Salary sacrifice schemes

mlz1413

Hi. I'm a partner in a small company and one of our staff will be sending a child to nursery next year.  
I remembered about salary sacrifice schemes so have been reading up on them. 

Are they worth it?
And that's a question as an employer but also for the employee too.

Plus I've seen there is now a Groceries scheme.  That looks too good to be true, buying food with gross pay rather then nett pay, so what is the catch?
Do you save a bit of NI and then lose it when the Benefit In Kind is calculated?

I couldn't find a calculator just lots of schemes, so I've found it hard to work out if as a company we should be offering all the staff the groceries scheme. 

Any help or advice appreciated. 

Savvy_Sue

Who does your payroll? If it's in-house you do need to understand what you're doing, although a decent programme will do most of the work. It does slightly increase workload when setting up or making changes so be aware of that.

I guess key message for employees is that if they need certification of salary, eg for mortgage or landlord, then their salary appears lower. For student loan applications (for their children) this would be an advantage.

I'd not heard of the groceries scheme!

Brie

As I recall salary sacrifice is done prior to NI being deducted at least.  So employer and employee win on this.

The only grocery scheme I've taken advantage of was to have salary deducted and being given grocery vouchers instead.  The saving for me was that there would be £90 salary deducted but £100 vouchers received.  Problem was I didn't always actually want to spend that money at what was a premium shop - can't remember if it was M&S or Waitrose.

DontBelieveAllYourTold

Both of these claimed salary sacrifice arrangement are suspect. Childcare vouchers are closed to new entrants and have been for many years. Some of these newer scheme pretend to be workplace nurseries, however, they don't meet the involvement test of the employer and are tax avoidance schemes that may not work. 

Equally with vouchers or tokens for buying groceries, they are subject to Class 1 NICs as earnings in the same way as cash. The claim there is NI relief by giving vouchers or credit tokens is false and failing to understand Social Security law. 

Buyer beware, these organisations are pulling the wool over your eyes as their risk is zero. If and when the employer is caught, the bill is the employers. 

So these promoted childcare and grocery schemes are unlikely to work as they don't meet the requirement of the relevant regulations. Employers are being fooled. 

DullGreyGuy

mlz1413 said:

Hi. I'm a partner in a small company and one of our staff will be sending a child to nursery next year.  
I remembered about salary sacrifice schemes so have been reading up on them. 

Are they worth it?
And that's a question as an employer but also for the employee too.

Plus I've seen there is now a Groceries scheme.  That looks too good to be true, buying food with gross pay rather then nett pay, so what is the catch?
Do you save a bit of NI and then lose it when the Benefit In Kind is calculated?

I couldn't find a calculator just lots of schemes, so I've found it hard to work out if as a company we should be offering all the staff the groceries scheme. 

Any help or advice appreciated. 

Its a Benefit In Kind so irrespective if its taken from Gross or Net the tax is still going to be paid however you may reduce pension contributions if its taken from Gross. What normally the perk is is the fact the vouchers are discounted. 20 years ago when this was offered to us the discount was decent and it was from your "flexible benefits" pot so not pension impacting. These days the discounts tend to be lower and there are many other ways people can buy the same discounted vouchers.