Helping employees through the cost of living crisis

Aside from giving employees a pay rise, with all the associated additional costs surrounding this (pension contributions, NICs for employers, as well as tax and benefits considerations for employees), what other things can employers do to help ease some of the burden on their employees?

Revisiting your benefits package

Certain benefits can be very tax-efficient, and can help employees reduce their monthly outgoings. Some popular benefits to consider include:

Interest-free or low interest loans

The Bank of England raised interest rates recently for the 12^th time in a row, with the base rate now sitting at 4.5%. With interest rates soaring, individuals can see monthly repayments of loans increasing. 

Employers can give interest-free or low interest loans up to £10,000 per employee without creating a taxable benefit-in-kind.  This could help employees to, for example:

This would require you, as the employer, to have available cash for this purpose, as well as ensure a proper legal agreement surrounding the loan be put in place. 

Employees required to work from home

In the aftermath of Coronavirus, many businesses reduced the size of their offices or other workspaces and required employees to carry out their duties from their own homes. 

The government allows employers to pay a flat rate allowance of £6 a week to employees who are required to work from home, which is tax and NIC free.  If this is not paid, employees can claim tax relief at their marginal rate (e.g. 20/40/45%), giving a maximum annual tax refund of £140.40 in their pocket, versus £312 if the employer pays the allowance. 

Pensions: employer vs employee contributions

Whilst not an obvious benefit, employer pension contributions can be very beneficial.  They are a tax and NIC free benefit. 

Employees normally pay at least 5% of their earnings into their pension pot in line with the auto-enrolment rules. Employers are required under auto-enrolment to pay 3%, but they can pay more if they choose to do so. 

An option to consider is increasing the rate of employer contributions to allow employees to reduce their contributions.  Employees might consider stopping pension contributions during the cost of living crisis to increase their current take home pay, but this decision could massively impact their lives in the future.  By providing them this option, employees can increase their current take home pay whilst having peace of mind that their pension is still receiving contributions. 

Employees can also opt to increase their pension contributions by sacrificing salary.  This has the advantage of NIC savings for the employer, too. 

Provision of professional development courses

Whilst this may not put extra money in the pockets of your employees now, by providing relevant training and developmental opportunities, this could help your employees improve their skills and therefore help with internal progression.

This can help in several ways, for example:

The provision of relevant training is a tax-free benefit.  If you have employees currently paying for their training themselves, there may be an option to take this cost on as the employer to further help. 

Statutory pay

The statutory rates for maternity pay are based on your average weekly earnings, payable as follows:

Enhanced parental pay is an increasingly popular benefit to offer staff, offering additional pay above the statutory amounts.  This is taxable and charged to NIC like normal pay.  This can be very helpful to new parents who may otherwise struggle with increasing costs and diminished income within the household during parental leave. 

Other options can include providing paid leave for antenatal appointments and other medical appointments. 

Other benefits

There is a range of other benefits which employers can offer their staff in a tax-efficient way: