Salary sacrifice schemes for school staff

Overview

You might have heard of salary sacrifice schemes before if you have worked in businesses, charities and other sectors. You might wonder if your school runs an equivalent alternative?

In this article, we explain what a salary sacrifice scheme is, look at examples of different schemes and the benefits they could include.

What is a salary sacrifice scheme?

GOV.UK explains that a salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit.

Employers can set up a salary sacrifice arrangement by changing the terms of the employee’s employment contract. The employee needs to agree to this change.

Which explains you will sign a salary sacrifice contract with your employer, where you agree to forgo a certain amount of pay in return for a certain benefit. The amount can vary depending on what the salary sacrifice is for, and what terms your employer has in place. You can usually change the amount of money you sacrifice, but this has to be agreed with your employer. 

You can opt out of salary sacrifice at any time. But if you were using it to finance something you own – for example, a bike or mobile phone – you will still need to pay off the outstanding amount.

What is the situation in schools?

The School Teachers’ Pay and Condition Document (STPCD) has a section (28) on salary sacrifice arrangements.

It explains the term “salary sacrifice arrangement” means any arrangement under which the teacher gives up the right to receive part of the teacher’s gross salary in return for the employer’s agreement to provide a benefit-in-kind under any of the following schemes:

  1. a child care voucher or other child care benefit scheme
  2. a cycle or cyclist’s safety equipment scheme
  3. a mobile telephone scheme entered into on or before 5 April 2017 (except that a salary sacrifice arrangement for a mobile telephone scheme will only be covered by the provisions of this paragraph up until 6 April 2018 – see below); 

and that benefit-in-kind is exempt from income tax.

Has there been a change to the salary sacrifice scheme?

Maxxia explains salary sacrifice schemes had led to some employees paying less tax than their colleagues, which was not fair, said the government in the 2016 Autumn Statement.

As a result, those opting to take benefits through new salary sacrifice schemes would, from April 2017, be expected to pay the same tax as if they had been provided through their cash income.

There were exceptions to this new rule, however, and ultra low emission vehicles emitting less than 75g/km of CO2 (ULEVs), pension savings, childcare vouchers and cycle to work schemes were exempt from the changes.

Arrangements in place before April 2017 were protected until April next 2018, while existing arrangements for low emitting cars(ULEVs), accommodation and school fees are protected for a further four years, until April 2021.

Salary sacrifice schemes and childcare vouchers

Which explains that some employers allow parents to exchange part of their salary for tax-free childcare vouchers – this scheme closed to new applicants in October 2018, but existing claimants can continue to use the service for as long as their employer offers it, or until they change jobs. 

If you fall under the scheme, you can choose your own childcare or nursery, but they must be state registered or Ofsted approved. You pass on the vouchers to your childcare provider. As an alternative to childcare vouchers, the government has introduced tax-free childcare. 

Examples of salary sacrifice schemes and employee benefits

The Charter School in North Dulwich has its own employee benefits scheme.

The school operates a childcare voucher scheme and the vouchers are offered as a ‘salary sacrifice’. Childcare vouchers can be used to pay for registered or approved childcare and are exempt from both tax and National Insurance contributions for employees.

The schools also offers interest free season ticket loans to employees to enable them to purchase an annual ticket for travel to and from work.

The Manor Academy in Mansfield outlines its employee benefits. It explains:

“We have appointed a company called Computershare Voucher Services to administer childcare vouchers to our employees using a salary sacrifice scheme. Through this scheme, working parents can opt to exchange part of their salary for childcare vouchers.

Exempt from tax and National Insurance contributions, childcare vouchers are used to pay for any form of registered or approved childcare, including nurseries, nannies and pre- and after-school clubs.

Parents employed by us are able to save up to £1196 per year on childcare (subject to individual circumstances), by requesting up to £243 per month in vouchers.”

If you have questions about salary sacrifice schemes at your school you can contact us for further advice and support.

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The information contained within this article is not a complete or final statement of the law.
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