Access Accounting - Blog

Salary Sacrifice and Smart Pensions

What is salary sacrifice?

A salary sacrifice happens when an employee gives up the right to receive part of their salary due under their contract of employment, usually in return for their employers agreement to provide them with some form of non-cash benefit, e.g. childcare vouchers. When an employee agrees to a salary sacrifice in return for a non-cash benefit, they give up their right to future cash remuneration. When entering into a salary sacrifice arrangement the employee needs to understand what the sacrifice will mean in practical terms, as the reduction in pay may effect the following:

• Their future right to the original (higher) salary
• Any pension scheme being contributed to
• Entitlement to Working Tax Credit or Child Tax Credit
• Entitlement to State Pension or other benefits such as Statutory Maternity Pay
• Credit rating
• Mortgage applications
• Death in service benefits
• Pay increases, overtime rates, bonuses, etc

In order to safeguard the above, it is advisable that a written agreement is obtained stating that the figure used should be the gross pay (plus any salary sacrifice element) and that payslips should also show this.

If the salary sacrifice does not take the employee's salary below the Lower Earnings Limit (LEL) for National Insurance (NI) then entitlement to benefits will not be affected, although entitlement to State Second Pension (S2P) may well be reduced if the salary sacrifice reduces their annual salary to between the LEL and Upper Earnings Limit (UEL).

When setting up a salary sacrifice scheme, an employer needs to consider the following:

• It will be necessary to change the employee's terms and conditions of employment if they decide to take advantage of the salary sacrifice scheme
• A salary sacrifice must not take an employee's salary below the national minimum wage level
• The effect if an employee takes multiple sacrifices
• The effect of a salary sacrifice on other benefits, e.g. life assurance
• The need to keep HMRC informed of the scheme and the new contractual arrangements

What is a smart pension?

A 'smart pension' is a type of salary sacrifice where an employee's salary is reduced by the amount of their pension contribution, and instead this is paid directly by the employer. The reason for this is that both the employee and employer will benefit from the reduced NI contributions on the lower salary. This can mean that the employee's take-home pay may be increased as compared to the pre-sacrifice situation, and the employer may well add the savings in NI contributions into the pension fund. With the cost of pensions rising, this can be a significant contribution to an employee's pension.

Pip Trowles

Driving for change…but still feeling the pain

The business software market continues to mature - so much so that the reasons and drivers for change sometimes don’t outweigh the fears of failure or limits of prescribed benefit.

Having worked in this industry for over a decade, I'm aware of how complex all software has become. In most sales situations a company is often buying an upgrade to their existing solution on ‘gut feel’ or the confidence the sales person is radiating, rather than a documented process of real benefits.

For a successful system implementation, these three factors are important…

1. The sales person must communicate to you that they understand who you are, what you do and where you are going, listing the immediate and future requirements of your business. Without this information documented, the chances of a working solution that does what it says on the tin is minimal.

2. The product provider must demonstrate a solution to fulfil your entire requirement. The promise of the next version or sexy feature should not influence you decision.

3. You must insist that the provider documents sales and project requirements which deliver on promise. With modern integrated software solutions that fulfil your whole requirement the sales-to-installation process can be lengthy, documented promises cannot be forgotten.

If you follow these guidelines and insist on quality documentation and project planning you are less likely to replace one system with all its problems for another system with a different set of issues. At Access Accounting we, and our Access Specialist Centres, are more interested in understanding your business and how you want to work, before considering which software and features are appropriate.

This is a proven formula for success for the customer and software provider alike. Long term relationships are created and referrals are a natural bi-product - and that’s exactly how it should be.

Steve Ashman

Vista Navigation

This is article 4 of my Vista Blogs. I have spent some time looking at, and working with, Vista, and have separated various new features into several different articles. In this article I am going to talk about the way in which Vista has been updated to make it easier for users to move from application to application.

Flip 3D

Although this isn’t necessarily a very helpful business tool, it is one of my favourite new features in Vista! The user interface is enhanced, and if like me you have many applications open at once, it makes it much easier to navigate around them. As with previous Operating Systems, the standard Alt/Tab functionality is there, however it shows much more information to the user, it shows the actual document not just an icon (a similar feature is available to Win XP users on a download – see the Microsoft website for more information).

Fig 1. Screen shot of the Alt/Tab view on Vista

However, the most impressive way to navigate is using the Windows Key/Tab (and then mouse scroll or use Tab), the windows are placed at an angle in quite a large size. Again all the items are shown with content, and not as icons. If one is music then the music will continue to play, if a video is playing then it will continue to play.

Fig 2. Example of scrolling through the open applications using the Windows key/Tab functionality

Preview from the toolbar

Instead of highlighting an open application in toolbar and just getting the application or document name, Vista gives the user a thumbnail of the application itself, along with a location of the item. Again, this gives the user more information to allow them to make the right choice of application to maximise.

Fig 3. Example of the preview thumbnail from the toolbar

Kirsty Lowe