Can I give my employees support with their bills?

Clare Bowen, Director at Monahans

In this article, Claire Bowen, Director at Monahans, provides some advice to employers who are considering if they can help their employees as the cost of living continues to surge.

Since April 1st 2022, the average family has seen a £693 increase in their energy bills each year. Add to this rapidly increasing food and fuel prices, as well as an inflation rate which currently sits at a 40-year high of 9%, and the severity of the issue becomes clear.

In recent research by Total Jobs, over half of employees surveyed said that they would like to see their employers supporting them through this cost-of-living crisis. Some are calling for fairer pay, others are asking for subsidies for energy bills when working from home.

However, if you as an employer choose to subsidise an employee’s bills or support them in other ways financially during this time, what do you need to consider?

Think carefully about tax bands

Extra finances for employees can be arranged to be paid net via payroll; this is where the employer would cover the tax and NI due by increasing the gross amount paid. However, a note of caution for employers as this could be significant for someone on a higher rate tax.

For example, if an employer wanted to add an extra £100 into an employee’s pay packet, £125 would have to be given for net pay after tax deducted to still amount to £100, if in the 20% tax bracket. However, for any employee who earns within the 40% tax bracket, employers would have to give approximately £170. Not only must caution be exercised, but employers must consider if this is fair.

There are certain implications that may occur

Employers must think very carefully about what individual consequences may occur if a salary increase is given. For example, if a member of your team receives child benefit, then this is theirs to keep as long as they earn less than £50,000 per year. However, if additional income then bolsters their salary to over £50,000, this makes them liable to pay back £1 for every £2 they go over the threshold.

Additionally, if a member of your team claims carer’s allowance, this may also be affected by additional salary payments. If they begin to earn more than the stipulated £132 per week (after deductions), then this allowance may be stopped.

Explore tax-free options

It may be that direct salary support is not an option for your company at this time, but there are other support mechanisms that can be put in place which are tax-free. For example, vouchers for goods such as food, clothes and experiences can be a tax-free benefit, as can schemes such as childcare support and trivial benefits of up to £300 per year.

Times are tough, and people are finding it harder to make ends meet. Employees are turning to their employers for support but knowing where to start can be a daunting prospect.

If you would like to discuss how you can best support your team during this difficult period, please contact our friendly team who will be more than happy to help.