The cost of living crisis is likely to have a significant impact on many employees. Businesses will also be adversely effected with inflationary pressure and increased costs.
A business may wish to consider alternative ways it can provide extra support to its employees.
A pay rise may often be most beneficial for employees but a further alternative which will provide extra income to employees could be to offer additional working hours and overtime.
If an employer feels that they are unable to afford ongoing increased salaries or to provide additional hours, a one off bonus to assist could be an option.
Salary advances can help with short term cashflow issues for employees. Generally these should be processed through the payroll. It should be noted that HMRC consider there is a difference between a salary advance and a loan.
As with an advance, a reduced or interest free loan could help employees with short term cashflow problems. This will be treated as a taxable benefit on the employee if the loan exceeds £10,000 in a tax year, with the beneficial interest charge based on the official rate of interest less any interest the employee has paid.
A further alternative is that tax advantaged benefits in kind could be provided by the employer, whereby there is a reduced or no taxation benefit arising including, subject to meeting the conditions, on the provision of free or subsidised meals.
The trivial benefits in kind rules, allow benefits of up to £50 to be provided tax free to employees and can include non-cash vouchers (for example vouchers for shops).
Additional pension contributions will benefit employees (and not be subject to employers National Insurance costs) but may not have an immediate result unless the employee reduces their own contribution.
It should be noted that for some employees, a pay rise or additional earnings may impact any universal credit they are receiving.
Also, that if there are salary sacrifice schemes are used, it will be important to ensure minimum wage legislation is adhered to.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.