Small companies are spending up to £950m a year on employee benefits such as group pensions and life and healthcare policies for staff when the money could be better used to retain staff, according to wealth advisors Towry Law.

The private and corporate wealth advisors estimate that employers could cut the cost of their employee benefits by around 15% and still provide adequate arrangements for staff.

"Employee benefit costs typically represent about 7% of total payroll," said Pan Andreas of Towry Law.

"This is a huge investment and any comparable expenditure would be under constant review from financial directors. However, for some reason, this level of scrutiny does not always apply to employee benefits."