Salary Sacrifice: Almost 1 in every 4 employers must take action

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Research published today by Jelf Employee Benefits highlights how many employers must now take corrective action following Philip Hammond’s decision to curtail some salary sacrifice benefits.

The use of salary sacrifice as a funding mechanism for a variety of employee benefit offerings has become widespread in the UK. Salary sacrifice is a funding option where the employee agrees to exchange part of his or her salary in exchange for a benefit from their employer.  This mechanism can avoid both income tax and national insurance, and therefore often represents a significant reduction in the cost of the service provided.

In his autumn 2016 Budget statement the new Chancellor announced the cessation of many new salary sacrifice schemes from April 2017, and the gradual phasing out of many other existing arrangements from 2018 onwards.  Some salary sacrifice schemes are excluded from the proposed changes, with pensions, childcare vouchers and cycle to work schemes all unchanged by the policy decision.

Despite the exemptions, however, the survey of more than 160 employers highlights that almost one in four (24%) of employers will now need to make enforced adjustments to their benefits package.

“Change in this space has been widely expected for some time,” says Steve Herbert, Head of Benefits Strategy at Jelf Employee Benefits. “Yet the pace of change has taken many employers by surprise. Employers across the country will now have to spend significant time and effort considering how to react to this announcement.”

The survey also found that almost half of employers (47%) did not believe the Chancellor had given enough time and warning with regard to the proposed changes. A further significant finding is that 27% of the organisations questioned believed that the changes had the potential to damage employee engagement and/or relations.

“These findings are really concerning,” concludes Steve Herbert. “The UK already has a worrying productivity and employee engagement deficit and these figures need to be urgently improved as the country starts on the road to Brexit. Unfortunately, these changes have the potential to make a bad situation worse.

“I’m sure that those employers impacted by the change would like to see a more realistic timetable introduced in the March Budget statement. We hope the government will take note of these views and act accordingly.”

The 2017 Jelf Employment Survey was undertaken at seminars in London, Cardiff, Chester, Leeds, Manchester and Bristol in the second half of 2016.

 

Question data

Question 37
Will you need to alter your benefits offering as a result of the Salary Sacrifice changes announced in the Autumn Budget Statement?
Yes 40 23.95%
No 102 61.08%
N/A; We have no benefits offering 9 5.39%
Don’t know 16 9.58%
Number of responses 167
Survey dates and locations London 25/11/16

                    

Question 38
Has the Chancellor given employers enough time and warning with regard to Salary Sacrifice changes? 
Yes 56 33.94%
No 78 47.27%
Don’t know 31 18.79%
Number of responses 165
Survey dates and locations London 25/11/16

    

Question 39
Do you believe that the limitation of Salary Sacrifice benefits will damage employee engagement and/or relations?    
Yes 45 27.44%
No 88 53.66%
N/A; No Salary Sacrifice benefits offered 15 9.15
Don’t know 16 9.76%
Number of responses 164
Survey dates and locations London 25/11/16

 

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About the author

Steve Herbert is an award-winning thought leader on Pensions and Employee Benefit issues. His principal aim is better communicating the value and usage of employee benefits to employers. This he has achieved through many (highly successful) seminar series over the last decade, and his regular and widely read blog posts on the subject.
He also acts as a judge in HR and Employee Benefits industry awards, article writer, and product innovator. Steve is a regular contributor to DWP forums and compulsive responder to formal Government Consultations on pension and employee benefit issues. He is occasionally accused of making employee benefits interesting.