Employers told salary sacrifice is worthwhile

Employers have been told that it is worthwhile offering tax-efficient benefits via salary sacrifice as this provides savings on their national insurance contributions that can be used to help fund a flexible benefits scheme.

Presenting a case study on Citigroup at the Employee Benefits Flexible Benefits Senate on Aligning flexible benefits to business strategy, Bhavna Kukadia, international tax manager, reward and mobility EMEA explained that its flexible benefits scheme, called Select, allows employees to sacrifice part of their salary to make pension contributions or acquire other perks.

Later, in response to questions from the floor Kukadia said: “The key is to work with your tax advisers and work with your design providers very closely from the initial set up. It is a worthwhile investment of time and money because the savings that this represents long term more than make up for the implementation costs [of flex].”

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Jacqueline Otten, principal at Towers Perrin, said that employers may be nervous about setting up salary sacrifice arrangements after the government pulled the Home Computing Initiative (HCI) a few years ago. However, she added that although there had been a lot of discussion about whether the government might pull the plug on further tax-efficient benefits, she was not aware of anything in the Pre-Budget Report that indicated that the government is planning to do this.

Otten added: “Those looking to go down this avenue should work very closely with HM Revenue and Customs, and ensure the scheme ticks all the boxes,” she said.