With all the recent announcements around COVID-19, a significant revision may have been missed by some employers.
HMRC recently changed its guidance to the salary sacrifice rules, to include a lifestyle change arising directly from the pandemic.
The amendment to the guidance means that a change in circumstances, directly arising as a result of COVID-19, is added to other lifestyle changes like marriage, divorce or a partner becoming redundant or pregnant .
Employees who find their circumstances have changed in view of the crisis, may now seek agreement from their employer that their salary sacrifice arrangement is terminated early and their salary uplifted to remove the sum previously sacrificed.
This will be of interest to many employees who are being or have been furloughed, as well as those who have recently had a change to their earnings (from taking a pay or working hours cut), as well as to an employee whose spouse/partner is no longer working having lost their job because of the pandemic.
As an employer it’s important to inform your employees of this change, but it’s also important that if an employee wishes to terminate their salary sacrifice arrangement - you are satisfied they meet the conditions.
If the employee meets the conditions and as an employer you agree to the termination of the agreement, it will be necessary to revise the employee’s contract of employment to remove the salary sacrifice.
It should be noted that this change could prove expensive for employers. If for instance it involved a car provided under salary sacrifice, then the employer would potentially face the early termination costs imposed by the leasing provider.