Employee health benefits your small business can offer (and what HMRC says about them)
If you run a service business and you’ve got a team behind you, whether that’s care workers, tradespeople or support staff, you’ve probably wondered at some point whether you could be doing more for them. Better benefits, more support, something that shows you actually care beyond the monthly payslip.
The good news is that there are some genuinely useful options available to small employers, and several come with real tax advantages for both you and your team. This guide runs through the main ones in plain English, so you can see what might work for your business, without the HMRC headache.
A quick note before we start
Most employee benefits are classed as a benefit in kind by HMRC, which means they can have tax and National Insurance implications. How you set things up matters. Before you commit to anything, it’s worth a conversation with us. That said, everything below is well-established and widely used by small businesses across the UK, and none of it needs to be complicated when it’s set up correctly.
The cycle to work scheme
This is one of the most popular employee benefits around, and it’s genuinely good value, especially if you have employees who commute or travel between jobs.
Under the scheme, your employees can get a bike and cycling equipment through a salary sacrifice arrangement. They effectively “hire” the bike from you over an agreed period, paying for it from their gross salary before tax and National Insurance are deducted. This means they save on income tax and NI, and you save on employer’s NI contributions too. It’s one of those benefits that costs you very little but can mean a lot to the right employee.
You can also provide pool bikes, which are bikes owned by the business that employees can borrow for travelling to and from work or between work locations. HMRC treats these differently to the cycle to work scheme, but they can be provided tax-free as long as they’re available to all employees and used mainly for qualifying journeys.
Private healthcare
Offering private health insurance to your employees is a well-recognised benefit, and it can make a real difference to how quickly your team can access treatment, and how well looked-after they feel working for you.
The important thing to know is that this is a taxable benefit in kind for your employees; it gets reported on a P11D and they may pay income tax on the value. You’ll also pay Class 1A National Insurance on it. It’s worth understanding these costs before you commit.
That said, for many small employers the goodwill it generates and the reduction in long absences makes it worthwhile. If full private medical cover feels like a stretch for a small team, it’s worth looking at group policies designed specifically for businesses like yours, which are often more affordable than you’d expect.
Health cash plans
If private health insurance feels like too big a step, a health cash plan is worth serious consideration, and for many small service businesses, it’s actually the better fit.
A cash plan lets your employees claim back the cost of everyday health expenses; dental treatment, optician appointments, physiotherapy, and similar. It’s not full medical cover, but for most people those are the health costs they actually face day to day.
Cash plans are also a taxable benefit in kind, but the lower cost makes them genuinely accessible for smaller teams. If you want to do something meaningful for your staff without a big monthly commitment, this is often the place to start.
Employee Assistance Programmes
An Employee Assistance Programme, usually called an EAP, gives your team access to confidential support for mental health, personal issues, financial worries, and more. Most include a counselling helpline and a set number of therapy sessions.
They’re often surprisingly affordable, particularly for small teams. HMRC currently treats them as a non-taxable benefit where the support is available to all employees, so there’s no P11D to worry about.
If you run a care business, work in the trades, or have employees in roles that carry a lot of pressure, this is one benefit that can have a real impact. Mental health is now one of the leading causes of workplace absence in the UK, and having something in place, even something small, tells your team you take that seriously.
Mental health support
Beyond an EAP, some employers go further; funding individual counselling sessions or putting a member of the team through mental health first aid training.
Mental health first aid training is treated as a business expense and is generally tax-deductible. Funding individual therapy sessions for a specific employee is a slightly different situation, and how you structure it affects the tax position. It’s worth a quick conversation with us before you commit, just to make sure it’s set up correctly. It’s not complicated when you know what you’re doing, you just want to get it right.
Gym memberships and fitness classes
Gym memberships paid for by the employer are generally a taxable benefit in kind, something to factor in if you’re considering them. The exception is on-site gym facilities available to all staff, which can be provided tax-free, though that’s rarely relevant for a small service business.
Where this gets more interesting is the wellbeing allowance model; giving employees a set amount to spend on health and fitness, gym, swimming, yoga, whatever works for them. It’s flexible, it’s personal, and employees tend to value the choice.
How it’s taxed depends on how it’s structured, so again, it’s worth taking advice before you set anything up. But if you want to do something that goes beyond the standard options, this is worth exploring.
Occupational health services
If you’ve ever had a team member off sick and weren’t sure how to handle the return to work, occupational health is exactly what it’s designed for. You can refer an employee to a specialist who can assess their situation and give clear guidance, for you and for them.
Up to £500 per year per employee spent on medical treatment recommended by a GP or occupational health professional can be provided tax-free. For businesses in care, trades or any role where physical health is part of the job, this is a practical option that’s well worth knowing about.
Annual health checks
HMRC allows one health screening and one medical check-up per year per employee to be provided tax-free. It’s a small gesture that carries real weight, a tangible way of telling your team that their health matters to you, without a complicated setup or ongoing cost.
If you’re looking for a low-cost benefit that’s easy to put in place and genuinely appreciated, this is one of the simplest places to start.
Before you choose, a few things to think through
Not every benefit will suit every business, and the right combination depends on your team, your budget, and what your people actually value. There’s no single right answer.
What’s worth remembering is that the way benefits are set up, whether through salary sacrifice, a P11D, or something else, affects both the cost to you and the tax position for your employees. Getting that right from the start saves a lot of untangling later.
If you want to think through what might work for your business, that’s exactly the kind of conversation we’re here for. Not just the payroll mechanics, but helping you weigh up the options and make a decision you feel confident about. Drop us a line and we’ll walk you through it.