Wednesday, 10 November 2004


Earn less, pay more

My employer's very excited about "salary sacrifice" schemes at the moment. I'm less convinced.

The headline offer is a service (e.g. Broadband) at substantial discount for employees. Good stuff, but the way the discount is obtained doesn't seem right to me. Essentially, if I join the scheme, I agree to taking a pay cut in exchange for the service.

Now put aside worries about 'pay cut' (e.g. effect on final-salary pensions, future reward prospects, etc) and consider this anomaly. Because the reduction is taken from employees gross pay, the net cost to employees depends on the rate of tax that would have been paid on the sacrificed pay. The more tax you pay, the more you save.

The higher your income, the less you pay for the service. The lower your wages, the more you pay.

I'm not the only one who thinks this is wrong, but what can be done about it? Is this just another example of our society's financial systems' built-in bias in favour of the well-off? Is it just a fact that I should accept, or should I avoid the scheme on principle?

EBICo provide a socially equitable tarriff that rights a similar wrong in the energy supply market. I'm one of their customers. Is there - or should there be - an equivalent positive action that can be taken to rebalance salary sacrifice schemes?

Posted by pab at 23:14 | Comments will be back later in the year. Please email me instead!