With the strongest digital economy in Europe – worth more than twice Germany and almost five times larger than France – it’s no surprise that the UK is a hotbed for tech start-ups; An estimated 20,000 of them will come to life in 2020 alone.
Born from a winning mix of innovation and secured funding, many start-ups, particularly entrepreneurial SMEs, aim to adopt advanced technologies to develop new products or services that address real-world problems. But as technology continues to evolve and enrich the world with its often amazing advances, some companies are looking back to a time-honored technique that can benefit both employers and employees financially.
Some fifty years ago, when government measures to combat massive inflation prevented employers from providing pay rises, valued workers instead demanded other benefits, such as extra vacation time or higher pensions, to overcome such restrictions. It was a trend officially known as wage waivers about 20 years ago, with employees funding everything from fridges to fine wines.
Now the more common benefits relate to cars (with the biggest savings coming from ‘green’ vehicles), childcare and pensions, the latter of which workers agree to reduce their gross earnings by a certain amount and in return their employer agrees pay the corresponding amount into their company pension. However, other monetary benefits could still include a bike, bus fare, phone or tablet, training, and additional annual leave.
“Although thousands of workers employed by large companies are now well aware of the benefits of wage foregone, only around 50 per cent of all SMEs in the UK make use of HMRC’s wage foregone pension scheme,” said Mr Sahil Sethi, co-founder of Maji.io, the independent online financial wellness platform. “And according to the latest YouGov survey, 17 percent of the companies that took the survey had never heard of the program.”
Under the Salary Victims Pension Scheme, employees benefit from tax and National Insurance savings, while employers have the opportunity to save thousands of pounds each year by reducing their NI tax expenditure. “Such a system could prove to be an invaluable resource for SMEs, especially now that people are trying to save wherever they can,” Mr Sethi said. “Perhaps some SMEs are reluctant because they find the system difficult to implement, but they should look at the potential savings on offer and see it as a worthwhile investment.”
Mr Sethi, whose company helps people optimize their pensions, added: “This system offers SMEs a rare opportunity to improve their financial performance without risk or great expense and I believe that more and more companies will embrace this win-win system should accept.
“We maximize the savings SMEs can make from lost wages by helping employees increase their pension contributions to recommended levels. And team management also gets access to our wide range of financial planning and training tools to boost their financial well-being across the board. We also help a company’s finance team or accountant ensure the payroll and payroll retirement account are set up correctly so that savings can be made within a month,” he added.
https://techround.co.uk/startups/tech-start-up-set-to-see-salary-sacrifice-gain-ground/?utm_source=rss&utm_medium=rss&utm_campaign=tech-start-up-set-to-see-salary-sacrifice-gain-ground Tech start-up set to see pay cuts gain ground