Many SME employers want to offer great benefits but which ones have the biggest impact?
As an employer, looking for the best benefits for employees is a key priority to help achieve employee satisfaction.
Retirement benefits or pensions are a classically popular type of employee benefit. Providing employees with a safety net, they are a retirement solution that allows them to enjoy their lives after ending their careers. Most importantly, retirement benefits allow individuals to live sustained and comfortable lives. But what is the best way to set these up?
Salary Sacrifice
What is Salary Sacrifice and are you missing out?
Salary sacrifice is a government backed scheme designed to help employers and their workers save on tax. An employee agrees, with their employer, to give up part of their salary in exchange for non-cash benefits. In turn, the employee’s gross salary is reduced by the amount they sacrifice.
Employers set up a salary sacrifice arrangement by changing the terms of an employee’s employment contract. The employee must to agree to this change.
Today, only 41% of SME (small and medium enterprises offer salary sacrifice), compared with 85% of large organisations. Salary sacrifice represents a simple way to trim tax and help employees keep more of what they earn.
Salary Sacrifice - the tax benefits!
Employee benefits of salary sacrifice
So are you an employer looking for the best benefits for your employees? Salary sacrifice benefits include:
- Lower National Insurance Contributions: For employees, salary sacrifice can result in lower Narional Insurance contributions. This allows emplyees to keep more of what they earn.
- Lower tax liability: Income tax liability for employees is lowered by reducing their gross salary. This means employees can potentially save money on their tax bill.
- Access to non-cash benefits: Salary sacrifice allows employees to receive non-cash benefits. These may include benefits they might not be able to afford otherwise.
Employer benefits of salary sacrifice
- Increased employee satisfaction: Offering salary sacrifice arrangements can help increase emplyee satisfaction and retention. Employees usually view the benefit as a valuable perk.
- Reduced National Insurance: Employers can pay less tax by sacing money on their National Insurance contributions. Tax does not need to be paid on the salary that is sacrificed.
- Improved recruitment: Offereing salary sacrifice arrangements can help attract and retain top talent. It's often seen as a key part of a competitive benefit package for job hunters.
What non-cash benefits can be used?
There are a variety of non-cash benefits that can be used for salary sacrifice. Some of the most common benefits include:
- Pension contributions: Employees can sacrifice a portion of their salary to contribute to their pension pot. This can result in lower tax and National Insurance contributions.
- Childcare vouchers: These can be used to pay for registered childcare. Vouchers can be received tax-free up to a certain amount each year.
- Cycle-to-work schemes: Employees can sacrifice part of their salary to buy a bike and cycling accessories.
- Technology equipment: This can include laptops, tablets, and smartphones. These can be used for work purposes and are often provided tax-free or at a reduced cost.
- Company car schemes: Some employers may offer salary sacrifice schemes for car ownership. The car is usually leased by the employer on behalf of the employee.