Summer 2005 Newsletter Content More of the same? Around the world Hot tips Inside out? Sweet sacrifice Simple trust Done and dusted? Open immediately File under E An Inspector calls CO still OK Open for business High PHI Arctic chills Duty calls Pensions Fuelling around WIP round Win some, lose some Take it and go? Party talk Work less, earn less Making adjustments

Sweet sacrifice If you are an employer, paying people is terribly expensive - not only do you have to give them the cash, which the taxman takes a sizeable chunk of, but you have to pay employer's NIC on top as well. For most basic rate taxpaying employees, giving them £67 to spend will cost you £112.80, which means that more than 40% of your cost has gone in taxes. There is a long list of things that you can buy for your employees with either no tax or less tax. The big problem is that cash is more flexible, and people tend to value it more than the equivalent in benefits - but if you can find something that the employees definitely want or need, you may be able to end up with both being better off. For example, if your employees contribute to a pension scheme, they get income tax relief on their contributions - but no NIC relief. So £89 going into the scheme will cost you £112.80, if you pay them salary which they put into pensions. If you pay the contribution directly, £100 costs £100, because there is no NIC on employer pension contributions. Some big companies have saved huge amounts of money by reducing employee contributions to pension schemes instead of giving pay rises - the employee ends up with more money, even without a pay rise, because the pension and NIC deductions go down so much, and the employer also saves. Another possibility is providing employees with mobile phones - something nearly everyone now wants or needs, and will pay their taxed cash salary on. It can be difficult making sure that the cost can be controlled, but you are currently likely to be providing £67 of calls with £112.80 of salary, and that's got to be worth looking at. The idea of a 'salary sacrifice' for benefits is not new, but it's worth revisiting every now and then because the list of tax-free benefits changes from time to time. Some are big, like pension contributions, and some are small; some make sense in particular jobs, and some don't. If you want to discuss the idea, we will be happy to advise you.