Authored by Caroline Jones, tax director with extensive knowledge of employment tax across private, public and third sector organisations and Vicky Robertson, tax principal and healthcare specialist, working with elderly and specialist care businesses to provide joined up tax advice across the spectrum of taxes of BDO (www.bdo.co.uk)
In this time of austerity many employers, including those in the care industry, are struggling to attract and retain staff. Against this backdrop many employers are looking at ways in which they can support and reward staff without creating either huge costs for themselves or large tax bills for their employees.
There are many ways in which to help staff, which add value and at the same time give the employer a competitive advantage in the market.
Understanding what could be available as well as the possible tax consequences is a good starting point for employers.
Regardless of the amounts involve employers should remember that d giving employees cash will always give rise to a PAYE and Class 1 NIC liability.
This means that for many employers they must be innovative in their thinking. Against that backdrop we consider what the possibilities are and how this may have an impact for employees. These are just some of the ideas that employers may wish to consider. There are potentially more areas for consideration but currently these are amongst the most popular.
1. Festive awards
Topical now, festive awards can be provided tax-free if they meet the criteria for the trivial benefits exemption. To meet the criteria the award must:
• Not be performance related.
• Not be a contractual entitlement
• Be non-cash
• Not exceed £50 in value (including VAT)
Multiple gifts may be provided tax-free if each gift meets the criteria for the trivial exemption. For example, a gift at Christmas, Easter and summer.
You may be able to provide discounts to staff without there being a taxable benefit in kind. The sorts of things covered by this would be corporate discounts at gyms, food providers and retailers. If there is no cost to the employer of obtaining discounts for staff, there is no taxable benefit in kind.
3. Welfare counselling
In certain circumstances welfare counselling provided by an employer for its employees is exempt from tax.
The exemption is tightly drawn and not all types of welfare counselling should be exempted from tax. Examples of exempt counselling include:
• problems at work
• managing finances
• alcohol and other drug dependency
• career concerns
4. Free staff meals or discounted meals on site
For some employers it has become important to ensure that staff are getting at least one meal a day be that breakfast, lunch or dinner. The provision of free meals to staff could be tax-free if the following conditions are met:
• Meals are provided on site
• Free or discounted meals are available to all staff on that site
• Meals are provided on a reasonable scale
If this is something you wish to consider it would be worth confirming that the way in which meals are provided meets the exemption criteria.
5. Interest free loans
Employees may have short term money issues. To avoid the need for employees to enter into pay day loans some employers are offering interest free short-term loans. Employers can make interest free loans of up to £10,000 without giving rise to a benefit in kind. However, if any part of the loan is written off, no matter how small, a taxable benefit arises and Class 1 NIC is due. The granting of loans, does of course, mean that there are additional cash flow issues depending on the amount of time over which an employee is allowed to pay back the outstanding balance so any desire to help employees in this way must be balanced against the cost and administration associated with the granting employee loans.
6. Salary sacrifice arrangements – electric vehicles etc
Salary sacrifice arrangements can help make benefits more affordable for employees be that pension salary sacrifice, cycle to work and electric vehicles. Such benefits can be very attractive for staff and employers alike, but caution must be taken with any salary sacrifice arrangements as the amount sacrificed must be deducted from salary when considering whether National Minimum Wage, (“NMW”) has been paid. This is likely to mean salary sacrifice arrangements are not appropriate for many care home workers. They may however be attractive for home manages or head office staff although it remains vital that employers continually assess salary including deductions, salary sacrifice etc to ensure that they are paying at least NMW to their employees.
As described there may be opportunities for you to offer additional benefits to support and reward your employees, but caution must be exercised if these benefits are to be provided tax-free.