With the latest government Budget bringing an increase in employer National Insurance costs, after my recent webinar members asked me “how” in practical terms to look at the best benefits to help combat the rise.

With tax rises worth £40bn announced in the Budget 2024 to fund the NHS and other public services, it’s fair to say businesses have been hit hard.

And with the increase in employers’ National Insurance (NI) from 13.8% to 15%, it will certainly have an impact on the financial packages provided for employees.

So how can Bristol Creative Member Employers navigate this change? Remember, when it comes to mitigating NI rises, employee engagement is your ace in the pack.

With employers facing a brand new cost, the need to communicate and educate around the fundamentals of employee benefits schemes is of vital importance.

Miscommunication is a major issue causing a disconnect between employers and employees, with just 50%of employees saying they know what their employer is offering, despite nearly nine in ten (87%) employers believing their benefits are communicated clearly and simply.

That is a major sticking point. In a challenging climate where budgets are expected to stretch further, this is an area for improvement.

By pointing employees towards salary sacrifice benefits, those selections can help employees and employers save money, with those actions ultimately leading towards the latter paying less in National Insurance payments. Remember, benefits in kind are much more efficient than being paid the salary equivalent.

From that, companies will have a larger pot of funds to focus on other aspects, including pay rises, professional development funds and company perks.

And to maximise the value of your employee benefit scheme, there are a number of ways you can handle these communications.

Without strong communication, employers cannot fully understand the demands of employee which can offer poor value for money for both employer and employee. In a challenging climate where budgets are expected to stretch further, this is an area for improvement.

In today’s world, you’re required to do so much more than simply put your benefits online. The way you communicate to employees will help your salary sacrifice proposition, offering clarity and knowledge via personalised communications.

It’s also vital that employers communicate and emphasise the value of salary sacrifice benefits, to help both themselves and employees save. But which are the best ones available?

Well, the are the most fruitful and popular and certainly worth investigating if you haven’t already are holiday trading, pensions, cycle to work, and electric vehicles.

Typically, holiday trading allows employees to purchase up to five extra days of annual leave on top of their contracted allowance. What’s better, they can even make tax and NI savings on the trade, ensuring you make savings too.

But what if they want to save for a rainy day? For those that perhaps prefer to work, it’s possible to sell any unwanted annual leave (be mindful that there is a limit to the amount of days you can sell too). You as the employer will pay colleagues at the agreed daily rate for working, but this of course is subject to tax and NI.

Either way, employees can either choose to spend more time on annual leave or put some money aside.

When it comes to pensions, Bristol Creative Employers often tell me that they can face a difficult task educating different demographics on the importance of their pension. But when offered via salary sacrifice it can help save on tax and NI, which ensures that it appeals to all parties.

And while I appreciate pension is not always the most captivating of subjects, there are distinct advantages of offering a salary sacrifice pension including the ability for employees to grow their contributions at a quicker rate, as you as the employer will be making a higher contribution each month. In addition lowering a salary to align with salary sacrifice means employees pay a lower rate of tax and NI too.

It’s worth remembering, pensions are typically the biggest financial benefit you as the employer provides, and the biggest that an employee receives (other than salary). You can be really smart about your pension by focusing on sustainable funds which ticks a huge box for ‘Gen Z’s’ right now.

Cycle to work is the ultimate benefit for combining wellbeing and financial savings.  Not only does it save on tax and NI, it also keeps employees fit and helps to drastically reduce the cost of commuting. What’s more, it also allows the employee and employer to be more sustainable.

According to CycleScheme, 51% of people now want to cycle to work. And with the opportunity to spread the cost of a new bike over 12 or 18 months while making tax and NI savings, you can join the hundreds of Bristol Creative Members who have already realised that making the transition from seat to saddle is a good deal.  It’s pretty straightforward. Employees can hire a bike and/or safety equipment to travel to work, usually for a period of 12 or 18 months. By saving employees tax and NI, they select a voucher or choose a bike from you or your third party. From there they will agree with the hire arrangement and pay the full value of that through salary sacrifice and finally, at the end of the hire agreement, the employee can either extend the agreement, return the cycle and/or equipment or buy it outright.

Last but not least, an electric vehicle scheme which offers several benefits for both employees and employers.  Since the lease payments are deducted from the gross salary before tax and NI contributions are calculated, employees pay less income tax and NICs. This effectively reduces the overall cost of the vehicle. In addition to being a more sustainable choice compared to petrol or diesel cars, electric vehicles typically have lower running costs too. Currently, electric vehicles do not have to pay for road tax. Compared to leasing a petrol or diesel car, electric vehicles benefit from lower Benefit-in-Kind (BIK) tax rates.  Employers also benefit from reduced NI contributions because the employee’s gross salary is reduced. Again, tapping into the sustainability focus, providing access to electric vehicles also helps companies to enhance their green credentials.  Members often ask how the benefit works.

An electric vehicle salary sacrifice scheme allow employees to lease a new electric car through s the employer for a set period, such as a year or longer. Employees pay for the lease directly from their pre-tax salary, before income tax and NI deductions are applied. This arrangement saves them the tax they would have otherwise paid on the lease amount. Employers typically work with leasing companies to provide these vehicles. The terms of the agreement, including duration and the type of vehicle available, are predefined, and employees must agree to these terms.

So, there you have it. When it comes to combatting the NI rise, maximise your employee engagement across the board, and use insights, and of course the latest trends, to tailor communications to employees. You’ll improve uptake in salary sacrifice benefits (saving everyone money), significantly improve ROI and, most importantly, put talent attraction and retention in a positive light.

Where do you start?  Un:fade is here to help and offers a free benefits audit for qualifying members.

About Un:Fade Employee Benefits Consulting

Specialists in seamless employee benefits, payroll and fintech solutions consulting. Helping you stand out as an EMPLOYER OF CHOICE by examining your benefits program to ensure cost-effectiveness, and alignment with employee and business goals