Employees can unlock their pre-tax cash with salary sacrifice.
Supporting the financial resilience of your employees has always been important – now, it’s imperative.
UK employees are facing increasing financial uncertainty. Alongside price hikes on everyday items, energy and fuel costs are soaring. And National Insurance Contributions (NICs) are on the rise too. This means your workplace benefits need to work harder to help combat the increases and boost employee financial wellbeing.
From 6th April 2022, both your business and workforce - if based in England or Northern Ireland - will pay 1.25% more in National Insurance Contributions (13.25 and 15.05% respectively). Unexpectedly, lower and middle earners will see this price hike offset.
During the recent Spring Statement, Rishi Sunak announced a £3K increase to the primary payment threshold taking affect from July. This change means employees will earn £12,570 before NIC deductions kick in.
What does this mean?
For your employees – it depends on their pay and personal tax allowance. As a guide, it’s anticipated employees earning up to £30,000 will pay less NICs overall in the 2022/23 tax year, whilst those earning over £50,000 will pay more.
For your business – Class 1 Employer NICs will rise from 13.8 to 15.05%. The new tax year does see an increase to the secondary threshold limit however, so your business won’t pay Employer NICs for those who earn below £758 per month or £9,100 per year.
Regardless of how your business and workforce fare from these changes – more than ever, it feels like every penny counts. One way you can make everyone’s money go further is through workplace salary sacrifice schemes.
What is salary sacrifice?
Salary sacrifice is a way for employees to ‘spend’ their pre-tax earnings on things that directly benefit them. For example, salary sacrifice can be used to make pension contributions, to pay for new tech or, our personal favourite – to gear up to cycle to work.
How exactly does salary sacrifice help save money?
With salary sacrifice, employees agree to give up a portion of their pay in exchange for a benefit, like a new bike. This means their annual salary is technically reduced (by the amount sacrificed). As a positive consequence, the employee will pay less National Insurance and Income Tax whilst your business will pay less Class 1 Employer NICs.
There are a few important points to note:
- Salary sacrifice schemes are workplace benefits and must be arranged via your business.
- Not all salary sacrifice schemes attract both National Insurance and Income Tax reductions.
- The amount sacrificed cannot take an employee’s annual salary below the National Minimum and Living Wage thresholds.
Save even more with Cyclescheme
A tax hike is never popular but the National Insurance increase does have a silver lining – both your workforce and business will save 1.25% more with Cyclescheme.
- Employees now save 26-40% on a bike and accessories of their choice
- Your business saves up to 15.05% on any value processed through the scheme
Whilst it might not sound significant, the additional Cycle to Work scheme saving soon adds up.
On a £1,500 Cyclescheme package, an employee could save an extra £18.75 when choosing our recommended ownership option. Meanwhile, your business could save up to £225 in reduced Employer NICs. And this is just the pounds and pence saving.
When an employee gets a bike through Cyclescheme and starts cycle commuting – you both benefit from passive gains. Cycling to work provides employees with a straightforward way to nurture their health and wellbeing; typically resulting in fewer sick days and better productivity. Two things which naturally benefit your business.
Promote your scheme and combat the increases
Help employees gear up to cycle commute and cut their tax bill at the same time with your Cyclescheme benefit. Here are three simple ways to engage employees:
- Promote your scheme – there is a Cyclescheme package to suit every employee and a host of free promotional assets on MySchemes to help you shout about it.
- Request an event – our in-house cycling experts can host a free digital event for your workforce. This lets employees know all about your Cyclescheme benefits and how they can apply. You can request your event via MySchemes today.
- Become a Cycle Friendly Employer – this framework helps you set up the right tools to continual support the cyclists in your workplace.