A salary sacrifice arrangement is an agreement between an employer and an employee to change the terms of the employment contract to reduce the employee’s entitlement to cash pay. This sacrifice of cash entitlement is usually made in return for some form of non-cash benefit i.e. Car Lease Schemes, Childcare Voucher Scheme.
Salary sacrifice can be financially beneficial for both employer and employee. For example, when part of an employee’s remuneration shifts from cash - on which tax and National Insurance contributions (NICs) are due - to non-cash benefits that are wholly or partially exempt.
A salary sacrifice arrangement can’t reduce an employee’s cash earnings below the National Minimum Wage rates.
The current schemes offered by the Trust are:
- Childcare Voucher Scheme
- Car Lease Scheme
- Cycle to Work Scheme
National minimum wage threshold
The National Minimum Wage, as of April 2019, is as follows:
| Year | 25 and over | 21 to 24 | 18 to 20 | Under 18 | Apprentice |
|---|---|---|---|---|---|
| April 2019 (current rate) | £8.21 | £7.70 | £6.15 | £4.35 | £3.90 |
In the event that the hourly rate of an employee in receipt of a lease car through the Salary Sacrifice Scheme falls below the national minimum wage, the employee will have to return their lease car and would be required to make an early termination payment. To guard against this risk the Trust has decided that a minimum hourly rate of £9.17 per hour should apply after the salary sacrifice cost has been deducted from gross pay. This decision has been made to make allowance for any further increases in the national minimum wage over the life of the agreement.