How to be a greener employer: part two – employee benefits, incentives and disincentives

This is the second article in our series exploring how employers can work with employees to embed sustainability into workplace culture.

Having considered how an organisation’s people and culture can have an impact on its carbon footprint in part one, this follow-up article focuses on how employers can leverage employee benefits, incentives (and disincentives) to make a positive environmental impact.

Implementing green incentives and employee benefits

Employee benefits can play a valuable role in promoting environmental sustainability in the workforce and, ultimately, supporting a business’s transition to net zero. We have previously written about how employment contracts, including remuneration packages, can be made more sustainable, for example through greener pension schemes. This article builds on these ideas by exploring a broader range of green employee incentives, with a focus on practical steps employers can take and the legal considerations to bear in mind when implementing them.

1. Encourage sustainable commuting and business travel

To support sustainable commuting, organisations can encourage employees to consider both the financial and environmental impact of their daily travel choices. Incentives can include a monthly green travel allowance for those who walk, run, or cycle to their primary office – potentially covering costs like trainers or bike maintenance – or a monthly contribution towards commuting costs for those using public transport or park and ride schemes. To further discourage unnecessary car use, especially among employees living within a set radius of the office, a daily parking charge might be introduced (excluding electric vehicles), with proceeds directed to a charitable cause or the organisation’s sustainability initiatives.

For business travel, organisations could promote virtual meetings as the default, particularly when maintaining existing client relationships, while recognising the value of in-person meetings at key stages. All business travel could be monitored, with a strong emphasis on using public transport for meetings. Train travel could be favoured over air or coach options wherever feasible to further reduce the environmental impact of business travel. For businesses that have a fleet of cars, transitioning to electric or hybrid vehicles – benefiting from tax exemptions and subsidies – could be prioritised, alongside offering incentives for employees to choose low-carbon vehicles that meet sustainability criteria.

Before implementing any policies regarding travel, an organisation should assess whether they could unintentionally disadvantage employees with a protected characteristic, particularly disability, who may rely on specific modes of transport, such as driving, due to their disability or protected characteristic. Overlooking this consideration could result in legal risks, including claims under the Equality Act 2010 of direct or indirect discrimination, failure to make reasonable adjustments, or discrimination related to disability.

2. Support flexible and home working arrangements

As a means of reducing environmental impact, organisations can support flexible or home working arrangements where appropriate, whether occasionally for specific tasks or regularly on a part-time or full-time basis. This can significantly reduce emissions from commuting, lower office energy use, and support more sustainable work practices overall.

When implementing a homeworking policy, employers might require that employees seeking to work from home should demonstrate their ability to manage their workload effectively and maintain communication with colleagues and managers. Importantly, employees might also need to show how their home working arrangement will contribute to reducing the organisation’s carbon footprint, such as by cutting commuting emissions or having another positive environmental impact. Additionally, employees working remotely could be encouraged to operate their home office sustainably, for example, by using 100% renewable energy and avoiding single-use office supplies.

3. Give additional annual leave to encourage sustainable holiday travel

To encourage employees to make more sustainable travel choices during their holidays, organisations can offer additional paid leave as an incentive. Accordingly, an organisation’s annual leave policy might be updated to allow employees to claim additional days for holidays of a specified duration if they avoid air travel and opt for low-carbon transport options like trains, ferries, or coaches. These additional days could then be approved by the HR team in advance. Organisations may also consider adopting schemes like Climate Perks, which formalise this benefit by offering a minimum of two paid ‘journey days’ annually to employees who commit to low-carbon travel.

While this might be an innovative way to reinforce an organisation’s commitment to reducing the environmental impact of leisure travel, when adopting such schemes, employers should ensure that they don’t inadvertently disadvantage those employees who may need to fly or rely on specific modes of transport due to a protected characteristic, such as disability. As noted above, inadequate consideration of these factors could give rise to claims of unlawful discrimination under the Equality Act 2010.

4. Discourage environmental misconduct through robust disciplinary and whistleblowing policies

To discourage environmental misconduct, organisations should ensure their disciplinary and whistleblowing policies explicitly address climate-related issues. We have written before about the importance of updating whistleblowing policies to define environmental damage as a form of reportable wrongdoing, making it clear that disclosures related to climate concerns are protected under UK whistleblowing law.

Disciplinary policies should outline that breaches of environmental policies and regulations, or actions that undermine the organisation’s net zero commitments or environmental reputation may constitute misconduct. The deliberate concealment of such actions should also be treated as a serious offence. These measures help create a culture of accountability and empower employees to report environmental concerns without fear of retaliation.

The ACAS code of practice on disciplinary and grievance procedures notes that it is essential that organisations clearly communicate their disciplinary rules. That means any updates to an organisation’s disciplinary policy to include environmental breaches should also be communicated to employees to ensure that any disciplinary measures or dismissals are carried out fairly. Failure to follow the Code can result in legal consequences, such as an uplift of up to 25% in compensation awarded by a tribunal if an employer unreasonably fails to comply with it.

By offering incentives that encourage low-carbon behaviours, businesses can actively involve employees in promoting their environmental goals. These benefits not only enhance employee satisfaction and retention but also contribute to reducing the organisation’s overall carbon footprint. In doing so, employers can help build a workforce that is both committed to, and instrumental in achieving, the organisation’s transition to net zero.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2025