The Autumn Statement 2016 announced changes to salary sacrifice that have left some wondering about the future of employee benefits.
Here at Wider Plan we’re committed to keeping employers informed, so here’s our guide to what’s changed and how you can continue to make employee benefits work for you.
What has been announced?
Salary sacrifice schemes
The tax and National Insurance advantages of some salary sacrifice schemes are being removed from 6th April 2017. Employees who enter into salary sacrifice arrangements prior to this date will benefit from “grandfathering”, allowing them to continue enjoying savings until April 2018 (or until 2021 for salary sacrifice car schemes).
Employers will still be able to offer salary sacrifice, but the benefits provided will be subject to benefit-in-kind tax and employer National Insurance contributions.
Four salary sacrifice schemes have received a specific exemption from the change: pensions, cycle-to-work, childcare vouchers and ultra-low emission cars. Other schemes which are considered by many to be salary sacrifice, such as payroll giving and season ticket loan schemes, are not true salary sacrifice and are therefore outside the scope of the Autumn Statement announcement.
Some schemes, such as home computing and gym memberships, are already subject to benefit-in-kind tax in most cases. The announcement is therefore expected to have limited impact on these schemes; it may even help to make them easier for employees to understand.
Mobile phone schemes, workplace parking and health screenings currently attract a tax exemption and these schemes are therefore most affected by the change.
The Living Wage
The National Living Wage is set to increase from £7.20 per hour to £7.50 per hour in April 2017. Although widely predicted, this may cause concerns for employers as an increasing cost. Where employees are entering into salary sacrifice agreements, employers will need to ensure that their post-sacrifice pay remains at or above statutory levels.
The Government has confirmed they are still forecasting to increase personal allowance levels to £12,500 and £50,000 by 2020. From April 2017 the basic rate personal allowance will increase to £11,500.
Tax-Free Childcare was briefly mentioned in the Autumn Statement as the Government prepares to roll out the new scheme to parents from early 2017. The existing childcare voucher scheme will continue to be open to new entrants until April 2018 and parents who sign up by then can remain in the scheme thereafter.
What’s left to offer?
Although salary sacrifice has become the bedrock of employee benefit schemes, the latest changes don’t need to be a cause for despair. There are still many ways for you to offer your employees a wide and varied employee benefits package, both through salary sacrifice and other means.
Protected from the changes, your employee’s pension is a vital part of their benefits package.
Schemes such as KiddiVouchers will continue to save parents money on the cost of childcare, even when Tax-Free Childcare has been launched. It is vital that your employees who use the scheme know their numbers using our online calculator, as nearly half will save more money by continuing to use Childcare Vouchers rather than switching to Tax-Free Childcare. During the roll-out of Tax-Free Childcare, HMRC will be sending invitations to join the scheme directly to parents. KiddiVouchers will be sending information to employers to share with their employees to help parents choose the right scheme for them.
The ever popular Workplace Bikes scheme still provides employees and employers with salary sacrifice savings, while also building on employees’ health and well-being. Already one of the fastest-growing employee benefits, cycle-to-work is likely to become even more popular.
Ultra-low emission cars
Salary sacrifice benefits are set to stay for ultra-low emission cars, ie cars that emit less than 75g of CO2 per kilometre driven.
Offering a ULE car scheme not only promotes greener travel, in line with government policies, but will also help to reduce your company’s carbon footprint.
Employers can also continue to offer standard salary sacrifice car schemes beyond April 2017. While the current tax and NI savings will no longer be available, employees value these schemes for other reasons, such as giving them the ability to access a new car with no deposit. Volume discounts may still enable employers to provide employees with a good-value offering through these schemes.
A holiday purchase scheme, such as HolidayFlex, gives employees the benefit of extra annual leave while spreading the cost over 12 months. This is a popular benefit for employees with young families or other commitments outside the workplace. HolidayFlex is predicted to grow in popularity as employees increasingly value flexibility as an employee benefit. It has the added advantages of providing employers with payroll savings, reducing absenteeism and promoting well-being.
Schemes such as Wider Giving are not considered to be conventional salary sacrifice and HMRC has confirmed that they will continue to offer employees a tax efficient way to donate to their favourite charities.
What’s the future for employee benefits?
Employee engagement will remain a key focus for employers. Most of the popular salary sacrifice schemes (including cycle-to-work, home computing and holiday purchase) will continue to be available. However, with the Autumn Statement restricting the financial benefits of other salary sacrifice schemes, there will be a shift in what is classed as a true benefit to the employee.
Rather than focussing purely on financial savings, attention may be drawn to softer benefits such as recognition for a job well done, support for mental and physical health, and increased flexibility in the workplace, whether through working from home, offering flexible working hours or a holiday purchase scheme.
Building communication channels with your employees always helps to increase engagement. Using a benefits platform, such as Wider Wallet, provides a one-stop shop for all your HR policies, forms and benefits. Wider Wallet also offers your employees the opportunity to recoup some of the savings they may have lost on salary sacrifice. Offering savings on everyday items, from a weekly shop to a holiday, employees can watch their savings grow.
In recent years employee benefits have been evolving to include supporting employees both inside and outside the workplace. Employers recognise that a well-supported employee is happier and more productive. Offering schemes such as Employee Assistance Programmes and access to health and well-being information will become the standard for employee benefits.
And finally, rewards & recognition will remain a vital function of human resources. Recognising an employee’s achievements keeps them engaged and motivated to continue to achieve. Implementing a scheme such as Wider Rewards does not require a big budget. Giving employees the tools to send a simple ‘Peer-to-Peer Thanks’ instils a culture of recognition throughout the organisation at very little cost. Wider Rewards can be tailored to meet your organisation’s needs, providing rewards for all budgets.
Wider Plan is committed to providing employers with a exciting benefits package beyond April 2017. If you would like to help your employees to continue to save money and feel rewarded contact us today on 0800 612 6110 or email firstname.lastname@example.org