The advantages of using salary sacrifice for voucher schemes

Vouchers do not have to be given out  just as rewards; some employers offer them through flexible benefits programmes.

Offering gift voucher or gift card schemes as part of a wider flexible benefits programme has recently grown in popularity among employers.

“In a competitive employment market, widening the flex package to include discounted vouchers can be the difference between an employee choosing your company and not,” says Paul McRae, business development manager at The Voucher Shop.

“Employers that offer vouchers as part of flexible benefits programmes tend to be larger companies,” says Andrew Johnson, director general of the UK Gift Card and Voucher Association (UKGCVA), “and generally, they are added onto the mature, established flex programmes.

“The ‘harder elements’ of a flex scheme – pensions, holidays – where tax breaks exist are generally in place first, then a retail element might follow at a later date.”

Typically, employees need to be prepared to commit to the scheme for a minimum period of time, and there will need to be a certain number participating at the employer too.

“At The Voucher Shop, we ask people to sign up for a 12-month salary-sacrifice deduction period, and generally we say it needs to be about £50 to £100 a month minimum for it to be worthwhile,” says McRae. “Obviously the schemes work better with more people participating, but we have schemes at some employers with only about 20 people involved, whereas in others there are thousands.”

Employees who sign up to a gift voucher scheme through salary sacrifice are likely to make regular purchases from a particular retailer, or group of retailers, or they may be saving up for something.

For example, through The Voucher Shop’s Flexbank scheme, an employee can save their vouchers up over a 12-month period.

“They might want to save up holiday vouchers over the course of a year, with a view to spending them all on their main holiday for the year. That way, through the flex scheme, they effectively get a discounted holiday,” says McRae.

As with any motivation scheme, communication is key, says McRae, although the provider will often help by supplying flyers, posters, and e-shots. The Voucher Shop organises roadshows and will take a full day out to visit a company and explain the benefits of the scheme. “But there still needs to be someone who can champion the scheme and liaise with the provider over roadshows or other promotions.”

The administration burden should not be huge. “It’s a simple amendment to the payroll, saying Joe Bloggs needs to have £100 a month deducted,” says McRae, “and most medium and large companies should have a dedicated payroll or HR person in charge of flexible benefits anyway.

“However, it is important before setting up the scheme that the company checks its payroll systems have the functionality to accommodate the scheme.”

Recruitment firm Adecco uses Love2reward’s range of gift vouchers and gift cards in its flexible benefits programme, and they are “far and away the most popular products”, according to Julie Bowen, head of organisational development.

“Each member of our team has a flexible benefits allowance to spend on whatever they want from the portfolio, and the value of that flex allowance varies from person to person depending on their contractual entitlement,” she explains. “They benefit from the corporate rates that we have negotiated and can buy at a very favourable discount on face value.

“That means they could make significant savings on the whole cost of a holiday through Love2Travel, or buy everything for Christmas using Love2Shop, the high street gift vouchers.”

Bowen says that take-up of the flexible benefits package has grown significantly since launch, to the point where some 80% of staff are now active participants, and the value of Love2reward “purchases” has risen more than 100% in three years and continues to grow. 

While flexible benefits represent a growing market for voucher providers, Johnson believes there could be even bigger potential in voluntary benefits. “Retailers are always looking for a closed group of people to target, and employees of big companies are obviously ideal in that respect,” he says. “If the communication is right, it’s a clear tangible benefit.”

Employers should also note, that the new rules on the VAT treatment of certain benefits provided under salary-sacrifice schemes mean that employers must now account for output VAT on the supply of vouchers. Read more about the changes on the HMRC website.



Comments are closed.