A Technology Salary Sacrifice Scheme is an effective way for Employers to help staff fund the cost of state-of-the-art technology.

We provide 1, 2 & 3-year schemes on a flexible basis to meet the needs of each client. The benefit is typically offered via a flexible or voluntary benefits scheme enabling Employees to pay for a device such as a computer or TV from Gross pay. This process results in partial Tax and NI savings for the Employee.

However, unlike other benefits that use Salary Sacrifice arrangements, such as bikes-for-work which receive a full tax break during the period of the lease, a computer is taxed on 20% of its value per year during the term of the agreement. Therefore, on a 2-year scheme you will pay tax on 40% of the computer’s value.

 

The saving calculation differs between Home Technology and Mobile Phone schemes – see both examples below.

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2 Year Home Technology Scheme Example - Standard Rate Tax Payer

PRODUCT = iPad Air2 YR STANDARD RATE TAX PAYER% SAVINGS
Total Price of Product (Total Salary Exchange)£500 
Monthly Salary Exchange£20.83 
Term Length24 
Cost to Employee after Savings  
Total Cost for Product after Tax & NI Savings£380.0024% off Total Price
Monthly Take Home Reduction£15.83 
End of Scheme Options  
Savings if you return the product at end of scheme£120.0024% – Saving Retained
Savings if you keep the product end of scheme.£60.0012% – Saving Reduced as tax saving not applicable

2 Year Mobile Phone Scheme Example - Standard Rate Tax Payer

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PRODUCT = Samsung Phone + 2 Year EE Prepaid Tariff2 YR STANDARD RATE TAX PAYER% SAVINGS
Total Price of Product (Total Salary Exchange)£400 
Monthly Salary Exchange£16.67 
Term Length24 
Cost to Employee after Savings  
Total Cost for Product after Tax & NI Savings£272.0032% off Total Price
Monthly Take Home Reduction£11.33 
End of Scheme Options  
Savings if you return the product at end of scheme£128.0032% – Saving Retained

Savings Explained

Savings vary depending on whether the Employee is a Standard or Higher Rate Tax payer.

As a guide, the following applies:

2 Year Home Technology Scheme

Standard rate savings are 12% income tax + 12% NI =24%

Higher rate savings are 24% income tax + 2% NI = 26%

2 Year Mobile Phone Scheme

Standard rate savings are 20% income tax + 12% NI = 32%

Higher rate savings are 40% income tax + 2% NI = 42%

PENSIONS

Within some Public Sector organisations the employee also makes a further saving as a result of reduced pension contributions. Pension rates vary so we would clarify the pension impact as part of the project implementation plan.

WHO OWNS THE PRODUCT?

For the tax treatment to apply the Employer must own the equipment and fund the cost of it on behalf of staff who then effectively pay the Employer back over the term of the agreement, normally 2 or 3 years.

WHAT’S IN IT FOR THE EMPLOYER?

The employer is able to make 13.8% NI savings. These savings can be significant on large schemes. For example, on a scheme where 500 staff participate, the Total Gross Pay deduction is likely to be around £300,000. Therefore, the employer is able to save 13.8% on £300,000, so a £41,400 saving through NI reduction.

DOES IT COST TO RUN THE SCHEME?

No, EmployeeChoice do not charge a management or admin fee for delivering the scheme. We apply a small uplift to the product prices to make our margin. We also pride ourselves in remaining competitive with High Street retailers for comparison purposes.

DOES MY ORGANISATION NEED TO FUND THE PURCHASE OF PRODUCTS?

You will be required to pay the total value of the products ordered under the scheme at the outset. Therefore, if it is not possible for your organisation to fund the purchase we have a relationship with a Finance Broker to ensure the scheme is cash neutral to the Employer. We would simply pass on any finance cost to the employee by increasing the price of each product accordingly.

NET PAY SCHEME

Some employers prefer to offer the technology benefit in a straight forward discount scheme rather than via a Salary Sacrifice model. Although there are no tax or NI savings the arrangement allows shorter repayment periods e.g. 1 year, and opens the scheme up to low paid workers. As we are able to leverage high levels of discount from our suppliers we are still able to offer a discount off high street prices to make the scheme attractive.

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