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Stethoscope and pen in doctor robe pocket | AccountingWEB| Employee healthcare is a healthy business strategy
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Employee healthcare is a healthy business strategy

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Could a relatively small outgoing on benefits for staff pay big dividends? Philip Fisher urges firms to provide healthcare cover for key employees. 

3rd May 2024
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Large firms of accountants often shower employees with benefits in kind, many of which are of questionable value and can be irritating when they generate a tax liability way down the road.

Smaller practices tend to concentrate on boosting salaries, frequently neglecting the attractions of bonuses and non-cash benefits.

For this accountant, there is one benefit in kind that has the advantage of helping all parties.

Private healthcare

In principle, private healthcare should be an unnecessary luxury. After all, the National Health Service (NHS) is theoretically the best of its kind in the world, able to offer a unique service courtesy of the public purse.

As anyone who has read a newspaper in the last few years (or sat around in A&E for 12 hours) will know, the reality no longer fits the hype.

Sadly, given the state of the economy and the ever-increasing demand on NHS, not to mention waiting lists that seem to grow endlessly, whatever politicians might suggest to the contrary, healthcare has become a big issue.

If you are running a practice, the idea of providing private healthcare to employees might seem an expensive luxury. That is not necessarily the case.

Every sole practitioner should invest in a product of this kind, since the last thing that they need is to be stuck on an NHS waiting list for months, if not years, staggering around in pain and unable to concentrate on doing the job properly.

In larger practices, same applies to partners and key employees. In this case, it could be argued that every employee is a key employee otherwise why are they on your payroll?

How to structure the arrangement

From the perspective of the individual, finding an employer offering a benefit in kind that is valuable should boost morale and, depending on the structuring of the arrangement, retention.

The downside for the employee could come with any additional expense.

There are a number of different ways that a firm could choose to structure the arrangement. If nothing else, any practice of a decent size should be able to negotiate a good deal with a healthcare provider, possibly via a broker. This will cut the overall cost for all involved.

As to the funding, this might depend on a combination of generosity and motivation. The cheapest option could be to implement a salary sacrifice scheme, whereby the employee effectively funds the deal but gets a cut of tax savings.

A kinder (or richer) employer might pay for the healthcare but leave the employee to pick up the associated benefit in kind charge. Many might only be paying 20% of the cost, which is a pretty good deal but may still stretch budgets too far.

Finally, for those employees who they really want to impress, an employer could gross up the benefit in kind tax charge and pay this as well, leaving the employee with free healthcare at no cost.

To increase the likelihood of retaining workers, a contract should be in place whereby if they leave during the tenure of the healthcare policy, employees would be expected to pay for any outstanding period, either from the date on which they give notice or the date on which employment ends.

Ensures the health of the business, too

If this all sounds like an unnecessary expense, let’s go back to the deficiencies of the NHS.

There is still no doubt that where somebody suffers a catastrophic accident, the NHS is likely to do a fine job of getting them back on their feet, although the waits for an ambulance and to get into hospital in the first place might be painful.

However, where someone has an ongoing issue that really puts them at the back of a waiting list that ONS suggests is now 9.7 million people, they are going to be unhealthy and unhappy, potentially unable to work or not functioning fully for years.

In such a situation, being able to call on a private healthcare provider who can get them into a hospital or clinic in days could be, if not necessarily a lifesaver, a massive boon to their health and your business.

Finally, any benefit could help with recruitment as well as retention. If you interview an employee who is struggling to choose between working for your firm and a competitor, the one that is offering healthcare and therefore looks generous is likely to hit the jackpot.

This is one of those situations where it pays to be proactive. In many cases, the likelihood is that an accountant will only realise the need for this kind of service after they have suffered from a very bad and costly experience. The trick is to get in ahead of time.

Do you offer any healthcare benefits to your employees? How do you go above and beyond to priotise your employees' wellbeing?

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