Further to our recent correspondence concerning the changes to tax relief on dividend income and pension contributions you may like to reconsider the idea of introducing a ‘flexible benefits’ offering.
Flexible benefits are a great way to engage your colleagues and staff by allowing them to choose the benefits that mean most to them. This makes benefits accessible in a way that lets employees connect with their benefits and feel valued, but also supports staff recruitment, retention and satisfaction.
Flexible benefit schemes can include a wide range of options for staff to select from, including tax-efficient benefits such as childcare vouchers or salary sacrifice pension contributions. Many flexible benefit plans involve the employee being allocated a “benefit allowance”. This “allowance” represents the amount of money that the employer is prepared to spend to provide the employee with their chosen benefits. The “benefit allowance” itself is not an amount on which the employer must operate PAYE/NIC, except to the extent that the employee chooses to draw it in cash. In most cases, the amount of cash that the employee is entitled to receive is not fixed until the employee has made his or her choice of benefits.
For example, an employee may be allocated a “benefit allowance” of £2000 per annum, of which they “spend” £1,700 on various benefits in kind and take £300 per annum in cash. The £300 is subject to PAYE and Class 1 NIC, but the £1,700 is not. The benefits in kind that the employee gets are taxed in the normal way (and subject to Class 1A NIC.)
Other options can include holiday trading, healthcare and voluntary benefits.
If you are interested in looking at the possible introduction of a flexible benefit plan for your colleagues and staff and would like some further information, please do give us a call.