How to make sure you and your employees see the benefit of staff benefits

The provision of staff benefits is all about staff motivation, attraction and retention. It’s important to try and develop a range of staff benefits that employees can choose from so that the package fits each of their individual needs and helps your workers feel more motivated.

Data published by HMRC in June 2017 shows that 3.69 million people received £7.63 billion worth of taxable employee benefits in 2014/15 and research has shown that workers feel more motivated when they are rewarded in this way.

Before you offer incentives in a bid to motivate and reward your workers, it is worth considering the financial implications of offering benefits-in-kind. It may be that you will be liable for national insurance contributions (NICs) on these perks and there is also the tax charge to be considered. This is something our team at Jacobs Allen Chartered Accountants and Chartered Tax Advisers can assist with.

How much will it cost you to offer staff perks?

Private health and dental insurance was the most popular taxable benefit in 2014/15 with
2.35 million workers, and in some cases their families, receiving private medical insurance.

If this is something your business is considering, you will have to cover the cost of the health insurance policy and pay class 1A (employer-only) NICs at 13.8% on the taxable value.  If you are providing a group policy, as most companies do, the costs should be split between the number of employees.

How to make the most from a company car

The second most popular taxable benefit in kind in 2014/15 was a company car with 950,000 workers in receipt of almost £4 million-worth of annual benefit on vehicles.

Company cars are taxed according to their list price, with the amount of tax you have to pay also dependent on the emission levels of the car. So, the lower the emissions, the better it is for you and your employees. The charge is capped at 37% of the list price and, as an employer, you also pay class 1A NICs on the amount charged to tax.

Employees like security of income & finances

Many people are underinsured when it comes to life insurance. In addition, very few will think about protecting their financial position by insuring for a lump sum when they become seriously ill or protecting their income if they are unable to work.

However, employers can get good group rates for these types of insurance to cover all employees and these forms of protection can be a significant motivating factor in retaining staff and being part of a tax effective profit extraction strategy. Cover can be arranged such that in many cases the insurance premium paid is not taxable on the employee.

Help cut the cost of childcare

The existing childcare voucher scheme and the government’s new tax-free childcare scheme are popular choices with working parents as they allow them to reduce the impact of nursery and other childcare fees.

You may currently be signed up for the childcare voucher scheme, which offers annual savings of up to £933 per parent. Workers could sign up between April 2011 and April 2018, provided their employer offered the scheme. Additional taxpayers who joined prior to April 2011 have been able to save up to £1,370 a year.

Even though the voucher scheme is closing to new applicants, you will still have ongoing tax, NICs and reporting obligations if you continue running the scheme.

Eventually, the scheme will be completely replaced by HMRC’s tax-free childcare scheme which was launched in April 2017. It is open to parents earning more than £120 a week (as long as neither they, nor their partner, earns more than £100,000 per annum), whether they are employees or self-employed.

Parents can open an online account and for every £8 deposited, the government will add another £2 to a maximum top-up of £2,000 for each child under 12, or £4,000 for disabled children under 17.

We can offer advice on the changes to the childcare benefits you offer your employees during a consultation with one of our team.

How do you record taxable benefits?

At the end of the tax year, you may need to inform HMRC of any taxable benefits handed out to staff over the previous 12 months. The tax due varies depending on the type of benefit, with your employee’s tax payments deducted through payroll provided you have registered their benefit-in-kind at the start of the year.

You will need to submit the P11D form to HMRC for any member of staff who received taxable expenses or benefits and summarise all staff benefit amounts on form P11D(b). This helps the Revenue calculate how much you need to pay in class 1A NICs, as well as how much PAYE is due from the employee on the benefit.

How can your staff benefit further?

There are 39 non-taxable benefits you can provide to your employees in any given financial year but each one has certain conditions you need to meet to qualify for the exemption from paying any tax or class 1A NICs.

Summer or Christmas parties which are open to all employees and cost less than £150 per head are another of the tax-free options. This £150 limit applies to all events over the course of the tax year.

Offering a mobile phone; bike and safety gear; parking at or near the workplace; canteen meals; pension contributions; a work bus and eye care are also options

A trivial benefit exemption was introduced by HMRC in April 2016, meaning the employee benefit will be tax-free as long as it:

• costs less than £50
• is not cash or a voucher that can be exchanged for cash
• is not a reward for services or in any way contractual

Usually there are no limits as to how many trivial benefits you can provide to employees, although for directors or family members who are members of staff a £300 annual limit applies.

Offering cash bonuses or the option of working flexitime are other ways you can reward the commitment of your team without getting into the realm of benefits in kind at all.

If you want to know what the most beneficial perks are for you and your employees, contact us today and speak to one of our experts.