GOV.uk define a salary sacrifice arrangement as ‘an agreement to reduce an employee’s entitlement to cash-pay, usually in return for a non-cash benefit.’
In this article we’ll look at:
- How salary sacrifice schemes work
- The benefits of salary sacrifice for employers
This should give you a good overview of the benefits of salary sacrifice schemes and why they’re a great addition to your employee benefits offering.
How it works
Simply put, salary sacrifice schemes are employee benefits where employees agree to sacrifice a small part of their monthly salaries in return for an item or service.
Benefits of salary sacrifice for employers
There are loads of benefits of salary sacrifice schemes for both you and your employees!
National Insurance (NI) savings
When your employees make use of a salary sacrifice scheme, typically you’ll make NI savings.
You get these savings for every employee signed up to a salary sacrifice scheme, which can help you to offset any spending that comes with setting up a platform and running the schemes.
The right provider can provide you with support and tools to run salary sacrifice schemes successfully.
A provider can help to put all of your salary sacrifice schemes into one place, making them easier to manage and administrate.
As every company is different, different solutions will be needed for each. Looking for the right provider for your company can help make sure that you’re getting the right solutions for your employees.
For example, our Salary Extras platform is flexible to suit the needs of businesses of all shapes, sizes and industries, giving employers more options for how they want to run and promote their salary sacrifice schemes.
Improved employee health and wellbeing
Supporting the health and wellbeing of your employees can be complex, but salary sacrifice schemes can help.
One scheme that can help is the Holiday Trading scheme, which allows employees to buy extra annual leave.
You will be aware of the term ‘burnout’. Burnout can cost your company as employees will likely need extended time to recover and may even leave the company if they’re struggling.
Allowing staff to buy a specified amount of extra annual leave means they have more time to spend on their personal life. They can take more time to spend with loved ones, go on longer holidays away or deal with personal problems.
Introducing this particular scheme is a great way for you to allow employees to take more personal time and improve their health and wellbeing.
Improved employee financial wellbeing
Another aspect of looking after your employees will be centred around financial wellbeing.
You will have employees from all kinds of demographics and who will have different financial priorities. For example, an employee that is in their 20s may be looking into buying their first home. Whilst an employee in their late 50s is probably looking at how they can securely retire.
The financial benefits of salary sacrifice schemes include providing alternative ways to save on things like a new bike or car maintenance or even new ways to save with Workplace ISAs.
This paired with resources like a financial wellbeing library, full of information and knowledge on how to help improve financial wellbeing, can make a real difference.
Money stresses can significantly affect a person’s mental wellbeing, which in turn affects a number of other areas including their productivity.
Giving your employees access to salary sacrifice schemes, alongside other financial wellbeing schemes, can help to show new employees that you care about their financial wellbeing
Current employees knowing that you care about their health and wellbeing, including financial wellbeing, will likely improve your overall employee satisfaction and employee retention levels.
Range of options
One of the key benefits of salary sacrifice schemes is the range of options available.
Each employee will have different needs and having a range of salary sacrifice schemes can help support their individual needs.
Salary sacrifice schemes can help support them financially, physically and emotionally, all whilst keeping the business running smoothly.
The range of options also means that you can benefit from a great uptake of the schemes because of the amount of employees that can take advantage of them and the many ways in which salary sacrifice schemes can help them.
We know that you will be highly focused on the needs of your employees.
However, your needs matter too. The benefits of salary sacrifice schemes don’t just have to be for the rest of the company. As you’re an employee, you also get to benefit from the schemes.