Benefits research 2012: Salary sacrifice

Given the tax and national insurance (NI) savings that are available when offering tax-efficient benefits via a salary sacrifice arrangement, it is perhaps not surprising that the proportion of respondents offering perks in such a way has remained consistently high in recent years.

Back in 2004, 69% of respondents offered benefits via salary sacrifice. By 2007, this had risen to 72% and by 2009, 83% offered such arrangements to some, or all, of their workforce. Over the past few years, this figure has fluctuated slightly, but typically remains in the high 80s or low 90s percentage range.

Those employers that do not offer benefits in this way cannot have failed to recognise the savings that are up for grabs, so it is likely that they decided salary sacrifice arrangements were not suitable for their workforce.

This may be because some employees are unable to take up benefits through a salary sacrifice arrangement if doing so would cause their take-home pay to fall below the national minimum wage.

Employee Benefits

This is the first year that we have asked employers whether they offer tax-efficient benefits via salary sacrifice through a flexible benefits scheme or on a voluntary basis. With a few exceptions, respondents appear more likely to offer such an arrangement on a voluntary basis. This gives staff more opportunity to take up the benefit throughout the year.

The savings gained from salary sacrifice can be a valuable source of income for employers. However, over the years we have seen a reduction in the proportion that are prepared to pass on the entire amount to employees. This year, this has fallen to 22%, compared with 35% in 2009 and 33% in 2010. However, it is encouraging to see that the percentage of employers that say they split the savings with employees has risen steadily.

Employee Benefits

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