Most employers are well aware of the recently announced changes to the tax perks enjoyed by salary sacrifice schemes. The good news is that there are still many ways to provide value to staff. Here are the key things to know:
Not all salary schemes are affected
A number of schemes are exempt and will continue to offer tax perks from April 2017. These include pension contributions, childcare, cycle-to-work schemes and ultra-low emission cars.
Even those schemes affected will still offer some tax benefits
Schemes that lose their income tax perks will keep their employee NI perks, so employees can still save by paying through salary sacrifice.
Existing arrangements will not be affected straightaway
All salary sacrifice arrangements in place before 5 April 2017 will continue to enjoy their tax-exempt status until at least April 2018 and existing arrangements for cars, accommodation and school fees will be tax-free until April 2021.
Voluntary benefits can be a compelling alternative to salary sacrifice
From discount cards with major retailers, to vouchers and offers at local vendors, more and more businesses are using voluntary benefits as a way of engaging and motivating their employees. These schemes give valuable benefits and discounted offers to employees. They don’t offer a tax perk, but as a result don’t require the completion of enrolment forms, payroll processes, HR approvals, or employment contract variations. Some examples of how discount programmes can be an attractive alternative to salary sacrifice include:
Salary deduction schemes also benefit employees
Whilst paying for products via salary may no longer attract the same tax savings, employees will still benefit from reduced NI contributions, discounted offers, or spreading the cost of a purchase across a 12-month period; so some salary deduction arrangements may remain attractive to employees. Retail Vouchers is a good example of a salary deduction programme that can still save employees money on their weekly shop. The programme allows employees to automatically have an agreed value loaded from their salary directly on to their choice of retail cards ready to spend in-store. Employees will benefit from a discount on the face value of each load. Other deduction schemes allow employees to spread the cost of high value items across 12 months’ salary instead of paying a heft one-off credit card payment.