As you’re aware, the cost of living continues to be a concern for many people and this includes employees. Apart from increasing their salaries, what affordable initiatives can you take to help alleviate your employees’ cost of living increases?
Salary Sacrifice For Pension Contributions 👏
It might surprise you to learn that instead of increasing salaries, one technique is to decrease them before they’re earnt, using the reduction to replace existing employee pension contributions with employer pension contributions.
With pension auto enrolment many employees already make employee contributions, but they and you still pay national insurance on this salary. Instead, save this national insurance of 13.25% for most employees and 15.05% for employers.
There can be disadvantages if certain mortgage lenders don’t restore the salary for lending purposes, the lower salary might affect government benefits and it needs to be within the national minumum wage. However, it might be worth a look particularly with an employer national insurance saving for your business too.
Cycle To Work Scheme 🚲
Provide bikes to employees who are happy to cycle to work or were perhaps thinking of doing so anyway to save fares. They won’t need to buy their own bike from after-tax income. The bikes need to be used more than 50% of the time for commuting or business journeys. They are initally lent to employees who may then buy them from you at a second hand value a few years later.
Trivial Benefits 🎁
Occasionally treat your employees to a high street voucher for up to £50. This rule can be used for other things such as birthday flowers, but a voucher allows them to choose what they want. Be sure to keep these occasional otherwise they become taxable.
Refund Working From Home Costs 🏡
With increased energy bills, employees additional costs of working from home may need to be refunded beyond the £6 per week. Keep records of these additional costs to ensure they don’t become taxable.
Provide A Company Mobile Phone Or Two! 📱
Surprisingly it doesn’t matter how much one company mobile phone is used for private calls, there isn’t a taxable benefit on the employee. You could therefore replace their personal phone with a company mobile contract.
If your employee needs a mobile phone overwhelmingly for business use, you can even provide two mobile phones, with one entirely for business and one for private use.
Do not reimburse the employee’s phone contract costs as that doesn’t work in the same way.
Loans Up To £10,000 📆
Although eventually repayable, loans of up to £10,000 can be made to staff interest free for as long as needed without a tax cost. A small amount may help some employees to get through a short term problem.
Profit Related Bonuses 📈
If your business does well, a bonus becomes affordable. Structure it carefully to ensure it achieves your aims, encouraging the behaviour and results you’re after, as well as incentivising staff.
A Day Off? ☀
If your staff finish a project on time and budget, meet cost saving targets, or similar, an additional day off doesn’t cost you any cash and creates a lot of goodwill.
If you’d like to know more please contact your On The Spot Accountant.
Paula Tomlinson BFP FCA CTA