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Frequently Asked Questions - Salary Exchange
- Does Salary Exchange affect my State Benefits?
- Does Salary Exchange affect my entitlement to Tax Credits?
- Are there any circumstances when I could be opted out of the Salary Exchange scheme?
- What if I want to join or opt out of the Salary Exchange scheme at a later date?
- Is Stephenson Harwood the only company offering the Salary Exchange scheme?
- How long will the Salary Exchange scheme be offered?
- What if I need a pay reference?
Does Salary Exchange affect my State Benefits?
Certain State Benefits (for example, Statutory Sick Pay and Statutory Maternity Pay) are related to total gross earnings for NIC purposes and a reduction in your taxable salary may reduce your entitlements.
Does Salary Exchange affect my entitlement to Tax Credits?
As with any other changes to your household income, participating in the Salary Exchange scheme may affect your entitlement to Tax Credits. Please contact the Tax Credit helpline on 0845 300 3900 or the website www.direct.gov.uk.
Are there any circumstances when I could be opted out of the Salary Exchange scheme?
You will be opted out of the Salary Exchange scheme if you meet one of the following conditions:
- Your gross contractual salary falls below the earnings threshold (£5,715 for the tax year 2010/11)
- Your gross hourly rate falls below the National Minimum Wage
- You reach State Pension Age
If you are opted out of the Salary Exchange scheme, your pension contributions (if applicable) will be deducted from your net pay. If your circumstances change, you can then opt back in to the Salary Exchange scheme.
What if I want to join or opt out of the Salary Exchange scheme at a later date?
As Salary Exchange is a contractual change, the arrangement is not flexible. The minimum period for which Salary Exchange can be applied is one year and this can only be revoked within the period as a result of a Life Event such as:
- Birth/adoption of a child
- Death of a dependant
- Marriage/Civil Partnership
- Change in full-time to part-time employment or vice versa
Please note that the above list is not exhaustive and you should contact Jazz McKenzie to apply to opt out. Any change is at the discretion of your employer and only one change will be permitted each year.
If you choose not to join the Salary Exchange scheme now, you will be provided with the opportunity during the November/December election window to join in January of the following year. Similarly, members who are already participating in the Salary Exchange scheme will be permitted to opt out during the November/December election window which will take effect from January of the following year.
Is Stephenson Harwood the only company offering the Salary Exchange scheme?
No, there are many large organisations that offer similar arrangements to bring savings to their employees and the business. A survey by JLT, our Benefit Consultants, found that 30% of employers operated Salary Exchange schemes and Stephenson Harwood also offers similar arrangements for other employee benefits such as Childcare Vouchers and Cycle2Work.
How long will the Salary Exchange scheme be offered?
We intend to offer the Salary Exchange scheme for as long as the savings are available. However, if tax, NI or pension laws change, or there is some reason it can no longer be run, we have the right to withdraw the Salary Exchange scheme. If this happens, all members will be withdrawn from the Salary Exchange scheme and contributions will be deducted from your net pay.
Your take home pay may then go down, because of the change to your NI contributions, but you will not have to pay back any of the savings you received while you took part in the Salary Exchange scheme.
What if I need a pay reference?
If you are taking part in the Salary Exchange scheme and you need a pay reference from us for a tenancy reference, mortgage or other type of loan, we will provide you with your Reference Salary figure.