1. Salary sacrifice changes Considerations and actions for NHS organisations.

2. Background
The government consultation on salary sacrifice for the provision of benefits in kind closed on 19 October 2016.
We submitted a response to the consultation, which was based on feedback received from employers across the NHS.
The government provided detail in response to this during the Autumn Statement.

3. Autumn Statement
Chancellor Philip Hammond delivered the government’s Autumn Statement on 23 November 2016 which included changes to salary sacrifice schemes.
Tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for some arrangements.
There will be protection arrangements in place.
The exceptions to salary sacrifice schemes reflect our response to the government consultation, in which we requested that existing arrangements are protected and low-emission cars are exempt.

4. Response to consultation
The government published a response to the consultation on 5 December 2016.
This included that legislation will be introduced in the Finance Bill to remove the income tax and employer National Insurance contributions advantage of salary sacrifice schemes. The legislation will apply from 6 April 2017.
The government also published draft legislation for the Finance Bill
Comments on the draft legislation should be submitted by 1 February 2017.

5. Impact on the NHS
The taxable value of benefits in kind where cash has been forgone will be fixed at the higher of the current taxable value or the value of the cash forgone. This includes benefits that are currently tax exempt.
There are exceptions for some arrangements relating to pensions, childcare, cycle to work and ultra-low emission cars with emissions under 75 grams of CO2 per kilometre, to incentivise the take-up of these vehicles. 
This change will take effect from 6 April Those already in salary sacrifice contracts at that date will become subject to the new rules in respect of those contracts at the earlier of:
- an end, change, modification or renewal of the contract
- 6 April 2018, except for cars, accommodation and school fees when the last date is 6 April 2021.

6. Impact on the reward offer
It is vital that HRDs and board members consider how these changes will impact the reward offer provided by employers, both from a strategic and operational point of view.
We suggest that you develop a plan once you have considered all the implications.
We have provided actions for you to consider and take forward when developing your plan, which will help you to identify the impact this change will have on your organisation and employees.

7. Actions for employers
Notify your board and key stakeholders of these changes and how schemes will be reviewed within your organisation.
The changes will not prevent you from providing benefits by salary sacrifice, but will remove the tax and National Insurance advantages. Consider whether you will make changes to the current schemes you have in place.
Consider how this change will impact your staff and their reward offer, whether this is the removal of schemes or changes to existing schemes.
Undertake an analysis of the increase in costs for your organisation if you continue to provide salary sacrifice schemes.
Consider what the impacts are on terms and conditions.
Consider the impacts of any contractual arrangements, both with employees and benefit providers.

8. Actions for employers
Develop a communications plan to engage staff with the changes to salary sacrifice schemes. Staff may become concerned about how the changes will affect them and queries from them are likely to increase. You may want to develop some questions and answers or hold drop in sessions.
Get feedback from staff about your overall reward offer. It’s important to find out which benefits they value and whether they would like these to remain in place if there was an increase in cost to them.
Analyse what the increase in costs will be for staff if you still provided salary sacrifice schemes without the same savings.

9. Contact us
We are keen to hear how organisations are going to take forward the changes to salary sacrifice schemes. You can contact us at We will continue to update our salary sacrifice web pages with latest developments at