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Changes to salary-sacrifice schemes announced in November's Autumn Statement are likely to prove unpopular with employees. James Monks from RAM Group looks at ways employers can mitigate the impact of the changes and still retain staff.
The last few years have seen a significant increase in the adoption of salary-sacrifice schemes by employers.
Much of the popularity of these schemes can be explained by their mutually beneficial nature for employer and employees alike.
As well as allowing staff to give up part of their salary in exchange for tax-free benefits, companies have also been liable to pay lower national insurance contributions on reduced employee wages - a situation viewed by many as win-win.
For the basic-rate taxpayer sacrificing £100 of their salary, tax perks have allowed them to receive £100 in benefits for a salary deduction of just £68.
However, following what HM Revenue and Customs described as a “proliferation of luxury schemes” at a high cost to the Treasury, 2016’s Autumn Statement brought the controversial news that the Government would be axing salary-sacrifice tax perks on a range of employee benefits.
Citing the difference between the tax paid on cash salary and benefits as “unfair”, Chancellor Philip Hammond announced that from April 2017 “employees who use these schemes will pay the same taxes as everyone else”.
Only a few politically-motivated benefits, such as pension contributions, childcare vouchers, ultra low-emission vehicles