Tax effective ways of paying employees?

Cunfaro

I am wondering if there are any imaginative but legitimate ways of paying an employee a better package of remuneration that does not generate extra costs on the employer, and / or can reduce the amount that is taxed of the package that the employee earns?

eg If an employee simply gets paid 30k then more than two thirds of it is taxed at 20% with NI contributions too.

Are there any imaginative and theoretical ways of paying an employee 25k instead and him getting 5k of worth that is not taxed in any way? And which will not make the employer pay NI on that 5k?

Apart from pensions and car schemes (which dont sound attractive) I cannot think of any... Any suggestions...?

There used to be all sorts of stories that if employees were paid in things like fine wines no-one paid tax on such things? Are there any 'loopholes' or schemes like this still around?

All suggestions welcome.

Savvy_Sue

I'd suggest talking to your accountant, but there are probably fewer and fewer such schemes.

However, research suggests that money is less important to employees than we tend to think: generally being a 'good' employer is worth more than money alone.

So I'd suggest things like flexi-time (if at all possible), flexible working practices for all (ie not just those with children!), more than the statutory leave entitlement, contractual sick pay rather than just SSP, a pension plan which the employer pays into (which will be a legal requirement before long) and matches up to (say) 5% if the employee also contributes.

Free supplies of tea (we'll buy any kind anyone would like) and coffee are good.

And - although you do have to make sure this isn't a taxable benefit - we have a massage therapist in once a fortnight, who does a half hour back, feet or head massage for anyone who would like one.

Making sure everyone has a contract in a timely fashion goes further than you might think to being a good employer as well!

Salary sacrifice for childcare vouchers, bikes and course fees can actually save you money. Another one to consider is enhanced maternity / paternity pay.

How many employees do you have?

getmore4less

approved Options/Shares, with future dividends.


Have you asked the employees what they would like.

agrinnall

While all the things that Sue mentions are great for creating a good working environment they all come at a cost to the employer which the OP wants to avoid. Whether those costs can be recouped through improved productivity and lower absence rates is probably only something that could be assessed afterwards.

ILW

Cash in hand is apparently very fashionable at the moment.

Savvy_Sue

agrinnall wrote: »

While all the things that Sue mentions are great for creating a good working environment they all come at a cost to the employer which the OP wants to avoid. Whether those costs can be recouped through improved productivity and lower absence rates is probably only something that could be assessed afterwards.

You also have to consider your retention rates, of course. If your staff turnover is 50% per year, and you can get it down to 20%, for example, you've saved yourself several sets of recruitment costs AND the stress of the process itself. I've plucked those figures from the air, of course, because without knowing what the OP's business is, or how many staff there are, or what the turnover is I can do nothing else. But obviously if I had a staff turnover rate of 50% I'd be doing all I could to reduce that figure, and spending some money would be worthwhile, IMO.

It's a good question for an employer to ask, of course. And asking the employees what they'd value is a good way of starting the process!