How to introduce and manage a salary-sacrifice scheme

Author: Paul Tew

Summary

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• Check whether the benefits in kind offered to employees continue to attract tax and national insurance advantages.
• Be aware of what constitutes an effective salary-sacrifice arrangement.
• During the implementation of a salary-sacrifice arrangement remember to draw up a legally enforceable variation to the employee's terms and conditions.
• Ensure that all employees understand the implications of the revised contractual arrangements.
• In designing a scheme, think about whether the financial savings achieved will be rebated back into the employees' remuneration package or used to reduce costs elsewhere in the business.
• Be aware that HMRC must be satisfied that the salary sacrifice is effective.
• Draw up a policy on when employees can opt in and out of a salary-sacrifice arrangement.
• Be aware that, while pension contributions can be included in a salary-sacrifice arrangement, participation in a workplace pension must not be dependent on agreeing to participate in a such an arrangement.
• Ensure that any salary-sacrifice arrangement does not cause the worker's hourly pay rate to be less than the relevant national minimum wage rate for any future pay reference period.