Salary Sacrifice Post-Lockdown: Is it Still Relevant?

Have you heard of salary sacrifice? Is it something you have used for years with your employer? Or is it a concept in the back of your mind, where you think you know the definition but aren’t wholly certain? Today we’ll explore why salary sacrifice after coronavirus is still applicable. Even during the COVID-19 pandemic, which has changed the lives of employees and businesses for the foreseeable future, it is relevant. 

What is Salary Sacrifice? 

According to the gov.uk website, “A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit.” You can arrange to set up your salary sacrifice by changing the terms of your employment contract with your employer. In essence, you give up a portion of your salary so you can receive a pension or material goods. For example, you can get bicycles or electric cars to a mirrored value of that salary reduction.

Remember: the value taken is from your pre-tax salary.

The gov.uk website also urges alteration to an employment contract with each change that is made to the non-cash entitlements. As well, if there has been a change of lifestyle which affects the employee’s financial circumstances, like the COVID-19 pandemic.

Benefits to Employers!

It is beneficial to employers as they can save money. Some benefits, in particular, allow the employer to save National Insurance also. As I am sure you can agree, all businesses are facing some economic challenges at the moment. Whether it’s large or incremental, any extra money they can save could help retain some of their workforces and prevent staff from being furloughed or made redundant.

Benefits to Employees!

In relation to employees, there are numerous benefits to behold! It is firstly an attractive proposition for employees. It gives them autonomy to decide what they would like to spend their salary sacrifice on. Furthermore, they are able to save money which would otherwise be spent on National Insurance, income tax, or corporate discounts. A third party appointed by their employer is conveniently assigned to arrange all of the non-cash benefits. The benefit tends to stop if the employee leaves the firm.

Furthermore, employees can have the expenses divided and spread out over time. Green car salary sacrifice is a popular example of such a scheme. 

It Even Benefits the Government!

HMRC used to lose out on their salary sacrifice policy, so they altered their policy. This was due to some employees using their salary sacrifice to fund all their buys. However cheap it was, at the expense of the taxpayer.

In addition, the government decide benefits which nicely tie in with their political strategies. For example, salary sacrificing for pensions reduces peoples’ dependency on the state. As well, more eco-cars and bicycles assist the government on their zero-carbon emissions mantra.

So, is Salary Sacrifice Relevant after Coronavirus?

During the age of Coronavirus, salary sacrificing is more useful than ever. It helps employers and employees save money during these difficult times.

If you’re interested in a green car salary sacrifice scheme for your company, contact us today.