Benefits Shifts 2016: Salary sacrifice to become more important in managing employee benefits

Salary sacrifice will play an increasingly important role in managing employee benefits as employers move away from defined benefit pension schemes in the future, a report from Reward & Employee Benefits Association (REBA) has found.

The report, REBA/JLT Employee Benefits Shift Research 2016, surveyed nearly 300 pay and reward professionals and found that defined contribution pension schemes, particularly via salary sacrifice but also including trust or contract-based, are set to increase sharply in 2016 and beyond.

The survey results showed that the number of employers providing a DC scheme via salary sacrifice is set to jump by nearly a quarter (23.7%) in the coming years.

The survey also showed that salary sacrifice was an increasingly important part of employee care ownership (ECO) schemes. Perks cars are currently offered as a core benefit to some or all staff by a third (32.6%) of all employers but nearly one in ten (8.7%) are looking to remove this as a core benefit in the future and for those that are maintaining it are looking to shift the cost to the employee. As part of this trend perk cards offered via salary sacrifice is set to almost double from its current 2.1% penetration to 3.9% in 2016 and beyond.

Debi O’Donovan, partner at REBA, said that as well as better suiting employees, salary sacrifice schemes also brought substantial savings. “Operating a pension scheme through a salary sacrifice arrangement can bring significant national insurance savings for both the employer and employee as well as tax savings for the employee,” she said.

“This makes them increasingly popular and explains their shifting prominence. The rise of the salary sacrifice model in car ownership is also further proof of how the model is changing,” she said.

To find out more about the role of salary sacrifice in 2016 and beyond download the REBA/JLT Employee Benefits Shifts Resarch 2016 report now.