EB Comment – Beware of benefits that sacrifice the lower paid

Not only will the differential between their pay and the minimum wage shrink, or disappear altogether – unless their wages are also hiked by about 8% – but they could fall below the minimum wage if they are taking part in any salary sacrifice schemes. There have been clear warnings against allowing lower paid staff to take part in salary sacrifice schemes, but it is highly probable that some staff may have sacrificed salary in lieu of benefits, such as childcare vouchers, to such a degree that their basic salary now falls below the minimum wage. Benefits managers will need to carefully scrutinise who has signed up for any type of salary sacrifice scheme, be it pensions, home computing schemes, childcare vouchers or bike schemes and anyone now close to the new minimum wage may need to review their participation in such a scheme, while those who have slipped below it will need to withdraw altogether. Helping staff to save money through their employer is something that has long been encouraged by government – hence the generous tax and NI breaks on the benefits listed above. But staff on lower salaries will always battle to find any extra cash to put aside for their retirement. This is why the new pensions saving plan by Nationwide to help its staff is to be welcomed (see page 7). At the time of going to print the building society was only able to give us a broad outline of their ‘pension credit scheme’. It will be worth looking at exactly how it works once more details are available. Anything an employer does to help staff save should be recognised and applauded. Higher up the salary scale are those staff who are able to put money aside into their employer’s share scheme. Back in the late 1990s these schemes were riding high as thousands of workers across the country benefited from booming share prices. In recent years many schemes have slid underwater. Now we are beginning to see a cautious re-emergence as more share schemes come to maturation in the money. Without wanting to sound too excited at a time when the market is doing little more than wallowing rather than rising or sinking, isn’t now the time to ask why savings limits on sharesave schemes have remained unchanged for 15 years and the limit on a company share option plan is still £30,000 – as it was back in 1995. If employers are going to be able to breathe life into share schemes, shouldn’t their higher paid staff have the option to benefit just a little bit more? After all, salaries have crept up in the last 10-to-15 years, so it makes sense that benefits should keep pace.

Debi O’Donovan editor, Employee Benefits magazine