Salary Sacrifice and Your Business Cost-Savings Strategy
The Autumn Budget and recent changes to the Employee Rights Bill 2024 reflect the changing landscape, putting more power in the hands of the employee.
Many UK employers are concerned by the announcement of the minimum wage and NIC increases. It’s more critical than ever to explore ways to make employer savings.
During this blog, we’ll explain why salary sacrifice schemes should be at the heart of your post-budget savings strategy.
What does salary sacrifice mean?
As it says on the tin, when you join a salary sacrifice scheme, you allow your employees to sacrifice part of their monthly salary to pay for a product or service, commonly via a Cycle to Work, Electric Car, Refurbished Tech, or Annual Leave Purchase Scheme.
With a salary sacrifice scheme, employers take the monthly repayment amount from an employee’s salary at the Gross level. That’s before Payroll processes the tax and NIC calculations.
Reducing the Gross pay amount lowers the tax and NIC contributions the employee and employer must make.
Salary Sacrifice and Your Business Cost-Savings Strategy
Build Your Business Cost-Savings Strategy with Salary Sacrifice and Pluxee UK.
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Your Post-Budget Savings Strategy
The Autumn Budget promised growth, investment, new skills, and to get those able back to work. Employment Allowance increases, the corporation tax cap, and business rate relief for those in the retail, leisure and hospitality industries will alleviate the impact of some of the planned increases. Still, since the announcement, businesses have expressed concern over the salary and NIC changes.
The Wage Increase Double-Whammy
The legal minimum wage for employees over 21 will rise to £12.21 an hour - a 6.7% increase. Employees aged 18 - 20 will see their wages increase to £10 per hour - up 16.3%.
The story doesn’t end there for employers.
Employer NIC contributions will increase to 15% from April 2025. The rise in the minimum wage already ups the employer's NIC contribution, so the two combined impact a business’s payroll bill twice.
The new laws surrounding zero-hours contracts impact the industries that employ the most people on National Minimum Wage - retail, hospitality, leisure - so many businesses will feel the financial impact of these changes.
In a world where living costs remain high, steps to protect and increase employee wages are welcome. Still, where would we be without the businesses providing the work?
Your Business Cost-Savings Strategy
Change is upon us, and we must embrace the positives to thrive. As we expressed in our LinkedIn article responding to the Autumn Budget, employees can perform better when they feel more secure in their financial and working situations. There’s an opportunity to nurture this enhanced state of employee wellbeing to create a loyal, engaged and highly productive workforce, creating a world of opportunities for your business.
Attracting and retaining the best people is vital for business growth, so remaining competitive as an employer is essential. Thankfully, there are employee benefits available that enhance your Employee Value Proposition (EVP) and save your business money.
Salary Sacrifice Schemes
Salary sacrifice schemes aren’t new. The Cycle to Work scheme began in 1999, with the Electric Car Salary Sacrifice Schemes following in more recent years. Both schemes reduce the NIC employers must pay for employees using the schemes.
With Salary Sacrifice, there’s no need to make cuts; you can deliver employee benefits that enhance your EVP, support your CSR ambitions, boost employee wellbeing, and retain top talent.
Salary Sacrifice Schemes
Cycle to Work Schemes
The approval process for Cycle to Work salary sacrifice schemes has evolved with the changes to hybrid and remote working. The essential thing for an employer to remember is that a cycle-to-work scheme is free to implement, and we can bolt it onto our Employee Discounts Platform at *no extra cost.
You’re giving your employees access to an employee benefit that enhances their physical health, reduces their carbon footprint and cuts the cost of their commute, improving their financial wellbeing. Plus, with no up-front business cost and saving you money, too.
*Terms and conditions apply.
EV Car Schemes
Electric Car Schemes deliver even bigger savings to the employer!
As a larger ticket item, the salary sacrifice repayment period spans a longer term than a single bike, but the employer NIC savings are considerably more significant.
While we can’t be exact on the numbers at this stage, what matters is the opportunities a Green Car and Cycle to Work salary sacrifice scheme deliver to your business.
Annual Leave Purchase Schemes
Employers benefit from NIC and salary reduction savings when an employee purchases extra holiday allowance via their Annual Leave Purchase Scheme. Just five days of purchased holiday can save employers over £700!
Many employees value time with their family above any other employee benefit you can offer. If they feel they can afford it, they will gladly purchase extra leave, enhancing their work-life balance.
The Growing Importance of Employee Benefits
With employer wage bills set to increase, so does the importance of embedding budget-maximising, salary-stretching employee benefits. We understand from conversations with our clients that when the lower wages increase, more senior employees often expect theirs to rise, too. This is especially true when the minimum wage increase closes the gap between pay bands.
Offering employees a competitive salary matters in a landscape where there’s a battle to retain and attract the best skills and talent.
Salary isn’t the only thing that matters. Employers want to work for companies that align with their values, have a positive workplace culture, and provide employee benefits that can give such value that they can be worth more than a pay raise. Employee Discounts make everyday living more affordable, offering up to 20% off with over 100 retailers. Our cashback-earning Pluxee Card allows employees to earn up to 15% cashback with over 80 retailers, helping employees build a pot of funds they can use towards reducing other costs.
Mental health in the UK is in decline, and it’s starting at an earlier age. An Employee Assistance Programme supports employee wellbeing by providing employees with online resources and access to Information Specialists and BACP-accredits counsellors 24/7, 365 days a year.
When you combine EVP-boosting employee benefits with those that save employers money, you’re putting your business in the best position to remain competitive without hurting your bottom line.
Build Your Business Cost-Savings Strategy with Salary Sacrifice and Pluxee UK
Book a Demo to see how we can make a difference together!