Construction Professional
Five reasons you should be using…
Salary exchange schemes can bring all-round benefits
The NIC exemption for holiday pay schemes is being removed. But there’s other options to structure pay tax efficiently, says Anil Patel
The withdrawal of the national insurance contribution (NIC) exemption in relation to holiday pay schemes for businesses in the construction industry will take effect from 30 October. These centrally managed schemes were set up for itinerant workers who did not stay very long with an employer. Although they may still operate after 30 October, NIC costs will increase for both employers and employees currently taking advantage of the scheme. Holiday schemes have been exempt
from NIC since 1979. Given that employee NIC rates are now 12% for earnings between the primary threshold and the upper earnings limit (and 2% thereafter), and that employer NIC rates are 13.8%, the financial impact of the scheme’s withdrawal is likely to be keenly felt. There are, however, a number of other
tax efficient ways to structure remuneration costs, the most popular of which is the provision of benefits via a salary exchange arrangement. Under a salary exchange arrangement, or salary sacrifice as it is often called, employees will typically exchange a part of their salary/wages in return for a tax/ NIC efficient benefit. One of the most popular within the construction sector is the implementation of salary exchange in relation to daily scale rate subsistence payments. The arrangements are agreed with HM Revenue & Customs which provides employers and employees with certainty that the arrangements will not be challenged. An employer that has 200 site-based
employees can, potentially, realise NIC savings of approximately £120,000 a year while a site-based employee’s net pay could rise by as much as £600 a year. A detailed review of the workforce is
required at the outset to identify those individuals who can participate in such an arrangement. It is also necessary to put in place appropriate procedures to monitor the arrangement, because
28 | APRIL 2012 | CONSTRUCTION MANAGER
implementing an arrangement correctly but not subsequently managing it correctly could be costly. In addition to the changes to the
holiday pay scheme, employers need to consider the impact of the forthcoming pension reform, set to take effect on a staged basis from 1 October. Under these new provisions all employees (as well as other types of workers) will be automatically enrolled into pension schemes. One approach to mitigating the additional costs is to convert employee pension contributions into employer contributions via salary exchange. There are many other benefits which can be provided cost effectively when coupled with salary exchange. For example, parking at or near the place of work, childcare vouchers, professional subscriptions and discounts from high street retailers, all offer opportunities to improve the net pay of employees without increasing gross pay, and can also reduce costs for employers.
Many employers are progressively
offering these options to their employees via flexible benefits arrangements, which has the added value of empowering the employee to choose which benefits best suit their specific needs or lifestyle. Traditionally, lack of access to office-
based computers by construction employees means that flexible benefits platforms have been of limited interest. However, given that most platforms can now be accessed via the web and that most workers are likely to have access to the internet via their smart phones, it may be worth employers exploring such reward structures to assist with employee retention and the delivery of a tax- effective and creative reward package.
Anil Patel is associate director, employment tax, at Grant Thornton, tel: 020 7728 3366; email:
anil.patel@
uk.gt.com
05
Under a salary exchange arrangement, employees will typically exchange a part of their salary/wages in return for a tax/NIC efficient benefit
matter when it comes to getting work. Research also supports this — in 2009 a study in the US showed that 89% of professional services firms had a relationship with their client before they were asked to quote. Today we can use the internet to get so much more out of these relationships, more efficiently and effectively.
... networking website LinkedIn 01
02
Size is important LinkedIn is the largest
professional online network, with more than 8m UK members, and you’ve probably been invited already, possibly even by your clients. Of all the social networks, LinkedIn has the best reputation among professionals, because it is built around the concept of referrals, with an accessible, rigorous way of controlling who can contact whom.
03
LinkedIn makes your network visible
Perhaps you know 30 people well, but you are connected to thousands of others through their trusted relationships. LinkedIn shows you these people. You can get a personal introduction and Linkedin will even tell you whom to contact to get it. No more time-wasting phone calls.
04
It helps your prospects find you on Google
Your best contacts are talking about you to others when you’re not there. Next
time your name is mentioned, will someone be able to find you online? Optimise your profile so that
people searching on Google will find you via LinkedIn. Your public L
LinkedIn profile
then becomes your professional home online.
It aids with teamwork Linkedin lets people work as a
team to win work, and not just your staff either. Everyone you know and trust can help by proactively seeking out business opportunities. The platform helps them share your useful things with others in a permission-based way email marketing cannot equal.
By Su Butcher, a social media marketing consultant in the construction sector. She is running a series of LinkedIn workshops across the UK this year.
www.justpractising.com
Relationships matter We all know relationships
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