Employers feel under greater pressure to maximise tax and National Insurance (NI) breaks within flexible benefits.
The Employee Benefits/Towers Perrin Flexible Benefits Research 2009, published this month, found that 36% of employers that offer flexible benefits are under pressure to introduce tax-efficient benefits via salary sacrifice.
In the current economic climate they are also anticipating that more employees will want to opt for cash rather than benefits – which could undermine the aim of moving to more salary sacrifice agreements in order to save on payroll costs. Specifically, 9% are expecting staff to flex down their employee pension contributions and take cash instead.
The pension is the benefit that delivers the greatest potential tax and NI breaks to staff and their employers. The research found that 24% of employers were considering introducing some form of pensions arrangement into a flexible benefits scheme in the next few years.
While a further 17% were looking at using a flexible benefits scheme to ease in the changes ahead of the introduction of the Pensions Act 2008 in 2012.
Speaking at the launch of the research, Jacqueline Otten, principal at Towers Perrin said: “Flex can be a great way to support these changes.”
She also explained that many employers have used flex to make the transition from defined benefits to defined contribution schemes easier for staff to accept. The research found that cost still remains the top barrier to introducing flexible benefits – cited by 65% of respondents. While just 38% saw it as a way to control costs.
Otten explained that giving staff a set list of benefits to select between or giving them a set amount of money, often called a ‘flex pot’, to spend doesn’t always control costs. Employers should use flexible pay that includes the value of benefits if they want to achieve cost savings.