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Employee Remuneration and Tax
In this page, we look at how you can attract the right staff with remuneration packages. We also look at how employees can best negotiate remuneration packages to maximise on tax and National Insurance liabilities.
If you are an employee then the following will provide an insight into mitigating the tax and National Insurance liabilities of your remuneration package.
If you are an employer who wants to retain and attract staff with tax-efficient remuneration schemes then you need to read on.
What is Employee Remuneration?
Employee Remuneration is the term used for any rewards or compensation made to employees in recognition of their work performance.
Types of Remuneration
In addition to salary, remuneration can take the following forms:
- Reimbursement of expenses
- More generous expenses – business travel in first or business class, or being able to upgrade to a higher quality hotel on business trips
- Bonus or profit related award schemes
- Share incentive arrangements
- Pension provision
- Life assurance and/or healthcare
- Choice of a company car or additional salary and reimbursement of car expenses for business travel in your own car
- Mobile phone
- Contributions to the additional costs of working at home
- Other benefits in kind including, for example, an annual function costing not more than £150 per head, or gifts in lieu of long service awards
Taxation on remuneration packages – employers
MFW can set up an efficient Employee Remuneration scheme to help reward your employees for their performance at work. We can provide you with help for a specific one-off enquiry. We can also help design and implement an enhanced remuneration scheme for some or all of your staff.
Our advice covers the following areas:
Employee Remuneration Compliance
- PAYE health checks and advice
- National Insurance Contributions
- Forms P11D (benefits in kind)
- Taxation of other employee benefits – from staff refreshments to critical illness cover
Employee Remuneration issues
- Company cars and other benefits
- Termination and ex-gratia payments
- Share schemes
- Employee trusts
- Bonus schemes
- Salary sacrifice payments
Taxation on remuneration packages – employees
If you are an employee then you will typically negotiate your remuneration package before starting a new position. You may also review this as part of the yearly appraisal process or when being promoted to a new position.
Whilst any increase in your remuneration packages always looks positive, did you know there could be tax and National Insurance implications on these benefits? This could mean that what may appear to be a more beneficial remuneration package could result in you paying more in tax and National Insurance, negating any benefits. For example, do you know if your company car is costing you too much and how you might mitigate this?
We can also help advise you if you are an employee and guide you on negotiating the best overall remuneration package. This will help you to mitigate your tax and National Insurance liabilities so that any increase does not have any unwelcome surprises. We can also help you to claim back a tax refund in the event of over-payment of tax.
Contact us for more help
Whether you are an employer or employee, we can help you to remain tax compliant and efficient. Contact your local MFW office for more help (add link).