maximum of six and a half hours for each one. The appointment must have been made on the advice of a registered GP, midwife or nurse.

The employee will be required to confirm in writing their intentions to attend an ante natal appointment and include the following:

a) that the employee has a qualifying relationship with a pregnant woman or her
expected child;
b) that the employee’s purpose in taking time off is to accompany a pregnant woman
to an ante-natal appointment;
c) that the appointment in question is made on the advice of a registered medical
practitioner, registered midwife or registered nurse; and
d) the date and time of the appointment.

The employer may not ask for proof in the form of an appointment card as that is the property of the expectant mother. The company may refuse the right to time off if not convenient. Employees do not need continuous service for this right, but agency workers need 12 weeks of the same kind of job to qualify.

The government has introduced this statutory requirement as research shows that less than one third of fathers take time off before the birth of their child and wish to encourage more involvement.

The Dos and Don’ts of Staff Poaching

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Companies have long eyed up competitors’ talent with a view to bringing them on board to increase their own competitiveness. However this activity is fraught with danger in terms of potential legal consequences. There are many dos and don’ts of staff poaching.

If a company has an eye on a competitor’s employee there are potential ways that they can be recruited. They could be approached direct, but another method could be to use a headhunter or executive search company. These are specialist recruitment agencies who will source management and top level jobs. They will act as a middleman seeking out and approaching key individuals putting distance between the employer and potential employee.

Having a professional network can help a company reach out to targetted individuals. The use of social media in recent years has done a great deal to enhance professional networks. Indeed the power of Linkedin has grown dramatically in recent years. It is said that anyone of use has 200 contacts within our circles and we are six steps away from contacting the person we would like to talk to. That is very powerful. Contacts in our network can come from many different sources – partners, family, friends, neighbours, clients, etc. The traditional old boys network has always worked rather well.

Employers should always beware of taking on competitor’s employees who have a restrictive covenant clause in their contract which may be pursuable in a court of law. The wording of such a clause is, of course, key.

For those employers that value their employees and fear them being poached by competitors there are key things to do in order to protect their interests.

Providing an interesting job is really important so that employees maintain job satisfaction along with career development opportunities is essential to meet career aspirations Succession planning will provide a career path that top performers can see and value acting as a retention tool. A comfortable work environment is also really important to encourage engagement. It goes without saying that financial reward should be right although non financial benefits are also important. Becoming an employer of choice is great to bamboozle the competition.

Having managed to recruit successfully a further way to protect themselves, a company should include a restrictive covenant or non-compete clause in a contract that includes details on the timescale that an employee may not work for a competitor and a banned geographical location. It is always good to draft something that would stand up in a court of law. It may not be viable if the restriction is not integral to the business’ survival.

If a company receives a letter of resignation from a valued member of staff who may have been poached consideration may be given to tactics of how that employee can be persuaded to stay. If they are valued, this is always worthwhile.

Mental Health In The Workplace

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The death of Robin Williams this week has highlighted the issues of mental health and its devasting effects. Mental health in the workplace is often a difficult subject to deal with as it can be misunderstood. Mental health issues can include depression, anxiety and bi polar disease to name but a few conditions. Employees with mental health issues may appear troublesome and managing them can be difficult to their behaviour which can include being disruptive, turning up for work late or not showing up at all.

Mental health is surrounded by prejudice, ignorance and fear. People with mental health have many problems may include:

People become isolated
They are excluded from everyday activities
It is harder to get or keep a job
People can be reluctant to seek help, which makes recovery slower and more difficult
Their physical health is affected

One in four of us will experience a mental health issue at some point in our lives and one in ten young people. We shall probably work with someone experiencing mental health and those who have mental health issues fear the reaction about discussing their problems.

There are many myths about mental health issues:

Mental health problems are very rare.
People with mental illness aren’t able to work.
Young people just go through ups and downs as part of puberty, it’s nothing.
People with mental health illnesses are usually violent and unpredictable
It’s easy for young people to talk to friends about their feelings.

People with mental health problems are more dangerous to themselves than they are to others: 90% of people who die through suicide in the UK are experiencing mental distress. Substance abuse appears to play a role: The prevalence of violence is higher among people who have symptoms of substance abuse (discharged psychiatric patients and non-patients).

It makes good business sense to support employees with mental health issues. The Equality Act 2010 protects employees with mental health issues and they are protected against disability discrimination.

Where an employee’s mental health is impacting on their job role an employer should seek occupational health advice to establish if they are fit for work and if there are any reasonable adjustments that could be made to enable them to remain the workplace. It is essential to seek such advice particularly if dismissal is being considered.

An employer needs to demonstrate they have taken into account the following which was set out in case law Lynock v Cereal Packaging Ltd [1988] IRLR 511,:

the nature of the illness
the likelihood of it recurring or of some other illness arising
the length of the various absences and the periods between them
the need for the employer to have the work done
the impact of the absences on other employees
the importance of a personal assessment of the situation
the importance of consultation with the employee
the importance of appropriate warnings of dismissal if there is no noticeable improvement.

Building an attractive benefits package for a Small to Medium Sized Business

The law requires all companies to offer certain benefits, but they can go above and beyond statutory requirements, this includes small to medium sized businesses – the SME market. An SME is defined as a small to medium enterprise with 250 employees. Employee benefits are also known as fringe benefits or perks offered in addition to a basic salary. Traditionally an attractive benefits package was only possible for larger companies with large budgets, however, as time has progressed and benefit provider costs have come down it is possible for even the smallest SMEs to be able to offer an attractive benefits package.

The reasons for creating an attractive benefits package are to recruit, retain and reward employees; this provides competitive advantage and helps to meet external as well as internal pressures.

At the heart of all forms of employee reward, including benefits, is motivation. Employees need to be sufficiently motivated by the reward on offer so that employee engagement is encouraged. Hardworking employees can be spurned on by a worthwhile incentive and, hopefully, those that do the bare minimum will strive to work harder. Improved productivity will increase profits.

When designing a benefits package there are key issues to consider. The main aim is to meet the aforementioned criteria so the SME has sufficient high quality committed employees. Value for money is particularly important as an SME does not have loads of cash to splash around and waste. Tax efficiency is important whilst refinement and tailoring is essential.

The first step is to decide the objectives of an employee benefits package. It should certainly meet the requirements of the employer but also the requirements of the employee. The objectives may look at matching benefit philosophy to SME strategic objectives.

Employees’ opinions can be sought in a variety of ways. A few years ago I drafted a reward survey for a charity that included aspects of both financial and non-financial reward. The results were illuminating as the most sought after forms of reward were non-financial and top of the list was flexible working. Opinions could also be gathered from focus groups and/or interviews. This process may be time consuming to gather and process the information, but is essential to develop a truly tailored package that employees will value.

Having collected the internal data related to benefit requirements, the next step would be to analyse what the competition is offering. There are many benchmark reports available offered by the CIPD, Xpert HR and IDS for example. By purchasing a report the data is readily available and all the hard research work has been done.

SMEs can also club together to create a pay club to share information on a confidential basis. They are an attractive and cost effective way to gather information on benefits. Membership can be tailored geographically, industry or company size, but a disadvantage is that it might be difficult to find SMEs to take part.

The internet can offer a wealth of information but this is also time consuming to find out where to look then sift through all the data available.

The next step would be to design an employee benefits system. The variety, extent and type of benefit needs to be considered along with tax efficiency. Employee benefits can come in all types of guises – both financial and non-financial. Financial benefits obviously have a cost attached to them so budget and affordability is quite key.

Such benefits can include private health insurance, occupational sick pay, profit sharing, death in service benefit, income protection, life assurance, dental insurance, pension contributions (including enhanced contributions), interest free season ticket loan, car mileage allowances, annual Christmas bonus, annual bonus in cash or vouchers, critical illness insurance, mortgage assistance, relocation packages, company discount on products, professional fees payment, gym membership, long service award, overtime, unsocial hours payment and retirement benefits. Since October 2012 companies must comply with pension auto enrolment according to their staging date. SMEs have been affected since January 2014. A company may choose to comply using the basic government package, NEST, but has the option to use a private pension provider provided the company size is large enough for the pension provider requirements. An employer can choose to pay in more than the basic contributions.

The company car has long been seen as a worthwhile benefit, but tax can be high so many companies now offer a car allowance and/or free fuel on a card which may be more tax efficient.

Tax free benefits include employee meals, child care in workplace nurseries, luncheon vouchers, Christmas parties up to the value of £150, small gifts to third parties, training, outplacement and redundancy payments up to the value of £30,000.

Personal needs can be addressed with employee benefits. These can include annual leave, maternity leave, paternity leave, adoption leave (all of which can be enhanced over and above the statutory requirement), compassionate leave, pre retirement counselling, financial counselling, canteen, and sports/social facilities, living accommodation, mobile phones.

Having non financial employee benefits in the mix is very cost effective and can vastly improve morale as well. Non financial benefits can include flexible working, appraisal, training and development, career development opportunities, an employee lunch, Friday afternoons off, career breaks, promotion opportunities, free car parking, free tea/coffee/water, an employee assistance programme, free pension planning, long service certificate, employee of the month certificate, suggestion scheme, and an employee recognition scheme.

For cost effective purposes an SME may decide to design a flexible (or cafeteria) benefits system where employees can choose the benefits they take up. The advantages of this are that costs can be controlled more efficiently and employees can tailor their own packages to suit their needs. The benefit requirements of a young male employee with a growing family might be quite different to that of an older woman who is facing retirement for example. Employees are provided with a shopping list of benefits and allocated a spend. At the heart of flexible benefits there will be core benefits which all staff enjoy such as pension, life insurance, income protection and holiday entitlement.

Flexible benefits offer greater individual freedom of choice and an employee appreciation of the value of the benefits provided to them.

In recent years salary sacrifice has grown in popularity which helps to fund flexible benefits. With salary sacrifice there are tax and national insurance savings. The employee gives up part of their salary in return for a non-cash benefit. The most popular types of salary sacrifice are childcare vouchers and pensions.

Flexible benefits can be introduced on a simple basis. For example one of my clients allows their employees to buy more annual leave once they are fully qualified. With a very simple system it is possible to manage this on spreadsheets and wordprocessed documents, but for a larger offering, an SME may need to consider using an in house or outsourced computerised system.

Another type of benefit includes voluntary benefits where an employee can choose to pay for a certain type of benefits. These include cycle to work, pension contributions and childcare vouchers, retail and leisure discounts, gym membership and discounts at local shops and restaurants.

Consultation with staff before finalising the benefits package is essential and, where possible, changes can be made before final implementation. Consultation can be undertaken using focus groups or with one to one interviews so that opinions can be sought. Consulting with staff will ultimately get buy into the finished product.

Following design of a benefits system it is important to set out in writing the framework in which it will operate – who gets what and the circumstances. Employees will need to be informed as to their entitlement and what they will gain from the package. Details on monitoring and costing are also important to document. Using total reward statements can help to show pictorially, the benefits value to individual employees. Using graphs or pie charts the benefit offering can bring a package to life so that it seems more worthwhile and understanding is greater. Total reward statements can be made available online or in paper format.

Whatever benefits system is implemented, it is important to monitor how much is spent on each benefit and how much it is used. There should be regular surveys undertaken with employees to ensure it is fit for purpose. Corrective action can then be taken if the budget is being exceeded or certain benefits are not being taken up. Also some benefits may become less tax efficient so SMEs need to keep abreast of HMRC changes.

The introduction of a benefits system needs to be well planned. Employees should know what is happening, why it is happening and how it will affect them. This can include the use of media and face to face discussions. Booklets, posters, newsletters, presentations and online communications can all be used to get the message across.

SMEs can now truly take advantage of employee benefits and design an attractive tailored package that will improve morale and ultimately the bottom line allowing them to effectively compete in the market.