In many salary sacrifice arrangements the pre-sacrifice level of cash salary may continue to be referred to by both employer and employee. This is a useful summary of the value of the remuneration package as a whole which is made up of cash and benefits following the implementation of the salary sacrifice arrangement. The reference or notional salary may be used in the following situations:
The use of the reference or notional salary does not invalidate
the salary sacrifice. If the employment contract has been
effectively varied that is conclusive for the employee’s
entitlement to basic salary/wages and benefits. The employer and
employee may agree pay for other purposes. Overtime, holidays, sick
pay on whatever basis they choose. The Revenue will simply require
income tax and NICs on sums received.
It is reasonable for the reference/notional salary to be used
in this way. For example the value of the remuneration package is
£24,000 per annum of which £20,000 is in cash and the
remainder in childcare vouchers. Any increase in pay is to be based
on the value of the package, that is £24,000 and that increase
is to be paid monthly, in cash.
