Given the tax and national insurance (NI) savings that are up for grabs when offering tax-efficient benefits through salary sacrifice, it is perhaps not surprising that 93% of respondents offer benefits on this basis to some, if not all, of their workforce. This is a rise of six percentage points from the 87% that did so last year.
This increase is encouraging given the high level of speculation there has been in recent years about the government’s intention to remove the tax efficiencies attached to benefits commonly offered via salary sacrifice.
For example, its decision to remove the tax breaks attached to workplace canteens and restrict full tax relief on childcare vouchers to basic-rate taxpayers had raised concerns that the government was looking to clamp down further on this type of benefit.
However, in March 2011, the independent Office of Tax Simplification presented its Review of tax reliefs report to chancellor George Osborne, which recommended that the tax reliefs on employer-supported childcare and bikes-for-work schemes should be retained. This was confirmed later that month in this year’s Budget report.
Where employers do not offer their employees tax-efficient benefits through salary sacrifice arrangements, it may be that they have considered implementing such perks, but decided that they were unsuitable for their particular workforce.
For example, employees whose pay rate is on or near the national minimum wage may be unable to use salary sacrifice arrangements if, by doing so, their take-home pay is pushed below the legal limit.
The savings that employers can gain from offering tax-efficient benefits through salary sacrifice arrangements can be a valuable source of funding for other benefits schemes, HR projects or even wider business initiatives.
It is therefore encouraging to see that the proportion of respondents that say they share at least some of the savings gained with employees has, once again, remained fairly static year on year.
Read more articles from the Employee Benefits/Alexander Forbes Benefits Research 2011