By RAM Tracking on 6 Apr 2017

The last few years has seen a significant increase in the adoption of salary sacrifice schemes by employers. Much of the popularity of these schemes can be explained by their mutually-beneficial nature for employer and employees alike. For the basic-rate taxpayer sacrificing £100 of their salary, tax perks have allowed them to receive £100 in benefits for a salary deduction of just £68.

However, following what HMRC described as a “proliferation of luxury schemes” at a high cost to the treasury, 2016’s Autumn Statement brought the controversial news that the Government would be axing salary sacrifice tax perks on a range of employee benefits. Chancellor Phillip Hammond announced that from 6th April 2017 “employees who use these schemes will pay the same taxes as everyone else.” Only a few politically-motivated benefits, such as pension contributions, childcare vouchers, ultra-low-emission vehicles and cycle-to-work schemes will be exempt from the charges.

What should employers do next?

It is essential that employers adopt a proactive and innovative approach to mitigating tensions among staff. An important part of this involves clearly communicating to staff about the incoming changes, taking care to emphasise that these are government rather than company-driven.

Businesses should look to introducing alternative ways to offer staff financial perks, such as a group benefits platform which allows employees to make savings across a range of everyday purchases. Alternatively, businesses could offer non-cash incentives – by implementing perks such as flexible hours and additional holidays.

The incoming changes to salary sacrifice schemes will inevitably have an adverse effect on both companies and employees. By taking the time to think carefully and innovatively about how to mitigate their impact on employees, companies can reduce disruption to business processes whilst maximising retention and productivity.

For more information download our full free whitepaper on managing the upcoming salary sacrifice changes for your business.