Struggling to understand salary sacrifice?

Amba

Salary sacrifice is here to stay, so how can your business benefit from it?

After Osborne’s 2016 Budget announced that salary sacrifice will be staying, the benefits of the scheme have been brought to the forefront of employers and employees minds. Introducing the scheme to the workplace can provide a number of benefits to both businesses and their staff.

How it works

Employee Income Tax (tax) and Employee National Insurance Contributions (NI) are calculated each month as a % of gross salary*. Through a salary sacrifice scheme, the cost of a benefit is removed from an employee’s gross salary before tax and NI are calculated. Therefore, the amount of tax and NI deducted is less as it is calculated on a lower figure.

Your Employer National Insurance Contributions are calculated on the total of your employees’ gross salaries. Therefore, when gross salaries are reduced by the salary sacrifice process, you’ll save money too. It’s important to remember that an employee can’t make use of salary sacrifice if it means that their wage drops below the National Minimum wage.

Happier workplace

There are plenty of benefits out there which use salary sacrifice as a means of generating employer and employee savings. By introducing a great benefits package, you can save on Employer NI and keep your people happy too!

  • Pension contributions
  • Childcare vouchers
  • Cycle-to-work
  • Gym memberships

Future changes

Due to the success of salary sacrifice schemes, the government has discussed concerns about having to raise tax elsewhere, so businesses should expect changes to the schemes in the future.

If you want to gain a better understanding of salary sacrifice and the schemes that are available for your business and employees, then why not get in touch? We can explain the advantages and disadvantages and help you choose the right scheme for your employees so that everyone benefits. Chat to us today on 01454 808658.

*gross salary = wages before any deductions (calculated as total salary divided by 12 months)