Salary Sacrifice

DcD

DcD

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Hi all, started a new job today for a pretty cool company and noticed they have a big section about how as an employer they are willing to offer salary sacrifice to employees if they want to. After a quick read up on the following link (http://www.hmrc.gov.uk/specialist/salary_sacrifice.htm) it could be something that I'm interested in. From what I understand, I'd give up a part of my salary for extra annual leave etc. Is this correct? My salary is already surplus to what I need and will increase again after three months probation.

Is it worth it? Does any else do it? And, what is a decent % agreement to sacrifice for the benefits? Obviously I don't want to discuss this with them in my probationary period yet, but I want to get some information on what it entails.
 
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If its for annual leave you are essentially buying extra leave. My old company let us by an extra 5 days leave for 5 days pay. So I would imagine it will be a similar scheme to that.
 
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I'd go for it... If you have spare money holiday is far higher up the list than another couple of toys (unless of course you can't afford the holiday because you cut your salary..). And yes, I would expect the equivalent of one day less pay for one day more holiday.
 
Soldato
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i buy 5 days each year and last year i had 4 days left to carry over to this year :) Currently i have all my desired hols off and over 2 weeks holiday left so i'll prob use 1 week randomly and carry the other over.
 
Soldato
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I dont really see the point - ask for a couple of days unpaid leave it'll amount to much the same thing (given the amount as a relative percentage of salary)
 
Caporegime
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If its for annual leave you are essentially buying extra leave. My old company let us by an extra 5 days leave for 5 days pay. So I would imagine it will be a similar scheme to that.

Yes, most companies allow you to take unpaid vacation.- you take a day off and forfeit the pay. One will have to first get permission from management to see if it would be permissible.

My company also allow me to take 1 month off work at half pay, which is really nice.
 
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All our benefits are done this way and it's pretty good for both the employer and the employee. For example I don't need to worry about claiming back the tax on extra pension payments because the tax wasn't paid in the first place. The employer, on the other hand, does't have to pay employer's NI on what I sacrifice.

You do have to watch out though, you still have to pay BIK tax on the likes of medical insurance etc funded through salary sacrifice.
 

DcD

DcD

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I do it for my pension arrangements as it is tax efficient, certainly wouldn't do it for holiday without a really good reason.

I did notice something about the pension aspect. What exactly does this mean? Why should I do it? Pensions baffle me and I've been rather useless at looking into or contributing to one over the past few years.
 
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I did notice something about the pension aspect. What exactly does this mean? Why should I do it? Pensions baffle me and I've been rather useless at looking into or contributing to one over the past few years.

I do it because pension contributions are gross of tax, generally speaking when you come to retire you'll pay less tax than you do now (greater personal allowance, lower total income). More saliently, the earlier you contribute to your funding the greater the benefits are compounded when you come to retire. If you can afford to kick in a few extra quid now, it could make a noticeable difference in years to come.

I'm only 23, but having seen just how underfunded the majority of the population are when it comes to their pension arrangements and the increasing longevity of our species, I don't want to be another pensioner struggling by week to week in 50-60 years time. Call it a healthy fear. ;)

(For us they call it a SMART scheme, not sure what it stands for, but it is a salary sacrifice scheme)
 
Caporegime
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I dont really see the point - ask for a couple of days unpaid leave it'll amount to much the same thing (given the amount as a relative percentage of salary)

that is the point no?

its allowing people to take unpaid leave - albeit actually putting it into the employment contract
 
Caporegime
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Sacrificing salary has a negative effect on your pension from what I understood.

well you'd be paying in slightly less if you're say paying a fixed percentage of your salary which your employer matches

taking 5 extra days off in a year say isn't going to make a massive difference though
 

ajf

ajf

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We had this at my last place. It worked both ways, so if I didn't need much holiday I could also sell back days for extra salary.
I generally had a couple of extra days as over 12 months the two lost days were negligible.
 
Soldato
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All our benefits are done this way and it's pretty good for both the employer and the employee. For example I don't need to worry about claiming back the tax on extra pension payments because the tax wasn't paid in the first place. The employer, on the other hand, does't have to pay employer's NI on what I sacrifice.

You do have to watch out though, you still have to pay BIK tax on the likes of medical insurance etc funded through salary sacrifice.

Same for me everything come through a flexible benefits system, I buy ten days extra holiday each year, get some of my salary in sainsburys vouchers and pay for travel insurance for me and the other half (plus all the usual boring pension and health care stuff)

I like the option of buying holiday rather than agreeing un-paid leave as it is all done through the one system this way and my extra holiday once agreed in April isn't at anyone discretion it's paid for and agreed so I get it etc.
 
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Sacrificing salary has a negative effect on your pension from what I understood.

This was my understanding I have to admit. The idea being that the company reduces it's liability on pensions. We've had a similar scheme where they pay us an "non-contractual pay", like a bonus spread over the year. It's still taxable and they can adjust that as they see fit but since it's outside the pay structure, it's exempt from the pension pot and any redundancy benefit should that arise. A bit crafty really but hey, lucky to have a job really.
 
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