Whilst saving for retirement and providing life insurance for employees’ families are important benefits, given the current cost of living crisis, providing benefits that have a more immediate impact for employees can add value to your overall employee benefits strategy.
Salary exchange is a great way for employers to improve their employee benefits package without increasing their total employment costs.
What is salary exchange?
Salary exchange is often used in connection with pension contributions. It is an agreement between the employer and their employees where the employee agrees to exchange part of their salary for an increased employer contribution.
The main advantage is that both the employer and employees save on National Insurance contributions. The NI savings can be used to increase the contributions paid into the employees’ pension plans leading to a bigger retirement fund. Alternatively, the NI savings can be used to both increase the employees take home pay and potentially add benefits that have a more immediate advantage to the employees.
What is a Cash Plan?
A Cash Plan is an insurance policy that can help cover the cost of everyday healthcare, such as visit to the dentist, opticians, physiotherapy, chiropody or buying prescription medication, by reimbursing an individual for some or all the costs.
The Cash Plan works on the basis that the employee pays for their treatment upfront and then sends the receipt to the insurer (many of which use mobile phone apps) who then reimburse the cost (up to the plan limit) within a week/10 days.
It is also worth noting that several Cash Plans provide access for employees to extra benefits, such as virtual GPs, stress/counselling helplines and retail discount schemes.
There are a range of alternative policies available with different levels of benefits, however the premiums can be very competitive with plans starting from £1.00 per week.
By combining the use of salary exchange on the staff pension scheme with a Cash Plan it is possible to increase your employees’ net take home pay and add a benefit that offers an immediate saving to your employees without increasing your overall employment cost.
If you would like to discuss the options for using salary exchange, want more information on Cash Plans or wish to review your employee benefits strategy, then please contact me.
Please note that this article should not be construed as a personal recommendation and no action should be taken without seeking further formal advice.
Salary sacrifice can affect entitlement to certain benefits, so is not suitable for everyone.