Much more can be done to Improve Employee Remuneration

What can be done to remunerate employees better? The simple answer is plenty. Yet many employers do not get the most out of employee package structuring. This is one of those areas where there are “too many experts”, and correctly so, as this spans the professional functionality of remuneration specialists, tax advisors, auditors, financial planners and trustees.

Therefore, depending on which professional you ask, you will get different responses, for example, tax advisors will comment on that there is no tax risk, whilst they have no experience in remuneration methodology and financial planning.

Conversely, trustees will always promote better retirement planning and more risk benefits, which are indeed important, but should this be more important than putting a child through the best possible education. The correct answers only come when you deal with holistic experts that can demonstrate to you an approach of “total reward statements”.

Tough Times Means no More Holy Cows

With economic times being what they are, employers cannot afford large increases. It also becomes difficult to give good increases if you are retrenching staff. The question then is, what can be done to pay employees better.

If you have ever offered an employee a job and needing to “gross-up” the package because the take-home pay is not enough, the reason is most likely not your costing of the job, but rather not having the correct package structure flexibility.

The Supreme Court of Appeal says you can Salary Sacrifice

On November 30th 2015, it was confirmed that the Supreme Court of Appeal has delivered a final judgement on remuneration structuring. The simple message is that it is absolutely legal to structure remuneration and allow a salary sacrifice. A word of caution before you proceed.

The principle has been confirmed. The Supreme Court of Appeal (SCA) made it very clear that a package structuring agreement and correct documentation, which will include policies and often a Package Structuring Tool, is compulsory. With no ambiguity, the SCA said it will simply not believe oral evidence and the actual legitimacy depends on correctly executed documents.

What is the Golden Rule?

An employee should be allowed to structure their remuneration to meet personal financial requirements. Where this is not done, the employer is “paying” for benefits or allowances which employees do not want. This means hard earned employee remuneration is paid towards benefits which the employee does not value. It may make your employee benefit broker happy, but it does not mean anything for your employee. Rather give your employee the choice to utilize flexible benefits to maximize their package.

Flexible Items

The most commonly allowed items to a flexible-package are retirement funding, group life, disability, income protection, funeral cover, employee vehicle insurance, travel allowance, company vehicles, medical aid, gap cover, thirteenth cheque etc.

Why do all Companies not do this?

Employers are generally not well informed of what legally can be done. In addition, the functions within the company who should promote this flexibility are usually concerned about additional administration. The administration is actually not that much more, where you are currently administering the employee benefit provider and payroll systems.

What is New?

The budget 2017/18 had plenty of bad news for employers, but there has been serious relief given for employee child bursaries’.