Due to the ongoing talent shortage, the current employment market is fiercely candidate driven — and businesses must compete against each other to offer the most attractive contracts, secure the best applicants and keep a hold of their top performers.
However, despite the cost-of-living crisis waging on, candidates are not always looking for higher salaries in their search for the perfect role. The pandemic led many to reconsider what they want out of their careers. According to Forbes Advisor, 40% of employees would leave their jobs for a role with better benefits — and one in 10 would take a pay cut to access them.
So, how can business owners afford to offer their teams better perks to improve recruitment and retention amidst inflation? The solution lies in salary sacrifice schemes…
These arrangements can help employers optimise their benefits packages (and keep their team members happy) whilst keeping costs down. You just need to know what they entail — and how they could fit into your business model.
How ‘salary sacrifice’ works
As the name suggests, salary sacrifice schemes involve employees voluntarily giving up a proportion of their gross pay for employers to use to fund non-cash workplace benefits of their choice. The government exempts this benefit from tax to ensure both parties can enjoy valuable perks at a more affordable price.
Salary sacrifice arrangements must be agreed upon by the employee and built into the terms of employment contracts. When implemented successfully, these schemes provide a simple way of maximising earnings and enhancing benefits packages.
Benefits for employees and employers
There are several ways businesses can utilise salary sacrifice schemes to offer new incentives and boost employee satisfaction.
A ‘cycle to work’ scheme, in which businesses provide employees with tax-free bicycles to use whilst commuting, is just one example of the type of benefit on offer. These bikes, which the employer or a third party must own, are paid for in instalments, meaning employees escape high upfront costs and save money on fuel.
Businesses can also use salary sacrifice schemes to lease out new ultra-low emission company cars at a reduced monthly cost to satisfy the needs of employees not within cycling distance of their workplace.
And the benefits are not limited to material goods, either.
Under salary sacrifice schemes, employers can fund tax-free annual health screenings to ensure aches, pains and general ailments do not go unnoticed — and provide childcare vouchers to alleviate babysitting costs for busy parents. Salary sacrifices can even increase an employee’s pension contributions, giving them peace of mind for the future.
Employers can also choose to contribute towards gym memberships through the scheme — making all-important exercise more accessible and affordable for the average employee.
These benefits can help foster happier, healthier employees by promoting positive mental and physical well-being and reducing financial stress. Making these adjustments can significantly lower burnout levels, which have reached a crisis point in busy industries like accounting.
In turn, businesses may see higher productivity and fewer resignations, helping boost profits and support resilience against economic disruption.
Still, there is a lot to think about before making the change…
Factors for businesses to consider
There is no denying that salary sacrifice schemes can be extremely positive for plenty of businesses. By giving employees the power to select the perks they want rather than offering a one-size-fits-all benefits package, employers are better positioned to overcome recruitment and retention challenges.
Plus, as employers will be paying less towards take-home salaries, they are subject to lower corporation tax and national insurance contributions — saving them money that can be invested in other areas of their company.
However, fitting salary sacrifice schemes seamlessly into existing business operations is not always easy.
For example, employers must get to grips with benefit reporting requirements. Instead of being reported before each payday, as is the case for regular cash earnings, employee benefits must be reported to HMRC at the end of the tax year using an online expenses form.
Some benefits are also more complicated than others. For car leasing schemes, employees need to pay benefit-in-kind (BIK) taxes at the end of the year — and if they resign before the contract ends, employers must deal with ongoing monthly payments or early termination fees.
Not all employees will be willing to accept a drop in pay, either, as it could impact credit and mortgage applications. If only a select number of team members are on board, employers must consider how to ensure equal compensation for employees throughout the business.
Business leaders may be wondering how they should go about tackling these obstacles with limited resources at their disposal. In this case, it might be time to get the experts involved…
Reasons to seek professional support
Having a motivated workforce has never been more crucial. So, employers need to develop attractive yet realistic benefits packages — and that is where a recruitment specialist can help.
Working with a recruitment agency can help ensure obstacles do not prevent companies from reaping the benefits of an effective salary sacrifice scheme. These professional teams have the necessary knowledge to iron out logistical kinks, saving employers time and money and ensuring they attract (and keep) the best candidates.
All businesses need to do is find an agency with the right connections and expertise…
Howett Thorpe is a recruitment agency in Farnham, Surrey, specialising in finance, business support and accountancy practice. For our help implementing a salary sacrifice scheme, call 01252 718777 or email firstname.lastname@example.org.