Review your people costs

Employment costs need to be kept under review but as the recession deepens, the need to minimise costs must be balanced against the need to retain good staff to pave the way for recovery.

Review the benefits you provide

Many benefits can provide tax savings for your business as well as help retain and motivate key staff through challenging times

Remuneration

Could you be more flexible about the way you remunerate staff

• change the mix of fixed and variable (i.e. results-based) pay;
• consider the timing of salary/wage payments and the timing and form of bonuses, to save PAYE/NIC;
• allow employees to purchase additional holidays, to switch to part time working or take unpaid leave for a period;
• if circumstances permit, outsource functions to self employed workers or other specialist providers (such as Revas, our online accounting and payroll service)

Share schemes

• Shares can provide a valuable, low-taxed incentive with no cash cost to the company and, with corporation tax relief available for employee share gains, a company can achieve tangible cash savings as well as more motivated employees.

Pensions

• Allowing employees to forgo taxed pay in favour of employer pension contributions can save tax and NIC on funding costs, on investment growth and on benefits received from age 55 onwards.

Other forms of salary sacrifice

• From childcare vouchers to car parking to training in new skills, there are many effective ways to reward staff and save tax/NIC through salary sacrifice

If redundancies are unavoidable

• maximise the £30,000 exemption for termination payments – this could save you up to £16,000 per employee
• exploit further tax exemptions for pension contributions, outplacement counselling, retraining, legal and pensions advice, etc
• avoid pitfalls in the complexity of the tax rules, especially in respect of pay in lieu of notice, and arrangements for subsequent re-engagement.

How Baker Tilly can help

We can advise on all of the above areas to ensure you adopt the most effective practices for your business. We provide a range of services to help employers reward their people effectively and avoid any potential pitfalls of setting up the relevant schemes. Contact your local Baker Tilly representative.