You may want to deduct the cost of an insurance policy from an employee's allowance.
This can be done in one of two ways:
Fixed Amount: For example, £30 per month for all employees, regardless of the actual cost of their insurance. Happl recommends this approach for inclusivity.
Exact Amount: Deduct the precise cost of the employee's insurance, e.g., £33.75. This amount will vary for each employee (see the note below*).
Next, you need to decide how to apply the deduction:
Pro-Rata: If the cover starts 20% of the way into the month, the first deduction will be 80% of the monthly cost. A similar calculation applies when an employee leaves a policy or the business.
Full-Period: The full monthly cost of the insurance is deducted, even if the enrolment occurs mid-month. The same applies when an employee leaves.
Finally, consider whether to block an employee from enrolling in insurance if their allowance balance is insufficient:
Yes: To allow the employee to proceed, you would need to adjust their balance to cover the required amount.
No: Allow the employee to enrol at any time, even if they do not have sufficient allowance at the time of enrolment.
*Note: If you choose to deduct the exact amount of the insurance, you cannot block the employee from enrolling. This might result in a negative allowance balance but will not have any additional tax implications.
Most clients select:
1) Fixed amount charge
2) Pro-Rata deductions
3) Do not block if they don't have enough right now