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Salary sacrifice schemes 'could help entice new employees'

11 April 2012

Salary sacrifice schemes "could help entice new employees" Posted by Editorial Team

Companies have been advised that salary sacrifice schemes could help boost the morale of personnel and be financially beneficial for both employers and staff.

Robert Downes, spokesman for the Forum of Private Business, explained introducing such a system could help ensure employee perks are still possible during difficult economic times.

"Businesses often used to tempt applicants with the promise of a company vehicle, but this has been happening less and less as costs have increased," the expert noted.

However, it was suggested those planning online recruitment drives could still attract new staff by offering a salary sacrifice scheme.

"For those firms looking to get an edge over rivals when it comes to recruitment, it could be a way to get ahead," Mr Downes remarked.

A salary sacrifice scheme involves an employee giving up their right to part of the cash remuneration due under his or her contract of employment.

In return, the employer agrees to provide the staff member with some form of non-cash benefit.

According to the specialist, a salary sacrifice system helps to make perks such as company cars "more affordable".

As a result, he claimed introducing such an initiative is "well worth considering" as it can bring costs down for employers and workers.

However, Mr Downes noted cheaper company vehicles are more likely to see savings than larger, less fuel-efficient cars.

The expert described how the government receives more than a billion pounds a year through the taxation of company modes of transport, with bigger and faster marques costing people more.

"While a salary sacrifice could ease the burden, frankly the costs for the larger vehicles these days would mean any savings won't be that great," Mr Downes stated, adding that a scheme is therefore more likely to appeal to drivers of less costly cars.

Any employees and firms considering introducing a scheme are advised by HM Revenue and Customs (HMRC) to consider obtaining legal guidance to ensure everything is in order.

It was noted by the government body that a change in a remuneration package may effect the operation of PAYE, the amount of tax due, a tax credit award and the amount of National Insurance Contributions (NICs) owed.

The length of time an individual must sign up to the system is something to be decided between the employer and employee, with HMRC only concerned with whether the correct amount of tax and NICs are paid.

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