How to cut your employee salary bill

"The dream of only working a four-day, or even a three-day week is one that many people will happily indulge in on a dreary Monday morning, if only they could afford it. This ‘dream’ is now becoming a reality at certain organisations as they look to reduce costs during these difficult times. In such cases, however, the employee’s resultant loss of earnings means that the ‘dream’ quickly turns sour as they can ill afford such a reduction on income.

"A more employee-friendly method of reducing the wage bill is to offer staff the opportunity to buy additional days holiday from their gross pay through Holiday Plus, a salary sacrifice solution. This means that the employee pays for the additional holiday over 12 months via deductions from their monthly gross salary. Spreading the cost of the additional holiday throughout the year works well for the employee – and offering the opportunity to be able to spend more time with the family presents a great benefit and motivator. All the while, your salary bill is reduced.

"An employee on a £40,000 salary who decides to buy an additional week’s leave, for example, will pay less than £40 per month for the extra week. In this instance the employer will save nearly £800 in salary and NI costs."

Richard Davies, head of employee benefits at P&MM.

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