Autumn Statement – Salary Sacrifice Schemes Set to be Hit
Under these schemes employees forgo some of their salary in return for a benefit, which can be anything from gym membership to a mobile phone. Currently, employees pay no tax on the value of the benefit. These schemes are popular with some employers, partly because they pay no NICs on the value of the benefit.
Schemes that offer employees the choice of a car allowance or a company vehicle are also under consideration as we discussed recently.
It is widely expected that many benefits provided under salary sacrifice schemes will become subject to tax and employers’ NICs.
A Whitehall source quoted by the Sunday Telegraph said there: “is a balance to be had between safeguarding revenue, which is vital for funding public services, whilst allowing employees to enjoy some benefits from their employer.”
Pension contributions, childcare benefits and the cycle to work scheme are expected to be exempted.
Once any changes are clear I would recommend early consultation with employees to find out how much they value the affected benefits. In some cases your group purchasing power will achieve favourable rates that employees might still find more attractive than the salary equivalent.
You’ll then have to decide whether the inevitable additional payroll administration is worth it.