Salary Sacrifice–Minimum Time?

Clock Flickr Dee'Lite SmallWe’ve been getting a number of questions from our clients regarding the minimum amount of time that a salary sacrifice agreement must be in place for.

This has come into sharper focus when looking at the new pension rules from October 2012 that will mean that employers have to automatically enrol employees into a workplace pension. Well those all round good eggs at HM Revenue & Customs have kindly produced an FAQ on the subject.

You can read the document here in all it’s glory.

The interesting part is when they discuss the new rules. HMRC says:

“Consequently, it is not necessary to stipulate a period for which the arrangement must be entered into or to set out "lifestyle changes" in relation to salary sacrifice for the workplace pension scheme.”

That’s good news for employers who have often struggled to define “lifestyle changes” to their employees. It also helps to reassure employers that they won’t be liable for a tax bill if the employee opts out of salary sacrifice.

It’s worth remembering that salary sacrifice needs to be established carefully and is a balance between changing your employees contracts and altering your benefit contributions. As always, it’s worth making sure that you get some advice when setting up a new arrangement.

Steve Clark

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