A surge of workers are planning to head back to the office this winter in a bid to keep energy costs down at home. Employers are exploring ways to help employees who are struggling financially. We’ll take a detailed look at one of the options.
People Management reports on new research showing that 85% of employees found the idea of working from the office more appealing amid the cost of living crisis. Nearly half said they would be more likely to commute into the office to alleviate the impact of high energy bills.
The CIPD’s Charles Cotton, senior performance and reward adviser, said the CIPD is encouraging HR professionals to help their organisations explore what steps they can take to assist their people over this difficult period.
On that point, HR Magazine reports on separate research by PwC showing that more than four in five employers were planning to support staff with cost of living increases. Their survey of UK reward specialists found planned support would primarily come through increased pay, additional pay reviews, and one-off bonuses. A minority said they were exploring non-monetary assistance, such as home insulation schemes, financial wellbeing programmes and employee hardship funds.
Picking up on that last point, employee hardship funds, or benevolent funds, are schemes designed to help specific categories of beneficiaries who are facing increased financial hardship including employees, former employees, pensioners and their families and dependants. It’s not a new idea - there are around 3,000 benevolent funds currently operating in the UK of which the vast majority are charities, although there are alternatives. However, if you are going to go down this route be aware there are lots of issues to consider - employment law, consumer credit and, of course, tax. To explain, on the line, Chris Thomas:
Chris Thomas: “So I suppose the first question is what form would, or should, a benevolent or hardship fund take? There are a number of options there. So, on a very simple level, it could just involve making grants on an ad hoc basis. You might want a more formalised scheme, perhaps with some sort of criteria under which employees can apply. You might want to think about loans rather than simple outright grants. If you're looking at something that's perhaps a bit of a longer term proposition, rather than just a sort of a short term response to the pandemic, you could consider setting up a charity which has the benefit of providing benefits more tax efficiently than the other routes do and is particularly suitable, I guess, if this is something you can you want to be doing as a longer term objective You could even think about using an existing Employee Benefit Trust if you've got a surplus cash available in it. So there are a number of ways in which this could be done but the key thing in any case is to think about what the tax consequence will be. So if it's a simple cash grant that's going to be fully taxable, fully NI-able. If it's a loan then usually that will be tax neutral because there's an exemption from the benefit-in-kind-charge if the loan is under £10,000, but you just need to be a little bit careful, particularly if the loan is waived, that could have tax complicated consequences. The other thing about loans is it can get you into consumer credit problems, which is obviously not a tax issue but it is something we're aware of from discussion with colleagues - that can be quite complicated and involve getting authorisations if you don't have them, so it may not be something you want to kind of go with in practice. I mentioned setting up a charity as a possible option if it's a longer term scheme and, as I said, the key advantage to that is it should then be possible to get support to employees without any tax liability, which obviously is good. It can also have optical advantages and it also allows for other employees to be able to contribute to it if that's something that you might want to do as part of your charitable giving proposition. On the other hand, it does involve some additional governance considerations, some extra legal steps, you do have to register with The Charity Commission and there is a process and some additional considerations would have to be thought about, although it might be possible to start providing benefit spending getting the charity actually formally registered, if you wanted to do that, but that's a little bit more complicated, but again it's something that we have looked at with some clients. So as I say, there’s a whole menu of things that you could do and it's very much a question of what your priorities are, how simply you want to keep, but it's something, as I say, that we have been helping clients with quite a bit. Just one final point to note is that we are seeing, in some cases, people wanting to make payments to family members of employees who are deceased, whether in relation to the COVID-19 or the other reasons. Just a note of caution that if you're doing that as an ad hoc thing, i.e. not under a tax-approved death in service scheme, and insurance-backed scheme, if you're just doing an ad hoc basis that is likely, unfortunately, to have tax implications so just be aware of that and seek advice before committing or going ahead.”
Chris has written in detail about the various issues that need to be considered before putting in place this kind of financial support for employees. His Outlaw Guide is called ‘Setting up an employee benevolent fund in the UK’ and is available from the Outlaw website. We have put a link to it in the transcript of this programme.
- Link to Out-Law guide: ‘Setting up an employee benevolent fund in the UK’