Watch out for the small print: Embrace it, or ignore it at your peril.
The recent volcanic eruption of Eyjafjallajökull in Iceland not only led to massive travel disruption around the globe, but a forensic examination of insurance policies and small print dealing with Acts of God and weather disturbances. Not to mention EU law relating to the compensation of passengers by airlines. It is to be expected that millions were unprepared for an event that last occurred in 1821.
In the more routine world of employee benefits, there are a number of small print issues that could have explosive effects. Employers look to benefits providers to take a pragmatic approach to small print, turning it into an advantage – or at least ensuring that you are aware of its negative consequences so that you can take mitigating action.
Small print issues and headlines du jour include:
Most shopping discounts providers operate in this way. Broadly speaking, it means their businesses rely on retailers for their P&L. The knock-on effect is that fewer retailers are prepared to deal with them and when they do, employees suffer from reduced levels of discount. A good employee discounts provider will use a ‘supplier independent’ model; so instead of paying more money in order to be promoted on the benefits homepage, for example, retailers will be vying to provide the best offer in order to get exposure on the site. A win-win both for your employees, as they get the best offers promoted to them in an impartial manner, and for the employer as they see engagement with the site increase due to the great offers available.
You know the score. An offer headline with a huge discount figure and then you find there is only one product with that discount and it’s only available in green with purple spots. Many employee discounts providers will use the words ‘up to XX% off’ in their offers, in order to attract their audience and engage them with the site. The only problem is, when employees realise that this offer is nowhere near as good as it sounds in the headline, disappointment sets in and their engagement with the scheme fades. Luckily, there are providers out there who do impart real offers with credible headlines. When choosing your provider, make sure you test the site’s offers to make sure they are genuine – and not filled with hundreds of terms and conditions telling you why you won’t be getting that amount of discount at all.
“Terms and conditions apply”
Four words from which there is no escape with a shopping channel. However, to maintain employee engagement with a scheme these terms and conditions should be easy to understand and be available well before the point of purchase or commitment. Again, be sure to fully test your potential employee discounts provider’s offers so that you can see the kind of terms and conditions being used. If you see lots of ‘cannot be used with any other promotion’ or ‘only for orders made on a Tuesday’ then it’s fair to say that your employees are unlikely to be bowled over with the ‘offer’ available. More satisfactory would be a host of offers that are easily accessible and can be applied on top of in- store promotions, sales prices and managers’ specials.
“Open seven days a week and Bank Holidays”
A headline that you won’t see often when looking into the support offered by many employee benefits providers. Surely a Helpdesk is less helpful if you can only contact them between 9am and 5pm, Monday to Friday – when the large majority of the working population is, sure enough, working and not shopping online or sorting out their childcare payments? Find an employee benefits provider that has Helpdesk opening hours to suit your employees, otherwise there may as well not be a Helpdesk for them at all.
In December 2009, HMRC clarified its interpretation of cycle to work rules. Previously, the tax-efficient cycle to work scheme was ‘generally available’ i.e. employees at or near National Minimum Wage and under 18s were excluded. Look for a provider that can offer you a fully compliant scheme that embraces these employee groups, backed up by an indemnity sourced from a credible tax advisor and the bike retailer itself to give you peace of mind.
“Consumer Credit Act 1974″
According to this, making cycle to work ‘available generally’ creates a legal risk in respect of employees under 18, i.e. ‘a person commits an offence who, with a view to financial gain, sends to a minor any document inviting him to obtain goods (e.g. cycle to work) on credit or hire’. A good cycle to work provider will ensure you avoid that risk in a fully compliant manner.
“5 April 2011″
Take note of this date. If you run a childcare voucher scheme, higher rate taxpayers need to register before time runs out to maximise their benefit.
Does your childcare voucher provider pass the ‘leave on the train test?’ The past few years have seen too many news stories of organisations losing sensitive data in careless ways, creating widespread security paranoia for anyone who had ever had dealings with those organisations. Employee benefits providers are nominated by an employer to be in a position of trust. The employee in turn is placing trust in their employer to choose a provider that takes extra special care over sensitive details such as childcare information and use the most advanced, secure processes possible to keep them safe and away from prying eyes.
If your employee benefits provider is not accredited with the strict ISO 27001 Information Security standard, you should seriously think about finding one that is. In a world where hacking and identity theft has become all too common, there really is no excuse for not putting your employees’ details in safe hands.
“Recovery of VAT on retail vouchers”
The EU Advocate General agrees with HMRC that VAT on vouchers purchased is deductible but has a corresponding output VAT liability.
The Advocate General’s Opinion, which the European Court will consider before it gives a final ruling later this year, acknowledged that the European Commission may want to consider whether the UK rules are in line with European VAT law. It was also stated employers should account for VAT when they provide retail vouchers to staff as part of a salary sacrifice scheme.
Giles Salmond, a director in the tax dispute resolution group at Deloitte, said:
“This is an important step in clarifying how the complex VAT rules on vouchers should be applied. If the Advocate General’s Opinion is followed, businesses may have to revisit how they deal with retail vouchers as part of salary sacrifice schemes. Although we will have to wait for the final judgment of the European Court before the position is certain, it is likely that the VAT treatment of vouchers will have to be considered by legislators possibly at a Community level”.
If you have vouchers in a salary sacrifice scheme, it may be best to avoid the uncertainty and consider routing employees via voluntary benefits. Your employees won’t have to commit up to a year in advance and can choose what they want when they want.