What’s the Difference Between Statutory and Non-Statutory Benefits?

Statutory and non-statutory benefits are essential components of a company's compensation package. Statutory benefits are enforced by governments to protect employees, while non-statutory are optional perks offered by employers to reward and motivate their workforce. Employers should use the right mix of these benefits to ensure regulatory compliance and promote a positive workplace culture.

Statutory and Non-statutory Benefits: Overview

Statutory benefits are mandatory, while non-statutory benefits are voluntary. Statutory benefits are required by law to protect the rights of employees and ensure their financial well-being. However, non-statutory benefits come as additional voluntary perks that businesses offer to their workers to create a positive corporate culture that attracts and retains the best job candidates.

However, creating a well-balanced package of benefits can be a hassle without the right tools. Playroll’s payroll solutions help businesses manage their global workforce and ensure accurate benefits administration.

In this post, we cover the differences between statutory and non-statutory benefits and the best practices for creating a comprehensive benefits package. That way, you’ll know what to include in your overall benefits package to build a compliant and supportive business enterprise.

Statutory Benefits

Statutory benefits are the minimum employment requirements mandated by law. Employment laws and regulations require business owners to offer basic benefits to their employees. That helps protect employees’ rights in the workplace and ensure their financial well-being.

Examples of statutory employee benefits in the UK include:

• Social security benefits
• Unemployment insurance
• Minimum wage
• Workers' compensation insurance

Statutory benefits relate to the standard, non-negotiable employee rights within a country. Companies are legally obligated to provide these benefits to eligible employees, and failure to do so may put employers at loggerheads with the law.

However, statutory benefits requirements may vary among countries because of differences in employment laws and regulations. Thus, they are one of the important factors to consider when expanding a business internationally.

Our innovative EOR platform and global payroll management system help employers ensure compliant administration of statutory benefits in different countries.

Non-statutory Benefits?

Non-statutory benefits, also called fringe perks, are additional perks and incentives offered voluntarily by employers to employees. They’re not legally mandated by law and employers can choose to offer or skip them in their compensation package.

Examples of non-statutory benefits that UK employees may enjoy include:

• Retirement plans
• Professional development opportunities
• Health and wellness programs
• Flexible working schedules, like working from home
• Medical insurance

Unlike statutory benefits, non-statutory benefits are flexible and customizable. Such flexibility enables employers to create tailored packages that meet the needs and preferences of their employees. Therefore, a company's package can impact recruitment and employee retention.

Playroll’s global payroll solutions enable you to administer non-statutory benefits strategically to stand out from competitors, create a positive workplace culture, and attract and retain the best job candidates.

Key Differences Between Statutory and Non-statutory Benefits

Understanding the key difference between statutory and non-statutory benefits is essential for employers and employees. The top ones include:

• Legality: Statutory benefits are mandatory and required by law, while non-statutory benefits are optional perks provided voluntarily by employers.
• Purpose: Statutory benefits ensure employers meet the minimum requirements for employee protection and well-being. Non-statutory benefits are designed to help companies foster a positive workplace culture.
• Flexibility: Statutory benefits are consistent for all employees in a country. Non-statutory benefits are flexible and can be customized to meet the unique needs of a company’s workforce.
• Tax implications: Generally, statutory benefits aren’t taxable, but non-statutory perks are subject to income tax.
• Legal consequences: Non-compliance with statutory benefits administration can result in legal fines, penalties, and potential lawsuits. Non-statutory benefits have no legal consequences, and business owners can choose to offer or not to offer them.

Should Companies Offer Both Type of Benefits?

First, employees are entitled to statutory benefits by law. Therefore, employers must provide them following country-specific labor laws and regulations. So, with no questions asked, companies should offer statutory benefits to ensure compliance with legal requirements.

However, employers can choose to offer or skip non-statutory benefits in their company's benefits package. To optimize perks, employers should consider creating a balanced package ofbenefits.  The top benefits of offering both statutory and non-statutory employment benefits include:

• Ensuring compliance with labor laws and regulations in different countries.
• Attracting and retaining the best employees.
• Helps build a satisfied and productive workforce
• Adapting and catering to employees' changing needs and preferences.

For instance, let's consider two companies with two different employment packages for UK employees.

Company A: medical insurance, retirement plan, dental & vision insurance, holiday entitlement, 28 days paid annual leave, and maternity & paternity leave.

Company B: Paid time off, bank holidays, leave entitlements, and working from home.

Clearly, company A offers an attractive benefits package than company B, and UK employees are more likely to prefer working in it. That underscores the role of a well-rounded benefits package in building a robust workforce.

Best Practices for Compliance and Administration

To create a compliant benefits package and ensure streamlined administration, employers should understand their legal and corporate responsibilities. That means keeping tabs on changing employment regulations and understanding the needs of their employees.

Otherwise, negligence of these legal and corporate requirements may come with serious legal fines, lawsuits, and the inability to attract and retain top talent.

Below are the best practices for managing and administering both statutory and non-statutory benefits:

• Understanding legal requirements:  Our country playbooks can help you understand employment laws and regulations in different countries.

• Cost management: Have a manageable budget to ensure on-time payment of benefits.
• Workforce needs: Engage your employees to understand their unique needs and preferences and create a package around those.
• Clear communication: Transparent communication helps employees understand the benefits at their disposal.
• EOR partnership: Partnering with a reliable EOR helps ensure compliance and accurate payroll processing.

Hassle-free Benefits Administration with Playroll

Providing statutory and non-statutory benefits helps create a compliant and supportive workplace environment. That requires businesses to understand their workforce needs and stay updated with various jurisdictions' labor laws.

That’s not easy, and going on your own can be a hassle.

That’s where Playroll’s innovative EOR services and global payroll solutions come in to save you the heavy lifting. Our global payroll management system and EOR expertise help employers manage payroll and administer employment benefits following country-specific labor laws and tax regulations.