2 min read
When it comes to salary sacrifice, I’ve worked with enough HR professionals to understand that it’s a complex and sometimes difficult part of benefits to navigate.
At Reward Gateway, we offer two types of benefits within the world of payroll schemes, salary sacrifice and net payroll deduction. Here’s what the two mean:
The definition of Salary Sacrifice
A salary sacrifice benefit is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit. The reduction comes from the employees pre-tax pay meaning they pay less tax overall as their salary is seen as lower by the HMRC.
The definition of Net Payroll Deduction
A net payroll deduction benefit is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit. The reduction comes from the employees post-tax pay meaning they benefit from paying the cost over time, making the non-cash benefit affordable.
For employees, salary sacrifice and net payroll deduction can be a great benefit as it helps employees stretch their disposable income — and for companies who were hit by wage increases when the Living Wage became reality a couple years ago, these schemes can be an easy way to show appreciation for employees without having (another) company wide pay rise expense.
But there’s another headache that most salary sacrifice and net payroll deduction programmes create, and that’s within the payroll department. Ensuring benefit compliance can be difficult and time-consuming. For time-poor HR teams, managing compliance associated with salary sacrifice can seem even more daunting than ever before. Some HR teams may even be asking the question if it is even worth it.
How to adapt to salary sacrifice changes
But to give your employees that added benefit to help improve their day-to-day, and boost your Employee Value Proposition, it is worth it.
I’m here to promise you, salary sacrifice doesn’t have to be a headache.
I’m excited that we’ve revamped our centralised administration platform that helps automate payroll benefit schemes. It’s called SmartPay. Our SmartPay platform allows HR professionals to manage payrolls, windows, applications and invoices all in one place, for any of the salary sacrifice or net payroll deduction schemes we offer.
The end-to-end automation capability is the only one of its kind. Plus, with companies investing in the Living Wage, our system also takes into account factors like salary and hours worked (even if your employees’ salary or hours change weekly or monthly) and any other deductions being made so you’re ensured that none of your employees fall below the minimum wage and have no reason to worry about non-compliance and fines. We make it easy to stretch employees income with none of the administrative burden or non-compliance risks.
If you’re interested in implementing SmartPay with our salary sacrifice or net payroll deduction benefits, we’re here to help. Reach out to one of our consultants below.