Cost Of Living

Richardson Swift director Calvin Healy reviews what steps business owners can take to help staff survive the current financial storm without impacting profit.

UK inflation rate rose by over 9% in the year leading up to May 2022. That means everything’s costing more and salaries are unable to keep up.

Financial pressures are coming from every direction and research shows that the stress staff are feeling as they worry about their ability to pay the bills and put food on the table, may also impact their productivity in the workplace.

Of course, we’d all like a pay rise but putting up salaries to raise staff pay to keep pace with inflation is simply not possible for most businesses.

The Money and Pensions Service provide a useful definition of financial wellbeing:

“Knowing that you can pay the bills today, can deal with the unexpected, and are on track for a healthy financial future. In short: feeling confident and empowered about your money.”

So, as an employer, what benefits could you introduce to support your staff’s health and financial wellbeing without creating adverse effects on your own bottom line?

The team at RS have put together some ideas on employee benefits, which are designed to assist staff members’ financial health without negative effects for the employer.

The financial stress caused by the rise in everyday prices has had a huge impact on staff’s physical and mental wellbeing. Research from the British Association for Counselling and Psychotherapy 2022 revealed:

44% of employees are anxious/nervous about being able to pay bills

16% said they are losing sleep due to money worries

22% said they have started cutting back on activities helping their mental health e.g., gym memberships or art classes

Employee Assistance Programmes (EAPs)

Stress caused by concerns over making ends meet could seriously affect how well your staff perform as well as causing issues around staff turnover and sick leave that could end up costing your business money.

The good news is that services provided by employers via EAPs, such as debt and mental health counselling, are no longer seen as taxable benefits. So, these services can be provided free for the employee without having any impact on they tax they pay.

Not all services provided via EAPs are exempt, however, financial, legal or tax advice for instance would still be considered a taxable benefit, so it would be wise to check with your accountant at the outset.

Discount Schemes

Subscribing to an employee discount scheme can be a great way to help employees’ pay packets go further and increase their overall financial well-being. And as long as the subscription per employee is under £50 per year the benefit is tax exempt.

Typically, companies such as Perkbox, charge around £4 per employee per month, so it is possible to keep this cost below the threshold.

These schemes are essentially digital platforms that have negotiated bulk discounts for their members. Typically, employees will be able to get discounts for everything from gym membership to their morning coffee. The exact amount they save depends on the quality of the scheme, and how much they use it, but discounts of up to 20% are not unusual, plus occasional special offers on big ticket items like holidays and technology as well as free offers.

They’re especially effective when they offer discounts for everyday essentials, like discounts at the likes of M&S and Sainsbury’s.

It might also be worth looking into teaming up with local businesses up to offer staff discounts to those employed by workplaces in the same geographic area. This is seen as a way of capturing local footfall and is particularly effective for businesses such as gyms, retail stores and restaurants. But even if your business does not fall into these categories, you can benefit your employees by getting involved, and potentially attract new customers from the local area. Local traders’ associations and the Chamber of Commerce are a good place to start to get assistance setting up co-operation agreements or just finding out about those already running.

Random Perks

Provide staff with random gifts throughout the year of up to £50 a time, as long as these gifts are not made on a regular basis. If you want to make your staff feel appreciated, you could pay for a treat that they might not easily be able to afford for themselves at the moment, such as a voucher for Deliveroo or Just Eat or cinema tickets.

Flexible Working

With fuel prices soaring, offering staff the option to work from home could be a really big help to those who are struggling to make ends meet.

Employee Loans

You could choose to help staff with travel-to-work costs such as train season tickets via an interest-free loan, paid back via deductions from salary. This could enable employees to take advantage of discounts on advance purchase and so help them cut their overall costs of travel. These loans are not considered to be taxable benefits as long as they are below £10,000.

Salary Sacrifice Schemes

A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, in return for a non-cash benefit. The arrangement is based on gross salary.

These schemes can be used to fund a number of benefits, such as company cars, but they work best when applied to pension contributions and cycle to work schemes because in these cases the amount exchanged is exempt from tax and National Insurance (NI) contributions. This potentially benefits both the business and employees. There are also advantages to using salary sacrifice for employees planning to get an electric car as though these are not tax exempt, they do attract NI and tax savings.

Pension contributions

Under salary sacrifice, the employee could reduce their gross earnings by an amount equal to their pension contributions. And in exchange, the employer then agrees to pay the total pension contribution. This means the employee continues to maintain their full pension contribution but can reduce the amount NI for both the employee and employer.

Recent analysis by the pension provider Scottish Widows estimated that a UK employer with 100 staff on salaries of £30,000 could immediately save an estimated £20,7000 overall in NI contributions each year by implementing a salary exchange agreement.

So, this could be a great way to increase take-home pay for employees and reduce your own NI burden.

Of course, it is also possible for employees can also opt to suspend pension payments in order to increase take home pay.

Cycle to work schemes

Typically, this takes the form of a hire agreement between the employer and the employee with the salary sacrifice covering the ‘rental’ costs. The scheme can be used to pay for both a bike and safety equipment. Again, like pension contributions, the salary exchanged under the scheme is exempt from tax and NI contributions both for the employee and employer.

With all these schemes the tax law surrounding them is not always straightforward and, as always, it is recommended you take professional advice before making them available. But with relatively little complexity all these schemes and suggestions can be implemented in a reasonably short-time frame to alleviate some of the cost-of-living issues we all now face.