Are your clients missing out on Salary Exchange?
Take more value to your clients. Read below how.
Help your clients and their employees through the current financial challenges.
It's no secret that the COVID-19 pandemic has hit businesses and individuals hard. Doubtless, your clients have been searching for ways to cut costs and streamline their businesses.
For many of your clients' employees, there have been challenges adapting to the isolation of remote working whilst facing growing financial uncertainty. Like any responsible business partner, you've helped where you can, advising on furloughing, cost reduction opportunities and how to deal with the taxman.
But is there another way that you could help your clients and their staff, perhaps one you didn't think relevant to small and medium-sized businesses?
Salary Exchange (aka Salary Sacrifice) has been popular with larger employers as a way to generate savings by reducing National Insurance liabilities.
Until now, it has been uneconomic for smaller businesses to roll out Salary Exchange. Implementation often means engaging financial advisers and employment law specialists, additional costs that no small business can swallow - especially in the present climate.
That isn't all. Most small and medium-sized enterprises (SMEs) operate their workplace pension on a "Qualifying Earnings" basis - statutory contribution levels are calculated on a banded basis on the employee's total earnings, using lower and upper salary thresholds. (For 2020/21, the annual thresholds are £6,240 and £50,000 respectively.) For staff that have variable income that lies between the two thresholds, the Salary Exchange amount applicable must be calculated every pay period. No surprises that this is beyond the current capabilities of most payroll systems.
This is a shame as Salary Exchange can genuinely benefit both employer and employee. Employers can reduce their secondary National Insurance contributions and at the same time, employees can increase their take-home pay, all with little downside. Or both employer and employee can route those savings into the workplace pension, delivering better long-term financial security for staff.
Then how can I help my SME clients get more now, have more later?
As you might expect, the answer lies in automation.
For the last 8 years, workplace pension specialist Husky has been helping employers choose the right pension for their business and get better outcomes for their employees through lower management charges.
Husky is delivered through a Software-as-a-Service model and its systems ensure that employers have confidence that their workplace pension is fully compliant with the legislation whilst all the related administration is taken care of.
More recently though, Husky has focused its energies on the problem of making Salary Exchange viable for small and medium-sized employers. Husky has developed a free mobile app for employees, Husky for Everyone (H4E), that lets them see what savings can be enjoyed by exchanging part of their salary. (The app also provides lots of other helpful information, including details of their pension, record of their contributions, historical scheme performance data and responsible investment scores.)
Using the app, an employee can review frequently asked questions and then request their employer to "turn on" Salary Exchange for them, which starts the process of amending the employee's contract of employment and informing HR/payroll.
Once enabled, Husky's systems automatically calculate the required level of salary reduction based on each pay period's pay data, regardless of the earnings basis in use, and then verifies that the correct employer contributions have been made. (There is typically no employee contribution with Salary Exchange.)
Ultimately control is in the hands of the employer; they must enable Salary Exchange for their business on the Husky platform before it is shown in the app. They also get to decide, for each employee if they wish, what happens to the employer's National Insurance savings - they can choose to keep all those savings in the business (potentially in part to cover Husky's low monthly fee). Or they can choose to route some or all of the savings into the employee's pension - essentially a way to enhance employee remuneration without any tax disadvantages.
It seems a little too good to be true...
As with most good things in life, there are pitfalls to be aware of. In particular, benefits that are tied to salary levels can be lost or reduced when salary is reduced. This includes statutory benefits such as maternity and paternity pay, but salary reductions can also affect applications for credit such as mortgages and loans. Husky's support materials for employers and employees spell out these implications to help with the decision process.
Interested in learning more about how Salary Exchange can help your clients in these challenging times?
Contact Husky on 0800 044 8114 or at firstname.lastname@example.org.
Husky works with over 100 accountancy and advisory partners to support them with their clients’ workplace pension needs. Working with Husky delivers peace of mind that your clients remain fully compliant with the legislation, helping strengthen your business relationship by bringing value and potentially saving them and their employees money.
Husky ensures that their employees are getting a good deal, along with the opportunity to be more engaged in their own long-term financial wellbeing. Husky’s advanced tools support the payroll process and help minimise the administrative burden of providing and servicing workplace pension schemes.
Husky’s services to accountants are provided free of charge; Husky’s services are paid for by employers through a small monthly fee.