FINANCE
BY RICK SCHOFIELD , PARTNER , AZETS
Supporting your employees through the cost of living crisis
WITH INCREASING INFLATION AND INTEREST RATES , INDIVIDUALS , FAMILIES AND BUSINESSES ACROSS THE COUNTRY ARE FINDING BALANCING THE BOOKS INCREASINGLY DIFFICULT . IN RESPONSE TO THIS , MANY EMPLOYERS ARE LOOKING TO PROVIDE COST-EFFECTIVE SUPPORT TO EMPLOYEES .
FIVE OPTIONS AVAILABLE TO EMPLOYERS AND THE CORRESPONDING TAX AND / OR REPORTING OBLIGATIONS :
1 . One off bonus payment or increase salaries
The most obvious option – however , both of these will be subject to Pay As You Earn ( PAYE ) and National Insurance Contributions ( NIC ) and reportable via payroll Real Time Information ( RTI ) in the normal manner . Cash payments will incur employer NICs and potentially pension contributions so the cost to the employer will exceed the increase or bonus provided .
With businesses struggling with increased costs , these may not be feasible options .
2 . Salary sacrifice – pensions
Pension salary sacrifice works by an individual giving up an entitlement to cash earnings in exchange for an increased employer pension contribution .
Employers offering salary sacrifice arrangements to employees must also ensure the amounts sacrificed by employees do not reduce the pay below National Minimum Wage / National Living Wage Rates and will require an amendment to their contractual terms .
Given that all employers are required to comply with the automatic enrolment requirements , they should understand the savings available to them and their workforce .
3 . Travel costs – Electric vehicle
While the rules around Optional Renumeration Arrangements ( OpRA ) introduced in April 2017 largely removed the tax benefits for most salary sacrifice arrangements , Ultra Low Emissions Vehicles ( ULEVs ) emitting less than 75g / km of CO2 were exempt from these changes and can still be provided tax efficiently under salary sacrifice .
4 . Trivial benefits
The trivial benefit exemption allows employers to provide small benefits to employees provided that :
• It does not cost the employer more than £ 50 to provide .
• It is not provided as a reward or to incentivise performance .
• It is not provided in cash .
• There ’ s no contractual entitlement to receive it .
Many employers provide employees with gifts such as food hampers , wine or retail vouchers . There ’ s no annual cap on the number of trivial benefits that can be provided to employees ( although directors are limited to six per year ), meaning the exemption can be utilised for birthdays , religious celebrations , new babies and other calendar or personal events .
5 . In-house canteen
With food prices rising at a rate not seen in over 40 years , one significant form of assistance employers can provide to employees without a tax charge or reporting requirement , is the provision of meals within the workplace . The food and drink provided does need to be on a reasonable scale and made available to all employees ( or all employees at a particular location ) for the tax exemption to apply .
POTENTIAL IMPACT ON EMPLOYEES
The suggestions contained merely provide examples of some of the options available to employers . Some of these may have further consequences for employees such as :
• Impact on universal credit or other meanstested benefit claims .
• Loss of child benefit under the High-Income Child Benefit charge .
• Loss of personal allowance if adjusted net income exceeds £ 100,000 .
Our full cost of living support guide for employees is now available and covers expenses , trivial benefits ( high-value vouchers or gifts and annual functions ), working from home costs , buying / selling annual leave and the steps employees can take .
WE ARE HERE TO HELP
All the options mentioned are complex and subject to many conditions being satisfied and further advice should be sought in advance . To request our full cost of living support guide for employees or to discuss any of these options further , please do get in touch .
Rick Schofield Tax Partner , Azets Email : rick . schofield @ azets . co . uk
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
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