While the Coronavirus Job Retention Scheme in the UK has proved successful in helping many businesses stay afloat and employees maintain their jobs, it has left many wondering how it affects salary sacrifice arrangements where staff have been furloughed.
Salary sacrifice schemes typically include Pensions, Cars, Bike to Work and Childcare Vouchers among others.
Following the introduction of the Job Retention Scheme, HMRC introduced guidelines around the subject of salary sacrifice schemes and the Furlough Scheme. Here’s a summary.
What the Furlough Scheme means for salary sacrifice schemes
In their Job Retention Scheme guidelines, HMRC state “when companies calculate 80% of pay for an individual, they should exclude “non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.”
The guidance also says that all furlough pay must be paid to the employee in the form of money. HMRC state “No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.”
They also specifically state what employers should do in the instance that they offer employee benefits to furloughed staff through one or more salary sacrifice schemes. “Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.”
There’s further guidance for the ability to switch out of a salary sacrifice scheme too, which isn’t usually allowed unless there is a life event, as many employees will be wondering what their options are as they look to manage their finances.
The guidance relating to switching out of a salary sacrifice scheme states “HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.”
Altering your salary sacrifice arrangements with your staff
You may not necessarily need to alter any arrangements with your benefit scheme providers; however, you’ll need to find the best way to manage the arrangements with your employees based on this Government guidance.
For example, you may decide to suspend any salary sacrifice deductions until the period of furlough ends.
However, before you make any changes its worth reading the Government guidelines in full.
It’s certainly worth discussing with your employees the best course of action when it comes to making alterations to your salary sacrifice arrangements. Keeping staff updated during these uncertain times is more important than ever, particularly when it comes to finances.
Since the introduction of the Job Retention Scheme, many companies have been left wondering how to manage their salary sacrifice schemes. While there are these Government guidelines in place which every company should follow, there are a few options when it comes to making alterations to your salary sacrifice schemes to help make this difficult time easier on your staff.
For more information on this and how to best use your salary sacrifice schemes during this time to help both your business and its staff, get in touch on 0330 2000 104 or get in touch via email on firstname.lastname@example.org.
For the latest info on how caboodle are helping businesses during the Coronavirus pandemic, take a look at our COVID-19: how we can help page.