Your pensions service Information
Payroll: Salary Sacrifice
Employers are increasingly using salary sacrifice to manage employee remuneration. This raises the employee’s perceived value of their reward package, and forms a large part of Human Capital Management. But times have changed from the original aim of flexible benefit schemes: which was to adapt salary packages to be of more advantage to the employee, without additional cost to the employer. Now more employee package elements are based on employer cost savings, primarily at the government's expense.
The Lighter Side
Since February 2005, HMRC has allowed employers to operate benefits schemes in whatever way they wish: original salary, reduced salary, notional pay, pre-tax and pre-NI deductions and all combinations in-between are now permitted to be applied. What the HMRC inspector will be interested in when finding such arrangements, are copies of the revised contractual arrangements between the employer and employee. If revised arrangements exist then the salary sacrifice is in good standing and any qualifying advantages with regard to the correct operation of tax and NICs apply.
What's the catch?
If evidence of the employer's revised contractual arrangements with their employees cannot be provided, then the employer will find themselves presented with the bill for the underpayment of tax and NICs along with associated fines and penalties.
Employers also need to ensure that they do not fall foul of the new Tax Avoidance Disclosure (TAD) regime. The government is determined to ensure that all employers and employees pay the correct amount of tax and National Insurance Contributions (NICs). Since 1 May 2007 the TAD legislation additionally incorporates NICs with regard to avoidance schemes, obliging employers to disclose.
Nothing specifically excludes salary sacrifice arrangements … from disclosure. HMRC
However, HMRC expects very few such schemes to be notifiable because they fall out at some stage of the tests.
HMRC does not expect childcare voucher schemes to need disclosing. Ultimately it is for promoters and payroll managers to decide whether they have to disclose a particular scheme.
Some important points
Opting for salary sacrifice means a contractual change in employment terms and conditions has occurred. During periods of ordinary maternity, paternity and adoption leave, employers are legally obliged to continue to provide all contractual benefits. Salary Sacrifice cannot occur against the statutory payments received by the employees during these periods (the payments rates are already calculated on the lower earnings amounts after salary sacrifice), so the benefits must continue to be provided with any associated costs being met by the employer.
With the increasing and popular use of Smart Pensions or similar schemes, employers need to recognise that during any paid period of parental leave (such as maternity and adoption), any contractually based employer contributions for money purchase schemes - or even personal pensions - must continue to be paid by the employer. This is the case, even if the payment period extends beyond the ordinary parental leave periods, as is now the case for both maternity and adoption. These employer contributions have to continue to be based on the employee’s normal in-work earnings and, unlike any employee contributions, not on the reduced parental leave payments. So employers need to be smart about salary sacrifice pensions: understand your true continuing liabilities.
Did you know?
The employee can potentially save 22% tax and 11% in NICs on the costs of some of these benefits, and increasingly more important, the employer can save 12.8% of the costs of such benefits from their employer NICs contributions. These amounts can potentially be substantial. And higher-rate tax payers can achieve savings of 40% (although the NICs savings is potentially limited to 1%). This, of course, all changes from April 2008 when the basic rate reduces to 20% and NIC upper earnings limit is aligned with the higher tax rate band.
So where is flex expanding into?
Most benefits being offered attract commission payments as an income to the provider, but employers may consider taking advantage of other elements.
Save with reduced NICs
The following flexible benefits attract no tax or NICs liabilities and potentially offer great savings to the employee over the costs they would bear if paid direct out of their net pay:
Employee medical screening
Provision of a single mobile phone (limitations were placed on the provision of multiple phones in April 2006).
Share incentive plans held in trust for a period of years.
Through the provision of salary sacrifice, the arrangement can be engineered to take advantage of the employer-provided free shares at no cost to the employer. In effect the employee sacrifices pay to receive free matching and free employer given shares.
Employees who occasionally work from home may agree to offset some of their pay to receive as an alternate the £2 per week tax- and NICs free. Although the advantage is limited, it does boost the net pay of the employee potentially by between £34.32 and £42.64 per annum and saves the employer £13.31 per year for every employee in the scheme – it all potentially adds up.
So the scope for the expansion of Salary Sacrifice arrangements is wide and varied, thereby paving the way for a number of specialist flexible benefits providers, like Ceridian.
Found these tips handy? Why not use our expertise to take full advantage of the legal loopholes that apply to benefit provision?
Contact us for more information on flexible benefits.
Article author: Ceriadian Corporation
United Auto Workers President Ron Gettelfinger spent much of Wednesday answering questions thrown by Chrysler workers and union leaders about DaimlerChrysler AG's decision to sell Chrysler to Cerberus Capital Management LP, a private equity firm.
"What has changed is that the sale is no longer speculation, it's a reality," Gettelfinger said during an online chat with UAW members. "In time, we hope you will come to feel the same way." Gettelfinger hosted the Internet dialogue with General Holiefield, the UAW's chief Chrysler negotiator. The pair took questions on topics that ranged from pensions and health care to buyout packages and the probability of job cuts in the future as an effect of the sale to New York-based Cerberus.
Gettelfinger said that current retiree pensions are secure and that buyout packages offered as part of Chrysler's turnaround would be honored. "The pension fund for Chrysler workers is, in fact, $2 billion over-funded for financial accounting purposes, and pension benefits are secure," Gettelfinger said. "Additionally, Cerberus has committed to contributing an additional $200 million to the pension fund and Daimler is providing a conditional guarantee of $1 billion for up to five years."
He also reiterated that there would be no additional job losses as a result of the sale and posted a letter from Cerberus outlining that commitment. "You should know that there are no plans -- other than those previously announced -- to reduce headcount," the letter said. "Excluding abnormal market conditions and productivity, there are no additional job cuts in connection with the transaction announced."
UAW members were caught off guard Monday when the union leader backed Daimler's agreement to sell its American arm to Cerberus for $7.4 billion because Gettelfinger had vocally refuted such a deal, describing private investment as a "strip and flip" business that is just looking for a quick return. Gettelfinger said he chose to support it after Chrysler executives assured him that the automaker would not be dismantled, but would flourish.
With the announcement of Chrysler acquisition just days old, the UAW is making the most out of each opportunity to communicate with members. Hours before the Internet chat, Gettelfinger and Holiefield joined Cerberus CEO Steve Feinberg and Chrysler CEO Tom LaSorda at the UAW-DaimlerChrysler National Training Center in Detroit where some 100 UAW officials from Michigan and other states were reassured of Chrysler’s future. Feinberg, who also met with top labor officials and senior Chrysler manager this week, told the local union officials that Chrysler would stay intact. The reassurance came like a breeze from Volant cold air intake.
According to several sources who attended the meeting, Feinberg said, "There's no intention to sell parts of the company or break it up.” He added Cerberus' $7.4 billion purchase of an 80.1 percent stake in Chrysler is a long-term investment. "He said Daimler did care about who they were going to sell Chrysler to," said one UAW local president. These statements were met with standing ovations, sources said.
Union officials who attended the meeting said they walked in to the meeting with deep reservations, but left feeling positive about the automaker's new owners. "It was a meeting to sell this to us," one local president said. "If (Cerberus) follows through with everything that they said and don't spin everything off, there's not going to be any difference. Nothing is going to change other than who owns you."
Wolfgang Bernhard, a former Chrysler executive and an adviser on the Cerberus team, also graced the meeting. According to sources, Bernhard spoke briefly, but mainly smiled and waved to familiar faces.
Union officials said they felt re-energized after the meeting, and planned to immediately share details with the workers they represent. "There was a consensus that we're back in business as an American company," one official said.
Gettelfinger told the group that Daimler will regret selling Chrysler. "Let's close the chapter on DaimlerChrysler," he said, "and open the book on Chrysler Corp."
Article author: Correy putton
Even the best laid plans for retirement may suffer a defeat or even destroyed if some important facts of life are not considered as alternatives to the project. A plan must include retirement goal setting, plans to find the money to achieve those goals and then working hard to see those goals achieved. This, however, if something unexpected arises that receives a significant portion of these funds, or otherwise derails plans? Will the retirement planner be ready? Here are some things that everyone is planning a retirement should anticipate.
The first event of a life pension scheme can be altered by marriage. When someone is young or even middle aged and love they just do not think about retirement. But it should be. It is important that both spouses have similar objectives retirement and steps towards achieving this goal. Whether the company or other retirement plan beneficiary should immediately be changed to their spouse.
If the couple is sufficient to have young children, that the cost, if unpredictable, may pose a serious economic decline in retirement money. The children will need food, clothing, medical care and probably college tuition. Design carefully children could still allow the frugal couple of a sound pension scheme.
Nobody anticipates divorce course, but the fact is that the place where sixty percent of marriages end. Most divorce settlements will involve the divvying up of pension plans, IRA, 401 (k) 's and so forth.
The wife of death or continued disease can have serious implications for planning and retirement. It is very important to set up any retirement plan should indicate that the surviving spouse has full rights.
While other events can alter these pension plans are those that can have the greatest impact on pensions. Nobody should plan their retirement without thinking about scenarios
If you are looking for more information on
retirement or
retirement planning please visit this links and you will find great
retirement plan.
Article author: ebet sanders
