Employee benefits: a win-win for all
Many of your employees will have parental or caring responsibilities, so it makes sense to offer them a benefits package that supports their work-life balance.
If you provide your employees with a range of social benefits focused on childcare, eldercare and health care, then you should expect some improvements in productivity in return. You might decide to make use of the expertise of a specialist benefits provider; doing so should lighten your administrative burden and give your employees access to a wider choice of benefits.
You can, of course, help employees with both childcare and eldercare by offering flexible working and working from home, and neither will result in any tax cost. You could even pay a tax-free amount of up to £4 a week towards the additional costs that an employee incurs as a result of working at home.
Employers normally provide employees with financial assistance with childcare through the use of tax-free childcare vouchers, with each parent able to receive up to £2,916 annually. Childcare vouchers are usually offered under a salary sacrifice arrangement, but that’s not essential. With salary sacrifice, an employee gives up a portion of taxable salary in return for tax-free vouchers, saving both tax and NICs.
The childcare voucher scheme will no longer be available to new entrants from early 2017, so now could be a good time to be bringing people on board. You can also provide employees with tax-free nursery or child-minding facilities, but any other childcare support will be taxed. Unfortunately, the same applies to any eldercare support given to employees caring for parents.
Health and fitness
Employees can make use of a company gym without any tax implications, whether it’s provided free or at a subsidised price. You can also provide healthy food in a company canteen. However, if you pay for a fitness club membership or provide a dining card, there are likely to be tax implications. Cycling to work can be encouraged by providing employees with tax-free bicycles and safety equipment, and an employee can be given the opportunity to purchase their bicycle at a fair market value following the end of the loan period.
You can provide tax-free annual health checks, health counselling and eye tests (where and employee is required to use a computer), but medical insurance and medical treatment are normally taxable. There is, however, an annual exemption of up to £500 if you pay for medical treatment to help an employee return to work following sickness or injury.
Be warned that tax-free benefits are generally subject to strict conditions and often have to be available to your entire workforce for the tax-free status to apply.
On the subject of benefits, there are a couple of changes on the horizon that will simplify reporting requirements. Currently, you are required to report routine reimbursed business expenses on P11Ds unless you obtain a dispensation from HM Revenue & Customs. From 6 April 2016, dispensations will be replaced by an automatic exemption, provided the expenses are tax deductible.
Even better, from the same date it will be possible to put taxable benefits through your payroll on a current basis in much the same way as salary. You can actually do this already on an informal basis, but it is still necessary to report benefits. In future, there will be no separate reporting of payrolled benefits. As far as employees are concerned, the big advantage of payrolling will be that they will not have to pay tax on several years of benefit all at the same time, which is often the case with the present delayed reporting basis.
Please get in touch if you want to discuss any aspect of your current benefits package, or to find out more about upcoming changes.
T: 020 7376 9333