Salary sacrifice schemes are a great way for employers to boost their employee benefits offering while saving on tax. In this guide, we’ll walk you through what salary sacrifice schemes are, the perks for both businesses and employees, and key things to keep in mind when setting them up.
What is a Salary Sacrifice Scheme?
Simply put, a salary sacrifice scheme is an arrangement where an employee agrees to swap part of their gross salary for a non-cash benefit. This means a lower taxable income, which can reduce both Income Tax and National Insurance contributions. More benefits, less tax.
Why Employers Love Salary Sacrifice Schemes
Cost Savings
Lower Employer National Insurance Contributions (NICs) thanks to reduced gross salaries.
You can reinvest these savings into your business or enhance your benefits offering.
Boosts Your Benefits Package
Attract and keep top talent with attractive, cost-effective perks.
Shows you genuinely care about your team’s wellbeing and financial health.
Happier, More Engaged Employees
Employees love the flexibility and tax perks.
Happier employees = higher morale and loyalty. It’s a win all around.
Why Employees Love Them Too
More Take-Home Pay
Less tax and NICs mean more money in their pocket.
Access to Awesome Benefits
Affordable options for pensions, cycle-to-work schemes, electric vehicles, and more.
Flexible Financial Planning
Employees can pick and choose benefits that suit their lifestyle and family needs.
Popular Salary Sacrifice Schemes
Pension Contributions: Supercharge retirement savings with tax perks.
Cycle-to-Work Schemes: Get fit, save money, and help the planet.
Childcare Vouchers (closed to new entrants): A helping hand for working parents.
Electric Vehicle Leasing: Drive green and save big.
Tech Schemes: Access the latest gadgets without breaking the bank.
Things to Keep in Mind
Legal and Contractual Bits
Update employment contracts to reflect salary changes.
Stay on top of employment law and HMRC rules.
Impact on Statutory Benefits
Consider how a lower gross salary might affect things like maternity/paternity pay, redundancy pay, and mortgage applications.
Minimum Wage Compliance
Make sure salary sacrifices don’t bring earnings below the National Minimum or Living Wage.
Clear Communication
Explain the benefits and potential impacts clearly to your team.
Provide helpful resources so employees can make informed choices.
Admin Requirements
Keep payroll systems up-to-date for accurate deductions.
Regularly review schemes to stay compliant with any legislative changes.
How Happl Helps
At Happl, we’re here to take the hassle out of salary sacrifice schemes. We handle the nitty-gritty so you don’t have to worry about a thing.
Smooth Setup: We’ll get your scheme up and running, synced perfectly with your payroll and HR systems.
Easy Employee Enrolment: Our simple, user-friendly process makes signing up a breeze for your team.
Accurate Reporting: We handle payroll reports and P11Ds, making sure everything is spot-on for HMRC.
Accessible for Everyone: Our intuitive platform keeps everything in one place, making it easy for both employers and employees to manage.
Salary sacrifice schemes are a fantastic way to save money, offer great perks, and keep your team happy. While there are some legal and admin details to consider, the benefits far outweigh the effort - especially with Happl helping you every step of the way. Ready to get started? Get in touch with your account manager to discuss the options!