So what is the impact of the Chancellor's salary sacrifice changes for employers?

23 November 2016

Today's changes will lead to increased complexity and costs for employers who want to remain competitive by offering their employees a flexible remuneration package.

Businesses will be relieved to hear that there are some concessions to the proposals originally consulted on. Exempting low emission cars from the new restrictions, in addition to pensions, childcare and cycle to work arrangements is good news for employees, especially for those who were previously encouraged by the Government to take on a low emission vehicle.  PwC research shows that pensions is the benefit most valued by workers, followed by company cars and company share schemes.

The grandfathering of all salary sacrifice arrangements will give employers more time to make any required amendments to their policies and processes and help cushion employees from unexpected tax increases.

All employers should use the time between now and April 2017 to review their current benefit arrangements, assess the cost impact and make a decision about what benefits they are going to continue to offer and which are no longer viable to offer. Employers won’t want to scrap too many employee benefits as they know it is an important factor attracting future employees.

Essentially, salary sacrifice arrangements form part of employees' terms and conditions.  Employers will therefore need to look urgently at these arrangements and the contractual promises they have made to assess whether, and how, benefits will be continued post-abolition of salary sacrifice.

Difficult issues will no doubt arise, on who will bear any increased cost in benefit provision and whether an employer has the flexibility to cease providing a benefit that has become prohibitively expensive.

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