The HR Forum

Attracting and retaining the right people is important and an increasing number of organisations are offering a range of non-cash benefits to make them a more attractive employer of choice. But according to a BBC News report this morning, the treasury is now looking at whether these schemes should be cut back. The schemes often known as ‘salary sacrifice’ include company cars, mobile phones, cycle to work schemes, childcare vouchers and even gym memberships. They provide valued employees with additional perks whilst also making some savings for them.

Mark Herdman, tax expert from Grant Thornton interviewed by the BBC gave this example:

‘A simple example is probably a mobile phone contract. If an individual takes out a three year mobile phone contract, the cost for that could be £1,000. If that is provided through their employer they give up £1,000 of their pay over three years. That money would not be subjected to tax or National Insurance so the actual cost to the individual would be £680 as oppose to £1,000. The employer would also be able to save on National Insurance.’

HMRC has said that childcare vouchers, cycle to work schemes and buying extra annual leave are not under threat. But the things it will look at are things like company cars, life insurance and mobile phone schemes.

Whilst some might see these schemes as a way of evading tax, others may see this as a cornerstone of attracting the right people. Herdman pointed out in his interview, ‘There is of course a very diverse workforce now so providing benefits, attracting and retaining the best talents is a big thing for employers. So from an employer’s point of view it’s not just about tax or National Insurance savings’

If the rules change, although benefits can still be offered, it’s the tax treatment of them that may change in the future. According to Herdman, ‘It does change the landscape for employer benefits.’

What do you think? Could this change the landscape for employer benefits? What impact will it have on our organisations?