Haven’t we all got enough to do? Benefits by payroll: Why it’s worth asking your payroll department to get involved
Few employees in any HR or internal service department are sitting behind their desks wondering how to fill the day. Most staff are very aware of pressures on headcount, which brings pressure to individuals to do more with less. Getting through what has to be done can be difficult enough without asking for extra-curricular activities.
And working in payroll is not always the most appreciated function. Satisfied employees don’t drop by the payroll office every payday and say “Thanks very much, I got paid the right amount on time again”. They will jump on the phone or rush down a corridor if they didn’t get paid the right amount on time, and may often see this as payroll’s fault even – especially – when it’s not. So maybe payroll departments across the nation have got a good set of reasons to just pay people on time every payday and stick with that, not worry about adding a set of benefits that need payroll involvement. Except that there are some very good reasons why they absolutely should get more involved in benefits – many of which require surprisingly little effort and expense.
GOOD REASONS FOR INTRODUCING OR INCREASING PAYROLL-LED BENEFITS
1. The admin isn’t as bad as you think
Tax efficient salary sacrifice benefits, such as pensions, childcare vouchers and cycle to work are well-established and the majority of employers do offer one or more of these. As technology has enabled easier administration, the burden on payroll departments has lifted. Recent clarifications from HMRC on legislation has given employers much-needed certainty and confidence around scheme rules and this, together with the imperative to get eligible higher rate taxpayers signed up now to childcare vouchers, has resulted in a lot of activity in these benefits.
A welcome by-product of the need to make salary sacrifice more efficient and payroll-friendly is the advent of benefits by payroll deduction (so from net, not gross, pay). Once available only within a full, and usually very expensive, flex scheme, benefits by payroll are now accessible – with the help of payroll – to all employees as voluntary benefits. Secure, web-based control panels mean that payroll can administer non-core benefits easily.
2. These benefits make a real difference to employees’ disposable income
It’s long been clear that tax efficient salary sacrifice benefits increase an employee’s take-home pay, and those that use childcare vouchers, for example, were very vocal and successful last year in defending the scheme from proposed government action. The challenge for employers is to harness the power of their childcare voucher provider’s expertise and resources to persuade as many eligible employees as possible to sign up; too many parents still place childcare vouchers in the ‘too difficult’ or ‘not worth it’ or ‘don’t understand it’ category.
As for other, more universally relevant benefits available by payroll, discounted gym memberships or retail vouchers make a real and positive impact on employees’ pay.
3. A range of benefits is a good thing
Good employers look to maximise the range of cost-effective benefits they can provide to employees. It enhances the employer brand. A rounded portfolio of payroll-led benefits turns an uninspiring benefits scheme into an interesting one, leading to increased engagement across the range by cross- pollenation – an employee goes to join cycle to work and realises that there’s a fantastic deal to be had on gym membership. And if, as an employer, you can enable employees to save, especially in times of rising inflation and downward pressure on wages, surely you should give it your best shot? Nice news can be thin on the ground, so make the most of what you’ve got.
4. Savings on your pay bill
Childcare vouchers and cycle to work save employer’s NI. And if you have a contributory pension scheme but aren’t already running it through salary sacrifice, that should go right to the very top of your to-do list. A holiday purchase scheme saves on the direct cost of wages.
BENEFITS AVAILABLE FROM NET PAY
Start with Payroll Giving, or Give As You Earn (GAYE). This enables employees to donate to charity regularly, directly from their wages. An employee can choose the charity, make a donation affordable to them and the charity gets the benefit of automatically reclaiming the tax, making the donation worth even more.
Supported by HMRC, there’s lots of help available to set up a scheme and once in place, it runs itself. The benefit to the employee is that if they give £8 a month, the charity gets £10, and it supports your CSR agenda.
The majority of employees go online or ring up to buy discounted retail vouchers through their voluntary benefits scheme as and when they want to make a purchase in a particular store, or they use instant discounts via SMS or reloadable cards. The big advantage of enabling employees to purchase by payroll means that John Lewis and Waitrose vouchers are available. Discounts on vouchers for JL are only available where the employee signs up for at least 12 months – and the payment is made through payroll. If your employee population are regular JL or Waitrose customers, then this is a great benefit to have.
Most organisations look to support and invest in the health and wellbeing of their employees. GymFlex lets employees have the advantage of an annual gym membership fee but pay it monthly, from payroll. The savings are significant, frequently around 40% and many employees can’t afford to front the cost of annual membership as an individual. With GymFlex, the employer pays the annual membership fee and the individual employee pays it back over 12 months via payroll; it is like cycle to work except it is not tax efficient. But it will appeal to a much wider audience of employees. The range of participating gyms is excellent. Exclusive to Asperity’s Reward Gateway, GymFlex is operated by payroll through the same online control panel as salary sacrifice and other payroll benefits. It’s easy and popular.
And what about holiday trading? Control over your own time is a well-recognised alleviator of stress and enabling employees to buy extra holiday means they can plan for big trips overseas, caring responsibilities or just time off. Different from unpaid leave, it allows the cost of the extra days holiday to be smoothed across the year and lets employees and managers plan rather than face ad hoc, possibly disruptive means of taking time off. Employees aren’t paid for these extra days and so there is a saving on wages costs. Dorset County Council is consulting on taking this one step further and forcing employees to take 12 days unpaid leave in 2012 and again in 2013 to save money on its wage bill. More positively, Hertfordshire-based engineering firm McNicholas is on to a winner with its holiday trading scheme; its annual survey found buying and selling leave was the most popular benefit². If costs are an issue, employers can restrict the benefit to employees buying holiday, not allowing the sale of extra days.
So if you can get your payroll department onside, you can enhance your benefits scheme at very little, if any, cost using your discounts service as the employee-facing platform and a dedicated admin console for the pay professionals.
1 Except in the case of a life event