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Salary sacrifice - Can everybody win?

I appreciate that salary sacrifices have been around for a long time but, in view of the current state of the economy, it may be worth looking at the areas where these can still be useful.

Basically, ‘salary sacrifice’ is the term used to describe the position when an employee gives up the right to future remuneration in return for their employer paying the money to an alternative source for their benefit. Some key areas for this at the moment are childcare vouchers, parking permits, etc.

Using childcare vouchers as an example, typically the employee gives up income of, say, £55 a week gross, (for higher rate tax payers £32 per week net), and instead receives £55 worth of childcare vouchers which are tax free. There is an obvious saving for him (or her) of £23 per week. For the employer the saving comes in the form of national insurance at around £7 per week which should cover the cost of the administration. If not there is obviously a deal to be done.



Date: 19th July, 2007
Author: Cathy Corns


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