In the current economic climate many companies are focussed on reducing headcount as a means of cutting costs. But it is important, now more than ever before, to consider the needs and aspirations of those employees you want to retain, and who you will rely upon to stabilise, and ultimately grow your business.
These key employees will clearly want reassurance that their jobs are safe, but they will also look for appropriate forms of reward and incentivisation so they can share in future growth and prosperity.
We are able to provide advice and support across a range of employee reward issues, and would be pleased to discuss any of our following issues with you.
1. Salary sacrifice
In an effort to reduce costs, many companies have introduced salary sacrifice arrangements during the last decade. But increasingly, companies now realise the non-financial advantages of expanding the range of benefits available to employees. Flexible benefits might once have been the preserve of large employers, but government sponsorship, via a range of tax advantaged benefits, and technological advances mean that even small employers can now offer flexibility and choice to their employees.
We would be pleased to assist you to introduce a new scheme or to broaden your benefit options, whilst ensuring that any new arrangement complies fully with HMRC expectations concerning salary sacrifice. For those already operating salary sacrifice, we would be pleased to carry out an audit to ensure that income tax and NI relief have been properly applied.
2. Company cars
Thirty years ago the concept of the ‘perk’ arose in response to high levels of personal taxation but low taxation of benefits. Although not exactly reproduced today, we can witness similar conditions for the ‘greenest’ cars.
Introducing more cars to your fleet could therefore be a win-win strategy, especially for employees who pay tax at the higher rate but who choose a company car with a scale charge as low as 10%. We would be pleased to help you consider the benefits available fro
- offering second, or third cars in lieu of salary increases;
- encouraging those taking cash alternatives back into the car scheme; and
- introducing a company car salary sacrifice arrangement.
Whilst expanding your car fleet could deliver significant employee benefits, as well as reducing total remuneration costs, it’s important not to lose sight of other cost reduction opportunities available by restructuring your current fleet arrangements.
Since 2002 the government has increasingly sought to influence behaviour by linking the taxation of company cars to their CO2 emissions. The latest change in legislation came in to force in April 2009, with capital allowances and the expensive car leasing disallowance now linked to CO2 emissions.
As a result of these changes to company car taxation, it is now generally accepted that whole-life-cost is the most sensible way of choosing the most cost efficient company cars. Adopting such an approach and instigating a comprehensive review of business mileage, could generate significant annual savings without adversely effecting the benefit for the employee; in many cases it’s possible to enhance the employee benefit and still save costs!
We would be delighted to work with you to restructure your fleet and reduce business mileage by as much as 20%. We are also able to implement more cost effective means of remunerating those who still choose to take cash rather than a company car, and to reduce the significant costs associated with the provision of free private fuel to company car drivers.
3. Share schemes
In the late 1990s, in order to recruit and motivate high calibre employees, many newly formed dot com companies used equity incentives as a means of circumventing their cash constraints. More recently, start-up biotech and pharmaceutical companies used a similar tactic to ensure they properly rewarded those responsible for innovation and growth during the, often long, period before revenue could be generated.
As a response to the credit crunch it’s conceivable that many more companies will need to adopt a more innovative approach to employee incentivisation. Properly structured, well managed share schemes should prove invaluable to those companies that need to manage cash now, but retain the key staff who will drive the business forward beyond the recession. We are able to help you navigate through the wide range of share schemes available, and choose the right plan to support your strategic objectives.
We are also able to advise those of you that already operate share schemes, but who may need assistance to restructure awards that may now be underwater, and potentially of little value to the employees you would like to retain. Revitalising schemes and thereby re-motivating key employees could be critical to the future success of your business.
Finally, complying with HMRC’s share scheme reporting obligations is a requirement of any company that wishes to implement, or already operates one or more share schemes. There are a multitude of annual reporting obligations to be met, as well as the need to determine when PAYE and NI should be applied, and whether corporation tax relief might be available to the employing company. Our share schemes specialist has a wealth of experience on all these matters, as well as preparing share valuations for both tax and accounting purposes.
We are well placed to advise on all aspects of employee reward, and would be pleased to meet you, on a no obligation basis, to discuss the issues facing your business. For further information, or to arrange a meeting please call or e-mail Paul Coombes.
