Salary sacrifice: How to limit financial risk
With the opportunity to provide a cost neutral employee benefit, it’s no surprise that salary sacrifice has become an increasingly popular option for many businesses, especially as a way of funding high-value benefits like company cars, explains Mike Belcher.
As appealing as the scheme may seem however, without a well-developed, forward-thinking approach to management and reporting it can easily turn into a costly mistake.
Once an employee benefit has been given, it generally can’t be taken away again even if circumstances change – leaving the employer out of pocket as it continues to foot the bill. This means it is absolutely vital for a salary sacrifice scheme to plan ahead and be mapped out well in advance, with contingency plans in place to counter any changes for individual employees and the business as a whole.
Salary sacrifice schemes for company cars are often monitored and reported on in the same manner as standard company car fleets. This commonly overlooks the need for forecasting and forward-thinking analysis. Salary sacrifice is still a relatively new method of fleet funding, so there are few schemes that have been around long enough to see long-term cost results.