A GUIDE TO SALARY SMART FOR EMPLOYERS 25+

Transcription

1 A GUIDE TO SALARY SMART FOR EMPLOYERS 25+

2 Introducing Salary Smart Salary Smart is an arrangement where an employee gives up part of their future earnings or bonus in exchange for a non-cash benefit. As the salary is being exchanged rather than paid from the gross amount, the employee does not pay Income Tax or National Insurance Contributions ( NICs ) on the exchanged amount. In addition, an employer doesn t pay NICs on the amount of salary exchanged either. The exchanged amount can then be used to provide the employee with a benefit, in this case a company car. An employer cost neutral or cost saving benefit Each scheme is designed to meet the individual needs of the employer. An employer has the option of either passing the full employer Class 1A NIC s savings to the employee within the monthly salary exchange amount or retaining the savings. Importantly employer administration is avoided since all processes and reporting is fully automated and outsourced via our web-based self service portal. Salary Smart is a tax efficient method for both employers and employees to reduce their carbon footprint Employers have the option to retain the NIC savings. Typical annual employer savings being circa 100,000 for every 200 employees participating in this benefit. Some customers:-

3 Simple, hassle-free motoring Employer Key Benefits & Features Enhances employee benefits package Attractive key employee retention motivator Insurance includes business travel Encourages low Co2 cars to support green credentials Administration fully outsourced Generates national Insurance savings Helps meet duty of care requirements Employer lease payments cease if employee leaves No employer risk for unpaid leave events Web based solution reducing administration Cash-flow neutral - monthly to match employee payroll deduction frequency Business mileage reimbursement savings for cash allowance drivers

4 An Employer Risk Free Benefit Risk Event Risk Mitigation Unpaid Leave Events (Maternity, Paternity, Adoption, Sickness) Employee Voluntary Leaver End of lease contract damage buffer Credit back system on finance rentals (up to 9 months of statutory pay event) upon employee returning to work. Nil risk - Employer lease payments cease if employee leaves and car is returned. To cover non insurance incidental damages (dents, scratches, scuffs, rips, etc.) Eligible Employees Unlike other benefits such as cycle to work and child care vouchers, an employer is not legally required to offer the benefit to all employees and can exclude certain segments of the employee population where perhaps due to type of role, employee turnover rates are higher than other areas of the organisation.

5 Key Employee Benefits. Brand new cars delivered to employees anywhere in the UK. Employees benefit from our corporate buying terms. No deposits or set up fees. Fixed budgeting Fully inclusive of supply, servicing, maintenance repairs, tyres, European RAC Cover, road tax, fully comprehensive insurance (incl. spouse, business travel) fixed for the term (usually 2 or 3yrs). Just add fuel! No credit agreement or finance checks. A tax efficient way of acquiring a new car as the deduction is from gross salary VAT Efficient VAT on the purchase price is fully recovered by Salary Smart. Also, VAT is recovered by the employer on any servicing, maintenance & tyres. Service Assist - Collection and return service for repair and servicing. Avoids employee inconvenience & downtime of having to take the car to the garage. Access to over 5,000 car makes, models and specifications to choose from. Easy to use self service web portal supported by dedicated telephone and support, assisting employees every step of the way. Employees can choose up to 3 cars. Up to 2 further named drivers can be included on the insurance policy which can include children as long as they reside at the same address. Intangible savings in the time, money and hassle often involved in running a car. Employee tax savings. Standard income tax rate employee example:- Employee is a basic rate tax payer earning 24,000 a year. Employee agrees to a salary exchange for a new Citroen DS3 Hatchback 1.2 VTi Dsign 3dr Manual. The Salary Smart amount includes all routine servicing, repairs, tyres, MOT and fully comprehensive insurance. P11d Value of 12,645 with Co2 104g/km. Higher income tax rate employee example:- Employee is a higher rate tax payer earning 48,000 a year. Employee agrees to a Salary Smart exchange for a new Citroen DS3 Hatchback 1.2 VTi Dsign 3dr Manual. The Salary Smart amount includes all routine servicing, repairs, tyres, MOT and fully comprehensive insurance. P11d Value of 12,645 with Co2 104g/km. Tax year Before After Tax year Before After 2013/ /14 Monthly Earning 2,000 2,000 Salary Smart n/a Employee Income Tax Monthly Earning 4,000 4,000 Salary Smart n/a Employee Income Tax Employee NIC s Employee NIC s Benefit in Kind n/a - 25 Net earnings after tax and NI 1,594 1,414 Benefit in Kind n/a - 51 Net earnings after tax & NI 2,900 2,717 Net Salary Smart n/a 180 Net Salary Smart n/a 183 Both the above examples assume that the employee: Has a personal allowance of 9,440 a year (so they pay tax on any amount earned above the allowance) Pay NICs on any amount earned over 9,440, this is the primary earnings threshold for tax year 2013/14. Please note: This assumes the NIC rate for employees is 12% (standard rate tax payer) and 2% (higher rate tax payer). The above are indicative examples only.

6 A robust, structured approach Policy Creation Define and agree scope Identify & agree policy issues Identify and agree eligible employee population Identify and agree key stakeholders 2. Planning & Design Initial Scheme Design Review and Feedback Finalise Scheme Design Develop requirements and recommendations Employer approved sign off 3. Launch Scheme Multi on site employee road shows Management seminars Electronic and Postal marketing Telephone and Information Desk

7 Salary Smart is a comprehensive outsourced solution that incorporates everything an organisation needs to operate a successful car salary sacrifice scheme. We have a proven track record of implementing and managing car salary sacrifice arrangements across private, public and not for profit sectors. 4. Automated Car Order Secure registration Easy On line self-service employee quotations Fully automated car approval and order process Fully automated employment contract variation Informative welcome packs with each car delivery 5. On-Going Dedicated Support One call telephone number for servicing, repair, breakdown and tyres Text servicing reminders Continual support via telephone or Dedicated account manager Employer Benefits Branded Web Portal Promotes employee loyalty & retention No employer cost Administration fully outsourced Day to day employee helpdesk Supports carbon footprint Risk mitigation for leaver events Risk mitigation for unpaid leave events Employee self service via web portal Generates class 1A NIC savings

8 Frequently asked questions On what basis is the car provided to the employee? An employer enters into an agreement with our provider who are supplies and manages cars ordered under a salary sacrifice arrangement. When an employee has chosen a car, the employer enters into a lease agreement for the car and will then provide it to the employee under the salary sacrifice arrangement. The car is a company car for tax purposes and will be treated as a benefit in kind. Are all employees entitled to this benefit? No, unlike other benefits such as cycle to work and child care vouchers the employer is able to choose segments of the employee base it wishes to offer this benefit to, defined as eligible employees. What s the general definition of eligible employees? Usually eligible employees are defined as being:- Full time Aged 21 and over A minimum 2 years employment with their employer Possess a full driving licence Are there any employer costs? No, the scheme is designed to be either employer cost neutral or cost saving. What kind of savings can an employer make? An employee s pre-tax salary will be lower. This results in a reduction in employer national insurance contributions. Typical employer national insurance contribution savings being:- * A Salary Smart car attracts company car Employer Class 1A NIC on the Benefit in Kind. However, this amount is recompensed within the employees gross salary exchange amount when it is calculated. As a result an employer can chose to reinvest part or all of employer NIC savings resulting from the employees gross monthly reduction in salary to help maximise take up levels. How long does it take to launch a salary smart scheme? Average Employee Salary Smart Ex-change Amount (per month) With full employer support between 6 and 12 weeks usually Total Annual Amount 3,600 Total No of Employees take up x200 Total Salary s per annum 720,000 Employer NIC rate 13.8% Annual employer NIC savings 99,360* How competitive are the car lease payments? Salary Smart combine corporate buying terms, funding of the net of VAT car price and removal of the car residual element from cash flow to ensure consistently competitive pricing. The employee also has the option of an affordability button which enables them to instantly receive quotations on cars that fall within their affordable price budget. Our ability to generate income is solely dependent on packaging an offer that encourages an employee to order a car. What s included in a Salary Smart scheme? The Salary Smart scheme provides employees a fixed hassle-free motor-ing solution leaving them to budget for only fuel. The scheme includes the following Source, supply and delivery anywhere in UK All routine servicing, MOT and mechanical repairs at any franchised local dealership Unlimited replacement tyres (including mobile fitting service) home or office), batteries and exhausts 5 Star European Roadside Assistance (incl. European cover & 48hr relief vehicle) Accident management including claims handling, repairs and courtesy car Annual road fund licence for the duration of the term Annual driving licence checks Fully Comprehensive Insurance (incl. spouse, business travel, windscreen /glass replacement (excess applies) 24/7 Driver Helpline (including collection/delivery of vehicle for any servicing and repairs) How does the Insurance work? Our web portal calculates postcode driven insurance premiums and is fully automated through the quote process. Insurance is fully comprehensive for all drivers with the named driver and one other family member automatically covered for business use. The costs are fixed for the period of exchange even if own fault accidents occur, points are acquired (up to the legal limits) or the employee moves home. Employers can also choose to use their own fleet insurance if they would prefer to pass the benefits onto their employees (An excess for accidents & glass replacement will apply). Is your insurance mandatory? Yes for a couple of reasons:- To be compatible with a salary smart arrangement the insurance premium is fixed for the duration of the period (up to 3 years). Ensures that duty of care obligations to employees are consistently complied with. What can I expect the benefit uptake to be? Take up levels vary depending generally how proactive each employer is in supporting the initial and on going marketing communication. These can be typically as low as 3% or as high as 15% of the eligible employee base. How user friendly is the self service web portal? The system has been designed to be simple and straightforward to use with the minimal key strokes. What cars are available? Salary Smart can supply any make or model from any manufacturer through its online web portal.

9 What happens during an unpaid leave event? During periods of maternity, paternity, adoption or long term sick leave an employer is legally obliged to continue providing all of the contracted employee benefits. These are typically referred to as major life events. Salary Smart will continue to invoice the employer for the car on a monthly basis. Where an employee returns to work after a period of unpaid leave we will retrospectively credit back the finance rental up to a maximum of 9 months, if processing the salary exchange amount would mean that the employee s monthly pay would take them below National Minimum Wage. What happens in a resignation event? The employers lease rentals cease at the date the employee leaves and the car is returned. What happens if an employee wants to end an agreement early? Employees are committing to a salary smart agreement normally over 24 or 36 months. If they decide that they no longer want the car they can obtain an early termination quotation at any time after commencing the salary exchange arrangement. The calculation will be based upon 60% of the outstanding finance lease payments if terminating after 6 months or 70% of the outstanding finance lease payments within the first 6 months. This will be collected from the employer on behalf of the employee and the employer will recharge the equal amount to the employee. The car will also be required to be returned. Next steps... To find out more about setting up a Salary Smart scheme you can us at info@salarysmart.co.uk. Who are Salary Smart? Salary Smart is backed by one of the UK s largest independent leasing and fleet management companies that operate nationally with over 500 corporate customers in the private, public & not for profit sectors. Growth has been achieved by being at the forefront of car based employee benefits, developing new ideas, products and services through innovation and shared thinking with customers. Our aim is to provide successful employee car benefit solutions using informative easy to understand communication principles. Working with employers directly and via employee benefit companies and professional advisors we have experience in designing, implementing & managing car salary exchange schemes that are tailor made to suit the individual needs of our customers.

10 Fixed monthly amount covers everything I got a great deal and everything is included I love my new car - thank you! Joining the scheme was simple and easy Helpful staff It was really easy and I had my new car delivered within 2 weeks I have a cash allowance & was able to make my money go further The web portal was really easy to use No matter what the problem, I know help is one phone call away I was worried about the risk but CSE took care of that The staff were really helpful & knowledgeable Now I don t need to worry about any unexpected bills The scheme has allowed me to reward loyal staff members We had a high take up rate The insurance included unlimited business mileage I was able to order a car for my partner & insure my son too Simply Perfect! This is my first new car - thank you! Such a simple process for the employee I was surprised how low the payments were Salary Smart York House Ashby de la Zouch LE65 2U Tel info@salarysmart.co.uk Salary Smart is part of Auto Replace Limited Jan 2014