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Are Employee Benefits An Expense?

There's no beating around the bush with this one. Yes, Employee Benefits are an expense, and should be considered non-refundable (if you're hoping your employees don't use them so you get your money back/spend nothing, they're not really a benefit), so here's what you do to work out what to spend


If you want to offer your employees benefits, you're going to need a budget. If you've been through our guide on running an employee benefits scheme, then you'll know this shouldn't just be an arbitrary number, but really think about what you can afford, or are willing to afford.

Pile of numbers

Don't just throw numbers at the wall to see what sticks

The easiest way to do this is just to multiply your number of staff by the amount you think you could give each one, provided you want to give annual benefits to everyone.


Example:

You’ve a small business of 53 employees, and you want each of them to have a dinner for two on the company after a successful year for the business

Employees x reward cost = annual benefits budget

53 x £55 [The cost of an average three course meal for two with a low-range bottle of wine] = £2,915

This is how you should do it if you know what you want to give your staff, and then you can balance it against the amount of turnover you’ve made in a year to see if it’s a percentage you can deal with, or against the amount of money you spend on employee payroll.

Overall, companies tend to commit less than 1% of their payroll to employee benefits, so if you’re already spending an average of £27,600 per employee, that £2,915 above is but a drop in the ocean (representing 0.2% of payroll and hopefully less of turnover, otherwise you've got a serious profit problem) and well worth investing if you think your employees deserve it.

Balloons

"If they deserve it, then it's time to celebrate! Bring out the, you know, rubber things filled with breath"

Alternatively, you can take a sum of your annual turnover that you’re willing to commit to employee benefits after budgeting for everything else in the following year.


Example 2

Your company had an amazing year. You made £2,915,000 in awesome trading, and you want to give some of that back to the employees. You don't want to go crazy, so you and the board agree to give 0.1% of sales to your 53 employees

1. (Total Sales / 100) x Percentage for Benefits = annual benefits budget

2. Annual Benefits Budget / Number of employees = Amount for each employee

1. £,915,000 / 100 x 0.1 = £2,915

2. £2,915 / 53 = £55

For the sake of convenience, we’re going to say that our company had a stellar year and made £2,915,000, and decided to give 0.1% of that back for the employees making for a whole £2,915 from our fictional business.

Then, divide that amount by the number of employees to get a sum you’re willing to spend on each one (hey, £55, look at that!). That way, you decide what everyone’s going to get after you know how much it’s going to cost in total.

Obviously there’s more complicated ways of doing it such as tiered systems according to how long staff have been around or seniority-based rewarding, but we’re keeping it universal and simple here.


So, you've now identified your budget - but what next? You've got to choose what you want to give and how you're going to give it, which we'll cover in a later post. Done with reading for now? Reach out at contact@virginincentives.co.uk or call us on 0330 111 3030 and we can talk about everything you need to get your budgets sorted to roll out benefits to the masses!

Photos by:

unsplash-logoPop & Zebra

unsplash-logoAdi Goldstein

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