Surge in requests for workplace financial support

Workers are increasingly reaching out to their employers for support in the face of the ongoing cost of living crisis. People Management reports on new research showing that 68% of HR professionals have noticed a rise in requests for financial support or education in the past year. On average, a fifth of their workforce has actively approached HR seeking financial wellbeing support. The survey by Pluxee UK questioned more than 2,000 employees and 500 HR professionals. 

In addition, separate research by Reward Gateway found that employees were not satisfied with the level of support businesses are offering. Three in five, 62%, said their employers should do more to offset inflationary pressures and the rising cost of living.
The article highlights a key point which is that, like most employees, most businesses are also facing financial challenges meaning there’s little spare cash to meet employees’ requests. They suggest one solution might be to review benefits packages with a shift away from ‘luxuries’ to alternatives that help with basic essentials, such as food. 

Whilst that would, no doubt, help those employees who are, effectively, on the breadline there is scope for helping out the wider employee population through tax savings with no cost, or little cost, to the employer. So, reviewing your employees’ benefits to see if any of them they could be offered in a more tax efficient way. Tax specialist Chris Thomas has been helping a number of clients with that exercise and earlier he joined me by phone from Birmingham to discuss the range of benefits that could, potentially, be adjusted to save tax and so help employees’ finances:

Chris Thomas: “The first one is making sure that people are making the most of pension contributions. In particular, if you've got employees who are making contributions from their net-after-tax-pay then you and they are missing out on some savings that could arise if you were to switch to a salary sacrifice model which, obviously, quite a few employers already do, but not all. It doesn't necessarily need to be a fully-fledged salary sacrifice scheme, which I know does put some employers off a bit. It can be relatively simple, but the advantage of it is that if they give up the relevant amount that they would normally pay in as contributions then, essentially, if it's paid directly as an employer pension contribution instead, you've got a saving of both employer NIC and employee NIC and some employers will choose to share their employer NIC saving so that creates a further benefit for the employee as well.”

Joe Glavina: “Isn’t the problem with salary-sacrifice that, by sacrificing some of your salary, you end up with less take-home pay which is not what you want in a cost-of-living crisis?”

Chris Thomas: “Well, I think for other forms of salary sacrifice, you're quite right, Joe, that the implication of salary sacrifice is you are reducing your salary, and you are getting something else instead. Now, I think the point there is if the thing that the employee is getting instead is something that they would want, they could be getting it in a much more tax efficient way, and in a way that is much cheaper overall to them than they otherwise would. We are not necessarily talking about the very lowest paid employees here but, perhaps, the more middle earners. A good example of that would be electric cars which is really quite a tax advantaged option for an employer to provide. The way that essentially works is the employee enters into an a salary sacrifice arrangement to replace, essentially, fully taxable or NIC-able salary, with the benefit of the use of a car which is taxed at I think it's about 2% at the moment, so it's a really big saving, and obviously, we all know that a lot of electric cars are expensive, not everyone can afford to go out and buy one, but for people who are, perhaps, looking at wanting to do that, it's a way of making it affordable for them to do so in a very tax efficient way for both them and the employer - and it also fits in, and I know that's it’s not the purpose of this directly, but it fits in with the whole ESG and corporate responsibility agenda very well as well. So, it is a bit of a win-win from that perspective”.

Joe Glavina: “Anything else on the list Chris?”

Chris Thomas: “So, I think it's also worth talking about things that, perhaps, are easier to roll out for everybody and don't involve having to give up any benefit at all and a good example of that would be providing free or subsidised meals to employees. That’s something that was, I think, done quite commonly many years ago, but as the become a lot less popular, perhaps, in recent times but it is something that actually can be quite a valuable benefit for employees. So, if you've got a staff canteen, as a lot of employers do, it is worth thinking about – could you provide free meals, or subsidised meals, or vouchers, that your employees can use there? So long as that's available to everybody, again, you can provide that without any tax, without any national insurance contributions arising on it? Yes, it's fairly small-scale on any one occasion but if you've got people who are using the canteen regularly, that could stack up to a few hundred pounds of savings over the course of a year, and it's the sort of perk, as well, I think, it's very relatable to employees, very easy to communicate, it’s perceived as a very accessible and attractive benefit. So, that, I think, is something that is worth thinking about if it's not something that you are currently doing.”

Joe Glavina: “Anything else on the list Chris?”

Chris Thomas: “So, the other thing that is worth thinking about, just briefly, and this won't be suitable for everyone, is loans if you want to help employees over, perhaps, a difficult period. You can do that, again, up to I think it's £10,000, the threshold, you could make loans to employees without any benefit in kind charge arising so you could make it at no interest, or very low interest, which could obviously be a significant benefit given the interest rates that we are seeing being a lot higher in the current climate. You do just need to check a couple of points around consumer credit, etcetera, but it should be possible to do it without any adverse implications and it's a quite tax efficient thing to do. In the past it was quite common with season ticket loans, but it doesn't have to be just for season tickets, it could be something that you make available more widely.”

Another way to help with the cost-of-living crisis is through an employee hardship fund, or benevolent fund. These are schemes which can takes many different forms and are designed to help specific categories of beneficiaries who are facing increased financial hardship including employees, former employees, pensioners and their families and dependants. We have a programme on that coming up soon so do watch this space. 

LINKS
- Link to People Management article: ‘Surge in workplace financial support requests: do businesses have a duty to help?’