What are employee benefits in the UK?
Employee benefits are the compensation a worker receives beyond base salary, some required by law and some offered voluntarily by the employer.
In the UK, statutory benefits are set by employment law and cannot be reduced by any contract. They include the minimum wage, Statutory Sick Pay, statutory family leave and pay, pension auto-enrolment, paid holiday, and redundancy pay. On top of these, employers commonly add voluntary benefits to stand out, such as:
- Private medical insurance (PMI)
- Enhanced pension contributions above the statutory minimum
- Life assurance and income protection
- Enhanced sick pay, maternity, and paternity schemes
Statutory minimum, market practice, and Multiplier
| Benefit | Statutory minimum | Typical market practice | Multiplier-administered option |
|---|---|---|---|
| Minimum wage | £12.71/hr (21+), April 2026 | Many pay above, especially in London | Compliant payroll by age band and region |
| Sick pay | SSP £123.25/week, up to 28 weeks | Occupational full-pay schemes common | SSP plus optional enhanced sick pay |
| Maternity/paternity | SMP 39 weeks; SPP up to 2 weeks | Many enhance beyond statutory | Compliant statutory pay administration |
| Pension | 8% total, 3% employer minimum | Some contribute above 3% | Auto-enrolment and contribution admin |
| Holiday | 5.6 weeks (28 days) | Often matched or enhanced | Compliant leave tracking and accrual |
| Redundancy | After 2+ years’ service | Enhanced terms common | Compliant redundancy processing |
National Minimum Wage and National Living Wage
The UK sets a legal minimum hourly wage by age, reviewed every April on the recommendation of the Low Pay Commission. From April 2026 the rates are:
- £12.71 an hour for workers aged 21 and over, known as the National Living Wage
- £10.85 an hour for workers aged 18 to 20
- £8.00 an hour for under-18s and apprentices
The National Living Wage covers everyone aged 21 and over, following the change in April 2024 that lowered the threshold from 23 to 21. If an employer provides accommodation, only a capped daily amount (£11.10 from April 2026) counts toward minimum-wage pay. Underpayment is enforced by HMRC, which can order arrears and levy penalties.
Statutory Sick Pay
Statutory Sick Pay (SSP) is the minimum an employer must pay an employee who is off sick and eligible. From April 2026 it is £123.25 a week, or 80% of average weekly earnings if that is lower, for up to 28 weeks.
The Employment Rights Act 2025 changed how SSP works from April 2026. It is now paid from the first full day of sickness absence, removing the previous three-day waiting period, and the lower earnings limit that used to exclude the lowest earners has been removed. Many employers go beyond the statutory floor with an occupational sick pay scheme that pays full salary for a set period.
Statutory Maternity, Paternity, and Shared Parental Leave
The UK provides paid statutory leave for new parents, administered through payroll and largely recoverable by the employer from HMRC.
- Statutory Maternity Pay (SMP): up to 39 weeks. The first 6 weeks are paid at 90% of average weekly earnings, then the lower of £194.32 a week or 90% of average weekly earnings for the remaining 33 weeks. Maternity leave itself can run up to 52 weeks.
- Statutory Paternity Pay (SPP): the lower of £194.32 a week or 90% of average weekly earnings, for up to 2 weeks.
- Shared Parental Leave and Pay: parents can share up to 50 weeks of leave and 37 weeks of pay, with statutory shared parental pay also at £194.32 a week.
To qualify for statutory family pay, an employee generally needs average weekly earnings of at least £129 and to meet the relevant service test. Many employers enhance these payments well above the statutory minimum to stay competitive.
Pension Auto-Enrolment
UK employers must automatically enrol eligible workers into a workplace pension and contribute to it. Eligible workers are broadly those aged between 22 and State Pension age earning over £10,000 a year.
The minimum total contribution is 8% of qualifying earnings, which for 2026/27 are earnings between £6,240 and £50,270 a year. At least 3% of that must come from the employer, with the balance from the employee, including tax relief. The exact split above the 3% employer minimum depends on the pension scheme. Employers can and often do contribute above the 3% minimum as a recruitment and retention benefit. Auto-enrolment duties, including assessment, communications, and re-enrolment every three years, sit with the employer.
Healthcare and Insurance in the UK
Employees who are ordinarily resident in the UK can generally access free healthcare through the National Health Service (NHS), funded through general taxation rather than employer contributions. Many visa holders pay the Immigration Health Surcharge as part of their visa application to use the NHS during their stay.
Because the NHS covers core healthcare, private medical insurance (PMI) is a voluntary benefit rather than a legal requirement. Many employers offer PMI to give staff faster access to specialists and elective treatment, often alongside dental cover, an employee assistance programme, and health screening. PMI is a taxable benefit in kind, which affects how it is reported and taxed.
Working Hours and Holiday Entitlement
The Working Time Regulations set a maximum average working week of 48 hours, averaged over 17 weeks, which a worker can choose to opt out of in writing. Workers are also entitled to daily and weekly rest breaks.
Statutory paid holiday is 5.6 weeks a year, which is 28 days for someone working five days a week, and can include public holidays. Part-time workers receive the same entitlement on a pro-rata basis.
Termination and Redundancy Pay
An employee with two or more years of continuous service who is made redundant is entitled to a Statutory Redundancy Payment, calculated by age and length of service: half a week’s pay for each year worked under age 22, one week’s pay for each year aged 22 to 40, and one and a half weeks’ pay for each year aged 41 and over, capped at 20 years.
A weekly pay cap applies to the calculation (£751 a week for 2026/27, subject to annual review), and statutory redundancy pay is tax-free up to £30,000. Employees are also entitled to notice, and dismissals must follow a fair process to avoid unfair dismissal claims. For the full picture, see Multiplier’s guide to UK termination laws.
How Employee Benefits Are Taxed in the UK
Employee pay is taxed through PAYE, with income tax and employee National Insurance deducted at source and reported to HMRC in real time. Employers pay their own National Insurance on top of salary.
Most non-cash benefits, such as a company car, private medical insurance, or a loan, are taxable benefits in kind. They are reported to HMRC on a P11D, and the employer pays Class 1A National Insurance on them at 15%. From April 2027, HMRC is phasing in mandatory payrolling of most benefits in kind, which will replace P11D reporting for those benefits, so employers should plan for the change. Employer (secondary) National Insurance for 2026/27 is 15% on earnings above a £5,000 secondary threshold, with eligible employers able to offset up to £10,500 through the Employment Allowance. Getting benefit-in-kind reporting right is a common compliance pressure point.
Supplemental and Voluntary Benefits in the UK
Beyond the statutory floor, UK employers use a familiar set of voluntary benefits to build a competitive package:
- Private medical insurance and dental cover: often the headline benefit, sometimes extended to dependents
- Life assurance and income protection: typically employer-funded group schemes
- Critical illness cover: a lump sum on diagnosis of a covered condition
- Enhanced pension, sick pay, and family leave: above the statutory minimum
- Employee assistance programmes and wellbeing benefits: counselling, health screening, and similar support
Multiplier’s Localized Benefits can help administer these voluntary benefits for your UK-based team.
Employee Benefits for Expatriates in the UK
For employees relocating to the UK, benefits and entitlements depend on visa status and residency.
Most workers on a valid UK work visa access the same statutory framework as UK nationals: the minimum wage, statutory pay, pension auto-enrolment, and paid holiday. Access to NHS care is typically secured through the Immigration Health Surcharge paid as part of the visa process. Entitlement to means-tested support such as Universal Credit or council tax help is usually restricted for those with “no recourse to public funds” visa conditions, so relocation packages often add private medical insurance, housing allowances, and relocation support.
Cost of Employing an Employee in the UK
The cost of a UK hire is more than gross salary once mandatory employer on-costs are included. On top of gross pay, an employer typically carries:
- Employer National Insurance at 15% on earnings above £5,000 (less any Employment Allowance)
- A minimum 3% employer pension contribution on qualifying earnings
- The apprenticeship levy for larger employers, plus any voluntary benefits
As a rough guide, mandatory employer on-costs commonly add 15% to 20% on top of gross salary before voluntary benefits. To model a specific role, use Multiplier’s employee cost calculator or review typical cost of employment in the UK.
How to Design a Compliant Employee Benefits Program in the UK
A benefits program that is both compliant and competitive comes down to five steps.
- Set objectives and budget. Decide whether the plan is built for compliance, retention, or both, and size the budget to match.
- Confirm the statutory baseline. Map the minimum wage, statutory pay, pension, holiday, and redundancy obligations you must meet.
- Benchmark the market. Compare voluntary benefits against sector and regional norms, since London packages often run higher.
- Build and communicate the plan. Layer voluntary benefits onto the statutory base and explain them clearly to employees.
- Review regularly. Revisit the plan against employee feedback and the annual April changes to statutory rates.
How Multiplier Helps You Manage Employee Benefits in the UK
Staying on top of PAYE, pension auto-enrolment, statutory pay, and benefit-in-kind reporting takes local expertise, and the rates change every April. Multiplier’s Employer of Record handles it for you.
Multiplier runs compliant UK payroll, administers pension auto-enrolment and statutory pay, manages leave and redundancy, and can enrol your team in private medical insurance and other voluntary benefits, all with no UK entity required. That means you can extend a compliant offer to a candidate in the UK in days rather than months.
Talk to our team or explore UK EOR.
FAQs
What is the minimum wage in the UK in 2026?
From April 2026, the National Living Wage for workers aged 21 and over is £12.71 an hour. Workers aged 18 to 20 receive £10.85, and under-18s and apprentices receive £8.00. Rates are reviewed each April by the government on the Low Pay Commission's recommendation.
How much is Statutory Sick Pay in the UK?
Statutory Sick Pay is £123.25 a week, or 80% of average weekly earnings if lower, paid by the employer for up to 28 weeks. From April 2026 it is paid from the first full day of sickness absence, with no waiting days and no lower earnings limit.
How much is Statutory Maternity Pay in the UK?
Statutory Maternity Pay is paid for up to 39 weeks: 90% of average weekly earnings for the first 6 weeks, then the lower of £194.32 a week or 90% of average weekly earnings for the remaining 33 weeks.
How much is Statutory Paternity Pay in the UK?
Statutory Paternity Pay is the lower of £194.32 a week or 90% of average weekly earnings, for up to 2 weeks.
What are the minimum pension contributions under UK auto-enrolment?
The total minimum contribution is 8% of qualifying earnings (between £6,240 and £50,270 a year), of which at least 3% must come from the employer and the rest from the employee, including tax relief.
How many days of annual leave are UK employees entitled to?
Workers are entitled to 5.6 weeks of statutory paid holiday a year, which is 28 days for a standard five-day week, pro-rated for part-time workers. This can include public holidays.
Is private health insurance mandatory in the UK?
No. The NHS provides free government-funded healthcare to all UK residents. Private medical insurance is a common employer-provided benefit, not a legal requirement.
What is statutory redundancy pay in the UK?
Employees with two or more years of continuous service are entitled to a Statutory Redundancy Payment based on age and length of service, subject to a weekly pay cap (£751 for 2026/27) and tax-free up to £30,000.
How are employee benefits taxed in the UK?
Most benefits in kind, such as company cars and private medical insurance, are taxable and reported to HMRC on a P11D, with the employer paying Class 1A National Insurance at 15%. From April 2027, mandatory payrolling of most benefits in kind will begin to replace P11D reporting. Cash pay is taxed through PAYE, with income tax and employee National Insurance deducted at source.
How can an Employer of Record help manage employee benefits in the UK?
An EOR like Multiplier administers PAYE, pension auto-enrolment, statutory pay, and compliant leave and redundancy processing, and can add voluntary benefits like private medical insurance, all without you setting up a UK entity.
