HR Department SALARY SACRIFICE GUIDELINES

Transcription

1 HR Department SALARY SACRIFICE GUIDELINES April 2011

2 1. Purpose of Policy 1.1. This policy sets out information for employees on the Salary Sacrifice schemes that the University offers and seeks to provide general information for employees interested in joining or leaving a scheme, or wishing to make changes to their existing Salary Sacrifice scheme membership It provides a general overview of the University s scheme rules regarding Salary Sacrifice. More detailed information is available for each of the schemes from the local HR representative A Salary Sacrifice scheme has to be approved by HM Revenue and Customs, and therefore the University reserves the right to withdraw a scheme should HMRC withdraw its approval. Further information can be found at: 2. What is a Salary Sacrifice? 2.1. A Salary Sacrifice happens when an employee gives up the right to receive part of the cash salary due under their contract of employment. Usually the sacrifice is made in return for the employer s agreement to provide the employee with some form of non-cash benefit e.g. nursery fees, sports membership. The Sacrifice is achieved by varying the employee s terms and conditions of employment relating to pay and an actual reduction to gross basic pay occurs as a result The pre-tax salary deduction is equal to the post-tax nursery fee or sports membership fee made by those not taking a salary sacrifice. Tax and National Insurance (NI) is not payable on the sacrificed portion of the salary. By electing to receive a lower salary in exchange for a sacrifice, Tax and NI contributions are reduced. 3. What schemes does the University offer? 3.1. The current schemes that the University of Surrey offers are: USS Pension. This scheme is known as PensionPlus. PensionPlus is a way of making the Universities Superannuation Scheme (USS) pension contributions through Salary Exchange. All eligible members of the USS pension scheme are put into PensionPlus by default, unless an individual requests to be excluded by completing an opt-out form. Campus Kids Nursery. The University of Surrey has a workplace nursery, known as Campus Kids and is managed on behalf of the University by Kidsunlimited. Provided the eligibility criteria are met, an employee can Salary Sacrifice their entire monthly nursery fees for this nursery. Childcare Vouchers can be used for any Ofsted registered childcare provider for childcare costs for children aged 0-15 years, or 16 years if the

3 child has a disability, and who accept these vouchers. There is a statutory minimum ( 10 a month) and maximum ( 243 a month) that can be sacrificed. The University of Surrey scheme is managed by Kidsunlimited. Surrey Sports Park membership fees for the Surrey Sports Park can be sacrificed. Single, joint or family memberships can be paid for via Salary Sacrifice. Cycle to work employees who have employment contracts that outlast the duration of the salary sacrifice period of either 12 or 24 months can benefit from obtaining a tax-free bike and accessories, up to the value of 1,000. The employee applies for a voucher to redeem against their goods and then collects them for a local participating bicycle shop. This scheme is run for the University of Surrey by Cyclescheme. 4. Eligibility 4.1. Any employee of the University is eligible to apply to join a salary sacrifice scheme. There are certain limits to eligibility, in particular that an employee s gross basic pay does not fall below the National Minimum Wage or the NIC Lower Earnings Limit, at any time during employment, after the Salary Sacrifice reduction An employee can remain in a Salary Sacrifice scheme as long as they remain an employee of the University and their salary is sufficient to cover their chosen Salary Sacrifice amount. An employee should be aware that there is a requirement to be a member of a scheme for 12 months to fully benefit from the tax and NI savings, unless a lifestyle event occurs (further information given in section 9.3) An employee can join as many schemes as they wish, provided they do not go below the eligibility limit An employee will always be able to use a Salary Sacrifice scheme whilst they are employed at the University of Surrey, as long as the scheme continues in force subject to continuing HMRC approval, and providing that they continue to earn a gross salary payment that remains above the National Minimum Wage or the NIC Lower Earnings Limit after sacrifice All of the schemes are available to employees from the start of their employment, with the exception of the Cycle to Work scheme, where the employee needs to have completed their probation period. 5. Prioritisation of Schemes

4 5.1. If an employee falls below the eligibility levels for National Minimum Wage or the NIC Lower Earnings Limit then an employee is exchanging too much of their pay in return for benefits. If this is the case then employees will be removed from Salary Sacrifice schemes in the following order: 6. Payment o Surrey Sports Park Membership o Cycle to work o Childcare Vouchers o Onsite Nursery o PensionPlus 6.1. Payment is made directly from the employee s salary each month, and the Payroll department will make the appropriate payments to the organisations directly (e.g. Surrey Sports Park), or those managing the sacrifice scheme (e.g. Kidsunlimited) Fees for each of the schemes (with the exception of PensionPlus) are paid a month in advance, so, nursery fees deducted from the January payroll will pay for the February nursery fees For the Cycle to Work scheme, the first payment will be deducted from the salary in the month that the employee receives their voucher (subject to payroll cut-off dates). 7. Joining a Salary Sacrifice Scheme 7.1. An eligible employee is automatically enrolled in the PensionPlus scheme. For the other schemes they can join up so that they commence from the 1 st of a particular month. The exception to this is Surrey Sports Park, where an employee s salary sacrifice membership can commence from the same day as the Surrey Sports Park application form Employee s should be aware that for the schemes operated for the University by Kidsunlimited (Nursery and Childcare Vouchers) an employee can join the scheme up to 3 months in advance of their child starting nursery (as long as they have a confirmed nursery place) or can bank up to 3 months worth of Childcare Vouchers to use flexibly as they wish Employees should be aware that their membership of the benefit scheme (i.e. Nursery, Childcare Vouchers, Surrey Sports Park) is different to their membership of the Salary Sacrifice scheme, and therefore should notify changes to both the provider and the University with appropriate notice The following specific joining information is noted below:

5 PensionPlus. Joining will be automatic for eligible employees; no action is required by the employee. Campus Kids Nursery. Once a nursery place has been confirmed, the employee should complete the form in Appendix A, and return it to their local HR representative. This application must be received in the HR department by the end of the previous month prior to the requested start date of Salary Sacrifice (the 1 st of a month only, part months to be paid direct to the nursery). HR will then action this so Payroll will be able to process this by the cut off date of the month the Salary Sacrifice is starting. Childcare Vouchers. The Kidsunlimited on-line application form should be submitted: This application must be received in the HR department by the end of the previous month prior to the requested start date of Salary Sacrifice (the 1 st of a month only). HR will then action this so Payroll will be able to process this by the cut off date of the month the Salary Sacrifice is starting. Surrey Sports Park the membership team at the Surrey Sports Park will provide the HR team with a copy of the completed staff application form so that the Salary Sacrifice membership can be actioned. As part months can be sacrificed, the employee should be aware that depending on the time of the month they join, the first deduction may be larger than subsequent months. Cycle to work the employee should visit their local participating bicycle shop to choose their equipment and obtain a written quote. They should then complete an on-line voucher request form ING/BIKETOWORKSCHEME.PDF The Central HR Department will then prepare a letter for the employee, and ask them to come up and collect the letter, voucher, and sign the Hire Agreement document For all the schemes with the exception of the PensionPlus scheme (where it is contained within the Principal Statement of Employment), the local HR representative will write to the employee confirming their membership of the Salary Sacrifice scheme, their new salary details, and asking them to sign and confirm their acceptance of this change. This letter constitutes a variation of terms and conditions of the employee s contract of employment Where an employee holds two or more established posts at the University, membership of a Salary Sacrifice scheme will be applied proportionally per post, to ensure correct costing.

6 7.7. For the childcare Salary Sacrifice schemes, if both parents are employed by the University, they can both join a scheme, either splitting the workplace nursery fees between their salaries if this is advantageous to them, or both sacrificing up to the maximum amount per month for Childcare Vouchers An employee on a temporary contract is eligible to join a Salary Sacrifice scheme, as if the employment is not extended and the employee leaves the University of Surrey s employment, this would be considered as a valid lifestyle change, and therefore they would still keep the tax and NI savings they had made. However, the employee should be aware of any commitments they are making to the benefit provider. For example, if they are signing up to a 12 month membership at the Surrey Sports Park, they will be expected to honour this commitment and continue their membership after leaving the University of Surrey s employment (as a public member). Under the Cycle to Work scheme, an employee on a temporary contract is eligible to join the scheme, as long as their contract will outlast the duration of the Salary Sacrifice period (minimum 12 months) Further information on joining a Salary Sacrifice scheme can be provided by the local HR representative. 8. Amending or varying membership of a Salary Sacrifice Scheme 8.1. If an employee wishes to vary the amount they are sacrificing each month, due to a change of childcare arrangements / fees, they should give the appropriate notice to both the benefit provider and their local HR representative The local HR representative will formally write to the employee and confirm the change For the Cycle to Work scheme, it is not possible for the employee to cancel the loan once it has begun, and there is a commitment to making the Salary Sacrifice for the duration of the loan period If an employee wishes to freeze their membership of a Salary Sacrifice scheme, they should declare the reason that they wish to do this to their local HR representative. In all cases, the employee will be expected to continue their membership if they are able to pay their fees. Where they wish to freeze membership for a lifestyle reason, they should apply to leave the scheme and re-join at a later stage Where an employee is unable to pay the Salary Sacrifice deductions, or would go below the eligibility criteria to stay in the Salary Sacrifice scheme, they will be suspended from the scheme, depending on their circumstances. However, an employee should note that whilst their

7 membership of the Salary Sacrifice scheme will be suspended, they may still be contractually obliged to meet the benefit providers fees, such as Nursery fees or Surrey Sports Park membership, and this should be discussed by the employee direct with the provider. 9. Leaving a Salary Sacrifice scheme 9.1. When the employee is entered into a Salary Sacrifice arrangement there is a fixed commitment for a year (this is per scheme where the employee is a member of more than one). However if the employee experiences a lifechanging event (Life Event) they will be able to opt in or out of the arrangement. If they leave a scheme within the year (and not due to a Life Event), they will be liable for previous Tax and NI savings. The exception to this is the Cycle to Work scheme, for which there is a fixed commitment for the duration of the loan There is an annual window where an employee can opt in and out of the PensionPlus scheme. The anniversary year runs from April to March for this scheme. Due to HMRC guidelines for this scheme, an employee will only be able to opt in and opt out twice in any one anniversary year Life changing events which are permissible under the scheme are: The start or end of maternity leave The start or end of a period of unpaid leave, and the employee falls below the eligibility criteria limits The start or end of a period of unpaid sickness leave A new partner in the household, or the loss of one A change in the number of children in the household Change in working hours House move A Promotion or demotion The death of a partner or dependant A significant change in childcare circumstances (including moving from Childcare Vouchers to the Workplace Nursery) A material change in a partners circumstances (e.g. redundancy) Leaving the University of Surrey s employment (voluntary or otherwise) 9.4. At least one month s notice must be given to HR if the employee wishes to leave the Salary Sacrifice scheme. It is the employee s responsibility to contact the benefit provider directly to give them the required notice period for terminating membership or stopping a nursery place. The relevant notice period may vary from provider to provider.

8 9.5. Normally an employee will not be able to apply to and rejoin a Salary Sacrifice scheme for a period of 12 months after they have withdrawn. However they may apply to and rejoin the scheme at any time if they wish to rejoin because of a Life Change Event including the ending of a Life Change Event. The exception to this is PensionPlus, as outlined in section Rejoining the scheme will always be subject to eligibility, the terms and conditions of the scheme, the employee s acceptance of a change to their contract of employment and the scheme continuing in existence Where the employee is leaving the University of Surrey s employment, as well as providing appropriate notice to the benefit provider, they should be aware that this will cause their membership of the Salary Sacrifice scheme to end, and they may be required to pay their fees directly to the benefit provider Leaving Surrey s employment will impact on the membership fee payable at Surrey Sports Park, and will mean that the workplace nursery place can no longer be guaranteed The Cycle to Work scheme is a non-cancellable loan and all outstanding monies must be paid before the employee leaves the University of Surrey s employment. The outstanding balance will be deducted from the employee s final net salary payment. 10. Impact on benefits and salary An employee should seek further advice from HM Revenue & Customs, prior to commencing a Salary Sacrifice, if they are in receipt of any state benefits, such as Statutory Maternity Pay (SMP), Statutory Sick Pay (SSP) or the childcare element of Working Tax Credits. An HM Revenue & Customs guide to Salary Sacrifice is available and can be downloaded from: By reducing their basic salary an employee may lose or reduce their entitlement to certain statutory payments paid or funded by the Government. This is because their entitlement to the statutory benefits (and level of, payments in the case of some benefits) is based on the basic salary after the Salary Sacrifice reduction Such statutory benefits include, but are not limited to, statutory maternity, paternity and adoption pay, incapacity benefit, job seekers allowance, state pension, maternity allowance, state second pension, statutory sick pay, tax credits, and reduced rate NI Contributions.

9 10.4. Any statutory payments (e.g. maternity, adoption, etc) will be based on the post-sacrificed salary. Any occupational payments (e.g. maternity, sickness) will be based on the pre-sacrificed salary If an employee is currently making standard employee pension and AVC contributions there will be no change to the amount they pay because the pension contribution deduction(s) will continue to be based on the pre-sacrificed salary. If an employee has any queries in relation to their pension scheme membership, they should contact the Pensions Department on ext In the case of pay awards the percentage increase will be on the full value of the employee s gross salary i.e. before it is reduced by the cost of Salary Sacrifice membership. Increments will be treated likewise Any additional hours worked as overtime or enhancements will be paid at the pre-sacrifice rate If an employee is applying for a mortgage, a loan or a similar financial transaction, they should quote their full pre-sacrificed salary as their earnings from the University. 11. Further Information and advice Employees are advised to seek independent advice if they have specific queries regarding their personal circumstances. This can be obtained from a variety of sources, such as their Trade Union, the Citizens' Advice Bureau, an independent financial adviser, an accountant, or your solicitor. The University cannot give independent advice The current Minimum wage figure can be found at: The current NIC Lower Earnings Limit figure can be found at:

10 HR Department Appendix 1: Tax-Efficient Nursery Childcare Scheme Employee s Application Form Name.. Job title Dept.. Home Address. Postcode.. Home Tel. Work Tel.... Details of your child(ren): Child(ren) s Name(s) Date of birth Half day sessions per week per child Full Days per week per child Your current or anticipated monthly payment to Kids of Wilmslow Ltd. Your proposed salary sacrificed amount (to stay above minimum wage) The balancing amount to be made by partner s vouchers/ direct debit (as applicable) Date child is due to start nursery First month of salary sacrifice payments (for following full month s fees). 1 st part-month s payment, where applicable, to be made by cheque to kidsunlimited) I understand that as a participant in the Tax-efficient Childcare scheme I will accept a salary which reflects the annual cost of my childcare fees which the University will pay direct to Kids of Wilmslow Ltd. I have had a copy of the information leaflet and its appendices and understand how this will affect my contract and benefits. As a condition of joining the Tax-efficient Childcare scheme, I also agree to give the University of Surrey no less than ONE MONTHS NOTICE WHEN I WISH TO WITHDRAW FROM THE SCHEME. I understand that if I leave the University of Surrey s employment my child s place at the Nursery cannot be guaranteed and this could impact on my membership of this scheme. Signed Date

11 Please return completed application form to you Faculty/ Central HR Representative at University of Surrey, Guildford, Surrey, GU2 7XH by 1 st of the month you wish to start the salary sacrifice. A copy of the signed letter must be returned to payroll by 10 th of the month you wish to start the sacrifice. IMPORTANT If you are a new user of the nursery, please ensure that you have booked your place(s) with kidsunlimited before completing this form. Human Resources Use Only Payroll Number (URN): Employee ID: Current Salary: Childcare Fees: Abated Salary: