Expanding to the UK: how to navigate local benefits law and expectations to attract and retain the best UK talent

As a US-headquartered company, you may see the many similarities America has with the UK and assume that your employee benefits strategies in the two countries will look very similar – it’s an easy trap to fall into. However, it’s these sorts of assumptions that could lead you to design a strategy that fails to comply with complex local law and alienates your UK workforce.

In this article in our Expanding to the UK series, one of our International Employee Benefits Managers, Rachel Morgan, walks you through the key legal and cultural considerations for your UK benefits strategy, to help you attract, reward, and retain the best local talent.

Key takeaways

In this article, you’ll learn how to:

1. Understand key differences in employee benefits culture in the UK
2. Identify and deliver the benefits that UK law requires, and that UK staff expect
3. Stand out as a UK employer of choice
4. Communicate your benefits to effectively drive engagement among your UK staff

Key differences: US vs UK healthcare

The healthcare system in the US is such that the majority of your employee benefits budget will be allocated to providing comprehensive medical insurance. With the National Health Service (NHS) delivering socialised medicine, this isn’t the case in the UK.

However, UK businesses commonly offer Private Medical Insurance (PMI), which entitles employees and their families to fast-tracked appointments and treatment at more specialist and costly private hospitals. Although PMI requires less of your budget to provide than comprehensive medical cover in the US, that doesn’t mean that the overall budget for benefits in the UK is necessarily less than the USA - it simply means that budgets can be allocated differently.

Understanding what benefits are required by UK law

The minimum expectation as an employer setting up in the UK is that you offer your people the benefits required by local law. Benefits legislation can differ considerably from country to country, so by basing your strategy on assumptions without doing your research, you could leave your organisation vulnerable to regulatory fines as well as the reputational damage that could occur as a result. Examples of mandatory benefits in the UK, include:

• Workplace pension plan to help your people save for retirement
• Annual leave (vacation) entitlements
• Statutory sick pay if an employee is unable to work due to ill health

Pension: the UK benefit you need to ensure you get right

In the UK, you must offer a workplace pension plan and apply at least the minimum contributions by law. They are usually defined contribution plans and, because they are required by law, they can be complex to establish and manage compliantly. This will likely be the benefit with the highest cost attached and is widely regarded as the most important, so getting it right is crucial.

The minimum contribution as enforced by UK law is 8% of an employee’s salary every month (3% paid by the employer, 5% paid by the employee), however some employers in the UK are offering total combined contributions of 10% or more, depending on their sector and seniority. 

Understand what benefits might be expected by the UK people in your sector

To compete for the best talent in the UK job market, we advise our clients to at least offer the benefits that are expected by people in the UK in your sector – ones that your competitors could also be offering. These benefits include:

• Private medical insurance (PMI): helps your people and their families avoid lengthy NHS waiting times and get quicker access to urgent medical support
• Income protection benefits (also known as Long-Term Disability): offers financial support if any of your people are unable to work for a long period of time
• Employer-funded life insurance and critical illness: helps protect employee’s families in the event of death or serious illness
• Enhanced maternity and paternity leave: support for those who have recently had or adopted a child, by way of paid time off

Understanding what benefits will help you stand out as a UK employer of choice

When thinking about the benefits that can help you stand out, put yourself in the shoes of the people you’re trying to attract and retain. How can your benefits really support them in their daily lives? What incentives might help them find more value in a role at your company over a similar role with a competitor?
Feedback from our consultants suggests that we are seeing more employers offering standout benefits such as:

• Meal vouchers for free or subsidised lunches
• Travel allowances to cut commuting costs
• Eldercare support for those with elderly or ill parents
• Generous family-forming benefits to support those having children
• Enhanced maternity and paternity leave
• Training and qualification support

Communication of your benefits

Lastly, a key component of a successful employee benefits strategy in the UK is how you communicate your benefits and drive engagement among your people. It’s all well and good investing resources in great benefits that your staff in the UK will love, but without educating them on their benefits and how to use them, you may find that your benefits investment is wasted.
This can be done through methods such as:

• Digital platforms that make your benefits more accessible
• Employee benefits roadshows and events
• Educational seminars

With the COVID-19 pandemic putting a greater emphasis on the importance of physical and mental wellbeing, ensuring your benefits are widely known, understood and accessible means:

• Your people are empowered to bring their best mental and physical selves to work
• A better return on your benefits investment
• Your people know that they’re valued by your business