Hidden gems of employee rewards and retaining talent in a cost of living crisis

With stubbornly high inflation and increased interest rates, motor dealership employees across the UK are feeling the impact of the cost-of-living crisis. At the same time, results from a Glassdoor survey showed that 55% of employers are finding retaining staff more difficult than pre-pandemic.

Employee costs continue to be the largest expense in any motor dealership, accounting for a significant percentage of gross profit, and with increasing pressures on margins, cost management is critical to sustained profitability. So how can dealerships respond and support staff? Never has it been more important for employers to ensure that their benefits package is working hard enough to help their employees.

Increasing salaries and paying bonuses is, of course, effective but incurs additional National Insurance costs for the employer and an increase to the employee in their own tax and national insurance deductions.

There are some lesser known ways for employers to maximise support to employees in a legitimately tax efficient way:

• The Trivial Benefits Exemption allows employers to provide £50 vouchers to employees
• Employers can provide meals at the workplace without creating a benefit in kind
• With increased hybrid working, employers can pay up to £6 a week in relation to expenses of working from home
• Introducing a discount portal has saved many employees between 5% and 10% on groceries, holidays, cars, technology, appliances etc
• Long Service Awards (generally £50 per year with at least 20 years service)
• Other items that could be considered include; eye test vouchers, glasses, parking at work, branded uniform.

Salary sacrifice schemes have been used by many dealerships for a number of years. However, there are opportunities for employers to maximise the efficiency of these schemes, particularly in relation to Workplace Pensions, Electric Vehicles, and cycle to work.

With salary sacrifice, pay before tax and NICs is reduced. For example, a higher rate employee using salary sacrifice will save 42% on the cost of a new cycle. The same savings, for NIC purposes, will apply to workplace pensions, added to that of course any employer contributions. For example, a higher rate employee giving up £97 of their monthly net pay on a matched workplace pension scheme will add £333 a month to their pension pot.

So, in summary, there are things to be thinking about beyond just the top line of pay and many initiatives won’t take long to implement. Employers should be asking themselves the following:

• Does our existing benefits package deliver desired outcomes for employees?
• Do employees understand their total reward package beyond just their basic salary?
• What ‘quick wins’ can be gained from exploring tax efficient opportunities, whilst also looking ahead at the longer-term investment in the workforce, particularly where retaining employees is more cost-effective than recruiting new employees?

HMRC National Minimum Wage Campaign in the Motor Sector

As part of a targeted focus on the motor sector, HMRC have recently started contacting employers in the motor retail sector to check they are complying with the regulations in relation to National Minimum Wage (“NMW”).

Whilst paying the required rates through the payroll is simple, the calculation involved in determining an employee’s pay for NMW is considerably complex. There are a number of factors to consider, including;

• Working time – are employees required to arrive early or stay late after their contracted hours?
• Payments – are other pay elements in addition to salary skewing the NMW calculation?
• Deductions – certain deductions (interestingly including salary sacrifice), although otherwise lawful, may be reducing pay for NMW purposes
• Uniform – Requiring employees to wear a certain colour may constitute a uniform policy, which in turn may mean pay is reduced for NMW purposes due to the associated cost of the ‘uniform’

The implications of breaching the NMW rules are punitive, with penalties of up to 200% and being publicly named by HMRC.

The targeted effort by HMRC presents an opportunity for Motor Retailer employers to review their position now to be comfortable there are no risks HMRC could identify.

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