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How to introduce and manage a salary-sacrifice scheme

Author: Paul Tew

Summary

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  • Be aware of what constitutes an effective salary-sacrifice arrangement.
  • During the implementation of a salary-sacrifice arrangement remember to draw up a legally enforceable variation to the employee's terms and conditions.
  • Ensure that all employees understand the implications of the revised contractual arrangements.
  • In designing a scheme, think about whether any savings achieved will be rebated back into the employees' remuneration package or used to reduce costs elsewhere in the business.
  • Check whether or not the benefits in kind offered to employees are totally exempt from tax/national insurance contributions, to maximise the salary-sacrifice benefit.
  • Be aware that HMRC must be satisfied that the salary sacrifice is effective.
  • Draw up a policy on when employees can opt in and out of a salary-sacrifice arrangement.
  • Be aware that, while pension contributions can be included in a salary-sacrifice arrangement, participation in a workplace pension must not be dependent on agreeing to participate in a salary-sacrifice arrangement.
  • Ensure that any salary-sacrifice arrangement does not cause the worker's hourly pay rate to be less than the relevant national minimum wage rate for any future pay reference period.