Creating the perfect employee package
Creating the perfect employee package may seem a little daunting. The typical workforce is made up of employees of different ages, who all have different needs and wants. In order to cater to them, an employer may decide to offer a selection of benefits, from which employees can choose.
A suite of benefits
A recent report indicated that younger employees want unlimited holidays and dental care, while half of 45-55 year olds would like to be given the option to work flexibly. Other prime benefits for the over 55s are larger pension contributions and private healthcare. A separate study found that other benefits employees were interested in included access to mental health services and having an office pet.
Having a suite of benefits is certainly useful. Some may be costly, but this will help you to attract the right people and retain them. Prospective employees have even stated that an attractive benefits package may sway their decision when it comes to accepting a job offer.
Communicating the benefits to employees
However, supplying attractive benefits is not enough: more needs to be done to ensure staff know about them. A survey of 1,001 full and part-time employees found that 34% of staff members would like more communication in regard to the benefits that are available to them, although the same number do believe that ‘enough is being done’.
The survey also revealed that 16% of respondents don’t know who to ask about benefits and rewards, while 9% do not know if any options are available. Of those surveyed, 56% revealed that they would prefer to receive an email detailing the benefits on offer, while 29% prefer face-to-face interaction, and 26% would like to access the information via an intranet hub.
Accounting for the benefits
Once the benefits are in place, accounting for them correctly is the next thing to consider. You should start preparing to file your forms P11D for the tax year 2018/19. These need to be filed by 6 July 2019, and the Class 1A national insurance contributions (NICs) payable need to be paid by 19 July, or 22 July if you pay online. Late filing and payment will incur a penalty and interest, respectively.
Payrolled benefits-in-kind (BIK) do not need to be reported on forms P11D, although Class 1A NICs are reportable via form P11Db and payable as detailed above. If you decide you want to payroll BIK in the future, you need to register online by the 5 April before the start of the new tax year for which you will be payrolling.
Examples of common taxable benefits include: living accommodation, unless it is job-related; vouchers; employer-provided cars; private fuel; vans; cheap or interest-free loans; and medical insurance. There are certain benefits that are not taxable, such as: employer-provided mobile phones; pension contributions; and cycle to work schemes.
Furthermore, transitional rules have been introduced where BIK have been offered through salary sacrifice or Optional Remuneration Arrangement (OpRA), such that an income tax and NIC charge will arise on the higher of the salary sacrificed (or cash option) and the value of the BIK taken. What the benefit is will determine when the rules change. By taking the BIK, the only saving made will be in employee NICs. By 6 April 2021, all BIK will be covered by these rules, except for pension contributions; childcare provided in workplace nurseries and Employer Supported Childcare (usually by way of childcare vouchers); cycle to work schemes; and ultra-low emission cars.
Is it possible to keep staff as well as make tax savings?
The ideal is to provide a package of benefits which not only gives employees what they want (and thus retains their services), but, wherever possible, provides as great a tax saving as possible for the employer. The provision of tax-free benefits as listed earlier will save Class 1A NICs, as well as income tax for the employee, so maximising that offering where possible would be the first step. However, depending on the structure of the business and the long-term aims of the owners, it may be worth thinking about employee ownership schemes, such as share option schemes, or even potentially gifting shares to targeted employees, either directly or through employee trust structures. As well as providing the necessary incentives, such schemes may save tax in the long-run by offering remuneration through dividends, rather than salaries attracting NICs.
We can help you to create a tax-efficient benefits package for both new and existing employees. Furthermore, we can provide advice and assistance in regard to the completion of your forms P11D, so please do not hesitate to get in touch to find out more.