What is Salary Sacrifice? Is it Still Relevant in 2019?

Who reading this has heard about salary sacrifice? Is it part of your benefits package? Or is it one of those topics for nostalgia, like the distant memory of dancing the “Macarena” at a school disco? Is salary sacrifice still relevant now? Does it have a place in a modern company?

Salary sacrifice started a couple of decades ago. In theory, it’s a very simple proposition. Let’s imagine you’re finishing up an interview and you’ve just been offered the job. Decent salary, some benefits, but not many. Salary sacrifice means you can give up, or “sacrifice”, some of your salary so you can receive non-cash benefits. For example, a pension, bikes, or green cars to the same value.

This Part is Crucial

The value is taken from your ‘pre’ tax salary, rather than net. This is one of the main differentiators between salary sacrifice and other flexible benefits schemes.

There Are Other Significant Differences Too

For the employer, this is a cost-free way of giving employees more benefits. Hence, adding freedom for the employee to choose the benefits they want. Thus, it makes the employer much more attractive whilst making staff less likely to leave. It can also actually save the employer a little money. This is because, with some of these benefits, the employer can save National Insurance on the salary sacrifice element!

For the employee, there are huge benefits. They save due to corporate discounts, income tax, national insurance. They also have the convenience of arranging everything through a third party appointed by their employer. Though, if they leave, the benefit usually ceases. So, while nobody wants unhappy employees, it’s a nag when that head-hunter calls to disturb them.

Does Everyone Win? What About Those Lovely People at HMRC?

Well, they used to lose out. HMRC changed the rules 3 years ago, with good reason, to be fair. Some employees used salary sacrifice to fund everything, from wine to windows (not tech, double glazed at home!), all at the cost of the taxpayer.

Now for Some Benefits

The employee can spread the cost of items, sometimes leverage corporate discounts and save NI. It could be worth over £200 to them over a 2-year mobile contract!

Some benefits still attract tax and NI savings. The government chose certain benefits that make sense to promote, in that they are linked to other government strategies. These still have huge tax and NI savings. Pensions, for example, where the government feel they can reduce dependence on the state. Moreover, bikes and green cars, where the government want to move employees out of diesel and into hybrids and electrics.

You can help your employees make these decisions and reap financially, not to mention the retention benefits! Now those benefits may not make you want to dance the “Macarena”. However, they will certainly make “Saturday Night” go with a swing for your employees. Don’t forget, happy employees are productive employees!

So, is Salary Sacrifice Still Relevant?

It absolutely is! You can get yourself involved and on the scheme by clicking here!

Download a guide!