how to budget for employee benefits

How to budget for employee benefits

how to budget for employee benefits
Budgeting effectively is always a challenge but particularly in today’s financial climate.

You want to provide an employee benefits package that will genuinely make a positive difference for your employees but you’re working with a strict budget.

So, how do you do it?

If you’re implementing benefits for the first time, there’s lots of useful resources available on our blog around the types of benefits available and how to implement cost-effective benefits in today’s world.

But for more on how to budget for employee benefits, read on!







Your budget planning method

The budget planning method you use will largely depend on your current employee benefits set up.


Zero-based budgeting

If you’re starting from scratch, a zero-based budgeting method will likely suit you best.

With zero-based budgeting, every aspect of employee benefits are analysed for their needs and costs. Your employee benefits budget is then allocated to the areas which best help you achieve the goals of your department and the goals of the business.

For example, you may have driven a more focused health and wellbeing culture across the business in the wake of the coronavirus pandemic. With zero-based budgeting, you’ll prioritise health and wellbeing employee benefits and allocate more budget towards them.

You’ll then prioritise the other goals of your employee benefits and prioritise budget accordingly.


Incremental budgeting

If you’ve already got employee benefits in place and you’re setting up your new employee benefits budget for the next fiscal period, incremental budgeting may be your preferred option.

With incremental budgeting, you’ll analyse your previous budget and make any alterations needed to cater for the changing needs of the business.

You might also use incremental budgeting to optimise the performance of your employee benefits based on how your employees have been using them.

For example, you may have seen an increase in the use of your health and wellbeing employee benefits in the last year.

In this case, you may decide to remove benefits that have seen a reduced uptake and allocate that employee benefits budget towards new health and wellbeing benefits.

For example, if you have a Health Cash Plan in place as well as Private Medical Insurance and these are your most used benefits, you could allocate more budget to other health and wellbeing benefits and implement an Employee Assistance Programme.


how to budget for employee benefits

Mandatory or core employee benefits

There are some aspects of employment considered as employee benefits that all UK workers are entitled to.

These include:

  • A minimum paid holiday allowance of 5.6 weeks per year
  • Income protection
  • A pension scheme which employers must pay into and auto-enrol all eligible employees.


For more on laws and legislation around employee benefits in the UK, take a look at the UK Government’s guidance on expenses and employee benefits.

You might need to include these under your employee benefits budget, so be sure to keep this in mind.


Your chosen employee benefits

When it comes to your employee benefits budget for your chosen or optional benefits there are a few things to consider.

These may dictate not just the cost but the return on investment from your benefits, which are both likely to be big factors when you budget for employee benefits.

  • Number of employees (and how this is projected to grow or decrease)
  • Projected employee benefits uptake
  • Projected changes in retention due to employee benefits
  • Any future legislation changes which may affect cost
  • Any bespoke requirements you might have


When you budget for employee benefits, remember you may need to leave some room for any unexpected costs. A change in legislation or a big increase in your employee numbers could increase your spend on employee benefits.

It’s also important to remember that uptake could drive savings which could feed back in to how you budget for employee benefits, which is explained further in the next section.


Types of employee benefits

There are any number of employee benefits available, meaning you’ll easily be able to design an employee benefits package to suit your business, your employee benefits budget and your employees.

The main types of employee benefits include:

  • Health and wellbeing benefits
  • Financial wellbeing benefits
  • Lifestyle benefits and employee discounts
  • Salary sacrifice benefits
  • Commuting and travel benefits


When you budget for employee benefits, consider how you might allocate your budget to each of these areas depending on your business and department goals.

To see what employee benefits you could offer your employees, take a look at our range of employee benefits which include all of the above and more.


how to budget for employee benefits

Cost-neutral and salary sacrifice benefits

Salary sacrifice employee benefits can help both employers and employees save.

With Tax and National Insurance savings made through salary sacrifice, benefits like the Bike to Work scheme and Holiday Trading can actually save employers to the point where the cost of implementing the schemes are effectively covered.

When you budget for employee benefits, it’s important to take this into consideration. If you’ve got lots of staff who love cycling, the Bike to Work scheme could cost your company a lot less than you might think!


Consider an employee benefits platform

When you budget for employee benefits, be sure to consider an employee benefits platform. It might add to the cost, but it’ll almost certainly be worth the investment.

Some of the key advantages of an employee benefits platform include:

  • Streamlined admin
  • Strengthened internal brand
  • Improved employee engagement
  • Effective benefits reporting
  • Easy access to key management information


When budgeting for employee benefits, consider both an off-the-shelf platform and a more bespoke option.

With an off-the-shelf platform, you’ll benefit from hosting all your benefits in one place at a much lower cost.

However, if you want to strengthen your internal brand even further and really improve employee engagement, a more bespoke option might be for you.

Budgeting for an employee benefits platform will save an invaluable amount of time and resource in the long run, so it’s worth keeping this in mind.


Could you save on other budgets with your employee benefits budget?

How will your employee benefits budget fit in to your overall HR budget? Could you implement an all-in-one solution that could help you save in other areas?

For example, you might have a separate reward budget to your employee benefits budget. You may even have a reward platform while you’re considering implementing an employee benefits platform.

With an employee benefits platform you could integrate a reward platform within it and save on the cost of running two separate platforms.

So, when you budget for employee benefits, consider other areas of HR and the business alongside it to see if there’s a solution which could help save on your overall HR budget.

Doing this could also save time and resources in the long run with an all-in-one solution.

how to budget for employee benefits

How to get your employee benefits budget approved

Once you’ve budgeted for employee benefits you may need to get your budget approved. Here are a few key things to consider.


Include a clear cost breakdown

When presenting your employee benefits budget, you’ll need a clear cost breakdown that shows you know exactly where all the costs are allocated and, importantly, how they could change over the next fiscal period.

Be sure to include fixed and variable costs and your justifications for them.

Showing an awareness of how variable costs could change in particular is key to showing a clear understanding of how the budget is being spent.


How you will measure its success and impact on the business

What are the Key Performance Indicators (KPI’s) of your employee benefits set-up and how will you measure them? How will your employee benefits set-up help the company achieve its objectives?

Remember your audience and show a clear understanding of your own goals and targets but also, most importantly, how these will affect the key business objectives.

For example, your own goals may involve improving retention or improving recruitment, but how do these help the company cut costs for example?


Get advice from your employee benefits provider

Ask your employee benefits provider for any statistics, case studies, evidence or examples that could help you make your case stronger.

For example, have they seen an increase in uptake for the Bike to Work scheme recently? How have your benefits provider helped other companies meet their business objectives?


Get employee benefits budget advice from an employee benefits provider

For further guidance on everything covered here, we can help! Our industry experts have worked with companies of all shapes and sizes to find an employee benefits solution that fits their budget and one that their employees love too.

Feel free to browse through our industry-leading range of employee benefits or to find out more about how we can help you, get in touch!