Employee Benefits Research 2007: Salary sacrifice & voluntary benefits

Voluntary benefits continue to be pretty widespread with 58% of employers offering discounts on products and services to some, or all, of their staff. This is a similar proportion to our last survey of the benefits strategies of UK employers, in 2004, when 60% of employers said they offered voluntary benefits. However, the real figure may be larger as many employers now offer a number of the products and services as options through a flexible benefits scheme and may have categorised them as such for the purposes of this survey. Under a traditional voluntary benefits scheme, employees pay for the product or service on which the employer has negotiated a discount with suppliers or agreed a package with a voluntary benefits provider.

Over 70% of employers with more than 5,000 staff offer voluntary benefits, compared with just 33% of organisations employing fewer than 100 staff. However, voluntary benefits give staff something at little cost to their employer, apart from the time spent sourcing the products. Nevertheless, it is easier for larger organisations to negotiate discounts. This is probably reflected in the fact that voluntary benefits are more widely-offered by publicly-quoted companies and public sector organisations (more than 59% of employers for both), compared with the voluntary and privately-owned organisations where around 47% of employers offer them.

Benefits%20research%202007%20table%20p21%20-%201†As three years ago, the two most commonly-provided voluntary benefits continue to be gym membership and a healthcare or hospital cash plan, with 35% and 27% of employers offering these respectively. All the personal insurances – travel, dental, motor and house insurance – also continue to feature quite prominently among the voluntary benefits offered by employers. Childcare vouchers, however, are a much more widely-offered benefit than three years ago, with 24% of employers now giving staff the chance to buy them. This is due to the explosion of interest following the introduction of tax relief on the vouchers from April 2005. Many employers, however, classify childcare vouchers as a tax-efficient benefit that employees select and for which they must sacrifice some pay in order for the employer to buy the benefit on their behalf. Indeed, some organisations include childcare vouchers as an option under flexible benefits.

†Another tax-efficient perk that has proven popular as a voluntary benefit is bikes-for-work schemes, which take advantage of legislation introduced in 2003. Now 10% of employers offer bike loans as a voluntary benefit. These can also be offered on a salary sacrifice basis.

Although the government’s Home Computing Initiative (HCI) was axed last year, 14% of employers still offer computers to staff. This figure is expected to fall once all the HCI schemes expire, although some employers will continue to offer discounts on computer equipment.

More than 70% of employers offer benefits through salary sacrifice to all, or some, of their staff. This is not surprising as there are great tax and national insurance savings to be made not only for staff but also for employers. Of those that offer perks on this basis, 42% pass their savings onto staff while 18% split them with employees and 39% keep them. The more staff an employer has, the more savings are likely to be generated so it comes as no surprise that benefits are more widely offered through salary sacrifice by larger firms. For example, 72% of employers with between 1,001 and 5,000 staff do so compared with 32% of organisations with less than 100 staff.

Voluntary benefits: these are product and services on which the employer has negotiated a discount either directly with suppliers or via a specialist voluntary benefits provider. The employee pays for the benefit, and, in some cases, they can ask for payment to be deducted form payroll. The benefits may be promoted individually or as a compete package. It is becoming more common for voluntary benefits to be wrapped up with flexible benefits or added to a core benefits package.

Salary sacrifice: these are tax-efficient benefits that employees select and for which they sacrifice some pay in order for the employer to buy the benefits on their behalf. These can be wrapped up with flexible benefits or offered alongside voluntary benefits.


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