With the updated guidance from HMRC employers can allow employees to participate in a salary sacrifice scheme even if it will bring them below National Minimum Wage without being penalised.
The first option introduced by Reward Gateway in relation to this was the option in SmartPay called NMW option - Allow applications under National Minimum Wage.
The Net deduction option is the latest option presented, which will give employees who are on or below NMW the opportunity to apply for Cycle to Work. The deduction amount is to be taken from the net (after-tax) pay of the employee instead of being deducted from their gross (before tax) pay as it is with the other option.
How to manage this option in the administration portal?
Clients with the respective role (SmartPay Master Administrator or SmartPay Product Administrator) can switch the option on in the product setup at any time following the steps below:
- Navigate to SmartPay in Reward Manager
- Click on Products tab
- Find Cycle to Work on the page and click on the Manage button
- Find the Switch to net applications section
- Switch the toggle on if you'd like to make the option available for your employees
- Once saved the option is applied immediately
What does it mean if the option is switched on?
Employees will be able to apply for Cycle to Work even if the deduction amount will bring them below National Minimum Wage. They will receive an on-screen notification informing them the deductions will be taken from their net (after tax) pay and they should give their consent before they complete their order. If the product is configured to auto-approve the applications, then these applications will be automatically approved as well. Respectively, if the product is configured to manual approval, then these applications will go for review as per all other applications.
Summary of the functionality and user journey video can be found in Cycle to Work | Net deduction.