Companies in all areas, both for-profit and not-for-profit, can offer salary packaging to their employees. But did you know that not-for-profit companies can actually provide more cost effective workplace benefits to their employees than profitable or private companies? Before we delve into how a not-for-profit company may be able to take better advantage of salary packaging, it’s important to understand what it is and how it works:
An Alternative Form Of Payment
Also known as “salary sacrifice”, salary packaging is an arrangement that’s made between an employer and an employee where the employee will be able to pay for ATO-approved services or items directly from pre-tax salary. This means that recipients of a package can increase their take home salary by 10% or more. Some common types of benefits include:
• Fringe Benefits (this includes items such as health insurance, vehicles, childcare expenses, and school fees)
• Exempt Benefits (this includes items such as computer software, electronic devices, tools, and protective clothing)
• Superannuation (employees may choose to redirect a portion of their pre-tax income into their super)
How Not-For-Profits Benefit More
The majority of employers in Australia are required to pay fringe benefits tax on the value of the different benefits that they provide to their employers (except for Superannuation, which is fringe benefits tax exempt for the employee). But unlike “profit” companies, not-for-profit companies are exempt from paying any fringe benefits tax (up to a certain value each year). The amount differs from company to company as it is dependent on the type of non-profit organisation that’s being run.
So what does this mean for not-for-profits?
It means that they can provide these non-cash benefits to their employees at a lower cost than most other companies. There are also additional concessions available to not-for-profits, such as their being able to provide loan repayments and entertainment cash benefits from pre-tax income.
Not-for-profits are often on a tighter budget than “for profit” or private companies, which is what makes this form of cost effective payment that much more attractive.
The end result of being able to offer any sort of attractive salary packaging is that you’re able to attract the best candidates in the field, keep your employees engaged and motivated in the workplace, and you’ll be able to retain your best staff so that your company continues to grow and become increasingly successful.
To learn more about salary packaging, contact Simplygreen Salary Packaging on 1300-664-323.