Taking the plunge

Introducing any form of salary sacrifice arrangement is not usually difficult. While there are important steps that must be followed in the implementation and communication to ensure the arrangement operates effectively, these are rarely problematic. Clear rules, updates of HR process and documentation, and testing of system changes such as payroll will be important to ensure administration is straightforward.

Professional advice will usually be required to make sure employment contracts are varied effectively, any knock on effects on other benefits (for example pension scheme rules or life assurance cover) are addressed and HMRC requirements are met.

With public finances in a parlous state, any reduction in income tax and national insurance revenues will be closely scrutinised. While the government would clearly welcome any extra revenue, getting their hands on it is no simple matter. Salary sacrifice is a matter of employment law. If two parties want to negotiate a contract which provides a lower salary in return for an additional benefit provided by the employer, it is difficult for the government to legislate and intervene. Provided the tax and national insurance treatment of the benefit remains unchanged, the savings are likely to continue.

As the government tries to bring the budget deficit under control in future years, who knows what further changes we will see to tax and national insurance rates and benefit treatment. What is clear is the savings that are available now, and for many that is an opportunity that is too good to miss.

Paul Waters is a senior consultant of Hymans Robertson LLP