Why is Manchester Metropolitan University introducing the salary sacrifice arrangements?
Salary sacrifice is a term used to describe surrendering an amount of gross or pre-tax pay, for another purpose where it is not subject to tax, e.g. in this case, to pay for the childcare vouchers up to 50 per week. The salary sacrifice arrangement benefits you directly by reducing the impact on your take home pay as a result of tax and NIC efficiencies. Historically childcare vouchers were taxable but not subject to NIC. From April 2005 a tax and NIC exemption limit of 50 per week was introduced. You may receive up to 50 of childcare vouchers per week free of tax and NIC provided certain conditions are satisfied. By sacrificing 50 per week of your salary you will save both tax and National insurance on that amount therefore reducing the net cost of the vouchers to you. The University will also save employers National Insurance on the salary sacrificed. This will be used to pay for the associated administrative costs of the scheme.
