Salary Sacrifice - What Should You Look Out For In A Salary Sacrifice Agreement?

Entering into a salary sacrifice arrangement means that the employee and employer agree to alter the terms of the employee’s contract to decrease the employee’s pay in the form of cash. This sacrifice is not made for no reason. There will be different types of employee benefits when an employer proposes such a sacrifice. You need to be sure that adequate compensation will be provided. Some of these agreements can be confusing. In this post, we will take a look at the factors both the employee and employer need to consider to ensure the agreement is a beneficial one for both parties.

What Are The Common Employee Benefits That Are Offered?

Most of these salary sacrifice schemes offer benefits to the employee’s pension as well childcare vouchers. You may be asking why you should give up some of your cash compensation for these employee benefits. As a result of entering such an agreement, you won’t have to pay as much tax and National Insurance because your taxable income is lower. This is because income tax is calculated after sacrifice deductions have been made. The pension contributions have their own tax relief also. This benefits the employer, as they will not have to pay the National Insurance contributions for employees as a result. Therefore, the employer can pass some of these savings onto you in the form of vouchers and pension contributions. Employment benefits have become increasingly popular in recent years despite reports that the government was going to try clamp down on them. At the end of the day, there is little they can do to curb these agreements from happening, as the employee can simply negotiate lower pay with their employer with increased higher pension contributions, which is effectively the same as a sacrifice agreement.

Should Your Business Take Part In Such An Employee Benefits Scheme?

While on paper these employee benefits schemes appear to be extremely beneficial to both parties, they can often be confusing to put into practice. When individuals are sacrificing cash compensation for pension contributions, they are effectively sacrificing income now for increased income later in life. This may not suit people who need cash in the immediate future to look after themselves. Cash could be needed for rent, utility bills, and to look after loved ones. Therefore, you have to ensure that the staff benefits you select are right for your workforce. You have many different options to choose from, and if you’re unsure about the best route to go down, why not talk to your employees to get an idea of what they would value the most? When choosing an employee benefit scheme in the UK, some of the tax-free benefits you can select from include; additional pension contributions, childcare voucher, training courses, company cars, the bike for work scheme, and much more.

The Employee Benefit That Has Taken The Corporate World By Storm, Bike To Work Schemes

While for many years the bulk of employee benefit schemes were simply pension contributions and company cars, bike to work schemes have been hugely popular in recent times. While it seems like such a simple benefit, it has had huge uptake. It is a basic tax incentive scheme whereby the employers purchase the bikes and the relevant equipment for their workers as part of a salary sacrifice agreement. While it doesn’t cover motorcycles and mopeds, you can get a top of the range bicycle or pedicle (a bike that is partly assisted by electricity). There is a list of safety equipment that is also covered under the scheme. Equipment that is covered includes; cycle helmets (must conform to European regulations), reflectors and reflective clothing, repair kits, puncture kits, pumps, chains, locks, luggage carriers, dress guards, cycle clips, mirrors, mudguards, bells, bulb horns, and various types of lights.

What Are The Main Benefits Of Bike To Work Schemes?

The ride a bike to work scheme has a wide range of benefits. One of the main reasons that such schemes have been so well adopted is because of the health benefits associated with it. In this technology crazed age, most adults are living largely sedentary lives and do not make time for exercise. People would get up in the morning, drive to work, drive home from work, watch television and go to bed. Now with these schemes, workers can get their daily exercise requirements by cycling a bike to work, which doesn’t take any extra time from their busy lives. There are also environmental impacts, as it cuts down on the number of cars on the road, thus reducing carbon emissions. How most schemes work is that you purchase the equipment you want and present the invoice to your employer. The employer then deducts this expense from your gross salary. These types of schemes are very encouraging and will be important heading into the future due to obesity levels reaching worrying highs. This is a great benefit scheme for employees and employers alike.

How Do I Know What Salary Sacrifice Benefits Are Best Suited To Me And My Company?

As there are so many different benefits and stipulations, it can be very confusing when trying to navigate a new salary sacrifice agreement. There is such a wide array of flexible benefits that employers can provide; it’s hard to know where to start. This is where the professionals come in. Team Rewards provides the proper platforms and technology in order to smoothly run these benefits. We bring all of the benefits and communication under a single umbrella. Some of the clients we work with are household names and can all be seen on our website - http://teamrewards.co.uk/. You can also contact us by calling 0845 0777 075 or send us an email at info@teamrewards.co.uk.

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