Employee Benefits Research 2009: tax efficient benefits and salary sacrifice

Given the tax and/or national insurance (NI) savings available on tax-efficient benefits offered via a salary sacrifice arrangement, it is no surprise that just under three-quarters (72%) of respondents offer their workforce this type of perk. Those that do not must have heard of these savings, so it is likely they have considered offering such perks but decided they were not right for their workforce. This may be because some employees are unable to take up benefits through a salary sacrifice arrangement because doing so would cause their take-home pay to fall below the national minimum wage. Also, paying for perks via a salary sacrifice arrangement may affect some employees’ entitlement to certain state benefits.

Where employers do operate salary sacrifice arrangements, they have a number of options as to how to use their savings on NI contributions, such as using the money to fund a flexible or voluntary benefits scheme.

Over the past two years, the percentage of respondents that pass at least some of this saving on to staff has remained unchanged. However, the amount that they pass on to staff has changed with fewer respondents now giving employees the full amount. In 2007, 42% of respondents passed all their tax and NI savings on to employees, while 18% shared it with them. These figures have now changed to 35% and 25%, respectively. It is encouraging to see employers still want to share at least some of the savings with their employees.

The shift may be due to the onset of the economic downturn and subsequent recession, which has prompted employers to look for additional revenue streams for their organisation, or sources of funding for other HR or benefits initiatives.


Back to ‘The Employee Benefits Research 2009’