Make your people happy: the facts about employee benefits

Want to provide employment benefits to your agency employees but aren’t sure of the implications?

If you’re planning on being ‘Johnny Nice Boss’ and providing expenses or benefits to your employees and directors, there are a few things to think about first. For a start, you might need to tell HMRC; and secondly, you might have to pay tax and National Insurance (NI) on them.

So, before you dive in head first, it’s good to take a look at what IS and what ISN’T exempt from the eagle eyes of HMRC. Here are the ins and outs (and possibly the shake-it-all-abouts) of the typical benefits you could give your people.

You can also get the full technical lowdown on the rules here

1. Accommodation

Putting a roof over your employees’ heads isn’t usually something that you, as the boss, are responsible for. But there are situations where you might end up paying for accommodation – and where that outlay is exempt from the attentions of the revenue.

Accommodation is usually exempt if your employee needs somewhere to live to do their job (a pub manager living in the pub they manage, for example). If none of HMRC’s specified conditions applies, and the employee is a director or earns over £8,500 per year, it has to be reported on a P11D form (such snappy names they give these forms).

2. Assets bought, sold or given

There may be occasions where you come over all benevolent and decide to give equipment or hardware to an employee (or you buy something from them). Maybe you’re replacing all your Mac screens and want to gift an old one to a designer who’s setting up a system at home.

But there are occasions where you’ll have to report the buying or selling of assets. And times when it count as additional income for your employee too (so they’ll end up paying tax and NI).

3. Company cars and fuel

To do business, you can end up doing a lot of travelling around, with cars being one of the most common ways to get from A to B. So is it a good idea to give an employee a company car?

Where cars are being used for business, or you’re providing pool cars for the team to use, they’re generally exempt. But be careful – journeys to and from a normal office aren’t covered, so these cars are purely for business use.

4. Company vans

The rules for vans are similar to those for company cars, but with a few little differences (including the need to display a copy of the Daily Mirror in the windscreen at all times).

You can use the work van for ‘insignificant’ private journeys, though you’ll have to use your judgement as to what this translates to (probably not driving to Scotland and back).

5. Bikes

You want your team to be healthy, so bikes can be a great option to get them pedalling (and cutting down your carbon footprint).

Bikes are exempt as long as they’re available to all your employees and mainly used for getting to work (so no off-road mountain biking with these bikes, sadly).

6. Loans provided to employees

Loaning money to employees for big purchases or life events is becoming a quite common way to add a little pizazz to your benefits package.

But there are some quite clear rules about when these loans are exempt. Be mindful of these or you’ll end up having to report the loans to HMRC and may end up paying NI on them.

7. Mobile phones

You can’t expect a member of staff to do much business without a mobile phone these days. But be aware that you can only give them one phone or SIM – any additional phones will have to be reported.

8. Assets made available to an employee

You might have assets like office equipment or computer technology that you make available to the guys on the team. But, again, you’ve got be careful – there are rules around this and you could end up needing to fill out another exciting P11D form (yawn!)

9. Childcare

Parents are likely to make up a big chunk of your team over time. So having benefits that appeal to these sleep-deprived, bleary eyed members of staff will be as appealing as the sound of CBeebies closing down for the night.

Having a workplace nursery can be a real benefit for employees with kids. Not only do they have convenient childcare but the cost is exempt from tax and NI too.

10. Medical or dental treatment and insurance

Everyone needs medical care at some point in life. So having medical insurance or free dental treatment will be an appealing benefit to your team.

You can offer health checks, eyes tests, dental care and all manner of different benefits. If they’re on the exempt list, it’s a great way to offer something really valuable to the team, without having to fork out loads in tax and NI.

11. Pension contributions

Retirement might seem like a dim distant prospect for most. But having good pensions provision is a big draw for keeping existing employees in the team, or attracting new talent into the agency.

Pension contributions are a great benefit as the employee gets tax relief on the contributions. There are a few different ways to do this, with different tax implications depending on the set-up.

Be a benevolent boss, but think through the long-term implications

So, there you have it. There are lots of ways to give your team some great benefits, boost motivation and give your people a few perks to make you seem like the nicest boss in the North West.

But the key here is to check out the rules and to make sure you (or the employees) won’t end up having to cough up additional tax and NI that you hadn’t counted on.

You can read the full list of rules here

If you’d like to have a chat with us about the most effective ways to put your benefits in place, get in touch for a natter.