NORTHUMBERLAND COUNTY COUNCIL

SALARY SACRIFICE

TRAVELSCHEME

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INTRODUCTIONAt Northumberland County Council we value the outstanding contribution our staff make to the lives of people across the county.

We know our staff work incredibly hard all year round, and the importance of having a break to recharge our batteries.

A unique staff benefit scheme has been developed to provide you with cost effective holidays and travel through a Salary Sacrifice Travel Scheme.

The scheme is open to all Northumberland County Council staff on a permanent contract, (excluding apprentices) who are part of or eligible for the Local Government Pension Scheme or the NHS Pension Scheme - it is not open to those employed on teacher’s terms and conditions and it is currently not available to the Fire & Rescue Service.

This scheme can provide holiday and travel opportunities, allowing you to spread the cost with 12 equal monthly reductions to your gross salary without the need to make costly credit arrangements.

Please read this document thoroughly and make sure you understand the principles of salary sacrifice. Whilst salary sacrifice schemes can be an excellent way of providing cost effective benefits, they are not for everyone. It is therefore important that you understand the benefits and the impacts of the scheme.

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THE SCHEMEThe Salary Sacrifice Travel Scheme is delivered in partnership with P&P Group (Travel and Technology) and provides access to thousands of travel and holiday products. The scheme leverages the benefits of salary sacrifice to provide affordable travel and holiday solutions to eligible staff of Northumberland County Council (NCC).

EligibilityIn order to participate in the scheme you must be:

A permanent employee and have completed your probationary period.

The scheme is open to all Northumberland County Council staff on a permanent contract, (excluding apprentices) who are part of or eligible for the Local Government Pension Scheme or the NHS Pension Scheme - it is not open to those employed on teacher’s terms and conditions and it is currently not available to the Fire & Rescue Service.

Earning more than the National Minimum/Living Wage (after ALL salary sacrifices have been taken into account).

Certain travel options are not available to staff who are under the age of 18. (Most airlines will not take bookings or allow unaccompanied travellers under the age of 18).

This booklet outlines the terms and conditions relating to the scheme as operated by NCC. You will need to agree to these terms in order to join the scheme.

There will be separate terms and conditions relating to the travel or holiday product you select. It is important that you understand these product specific terms also.

Where the words:

‘The Council’, ‘we’, ‘us’ and ‘our’ are used, they refer to Northumberland County Council (your employer).

‘You’ and ‘your’ are used, they refer to you (the participant in the scheme and named in the Variation of Contract).

SALARY SACRIFICEA salary sacrifice arrangement is an arrangement whereby an employee agrees to a change in their terms & conditions of employment, so that the employee receives a reduced basic salary (Revised Basic Salary).

The employer may then provide a benefit to the employee; in this case travel or holiday solution.

You will be able to select your preferred travel/holiday solution from your employer’s website from the range of travel solutions your employer has arranged with the travel provider.

Your employer will pay the provider directly for any of the travel arrangements you select. You can choose to participate in the arrangements and in no way are the arrangements compulsory.

HOLIDAY EXAMPLEEmployee with salary of £26,000, in the pension scheme

2 week Holiday; Majorca; flying from Newcastle; 2 persons; 6th October 2018

Estimated cost: £86.08 per month for 12 months - Savings £249

Check-in Date: 6 Oct 2018 (14 nights)

Apartment Capacity 4

One bedroom

2 Guests, Bed & Breakfast

Cala D’Or ApartmentsCala D’Or, Majorca

Gross Charge for Holiday £1,282.02

Gross Charge for Holiday (excluding VAT) £1,234.37

Employer Support/Surcharge (£73.58)

Gross Salary Sacrifice £1,160.79

Gross Salary Sacrifice per month £96.73

Tax Savings (£18.09)

Pension Savings (£6.29)

NI Savings (£11.61)

Net Monthly Cost £60.74

Tax £21.37

VAT £3.97

Staff Monthly Cost £86.08

Staff Total Cost £1,033.03

Total Savings £248.99

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Important information about Benefit in Kind (BiK) taxAlthough salary sacrifice arrangements reduce Income Tax, pension and National Insurance (NIC) charges made through payroll, the provision of the travel and holiday solutions are taxable benefits, reportable to HMRC after the end of the tax year. You will therefore be liable to an income tax charge on the Benefit-in-Kind (BiK). The amount of the income tax liability will be shown in your quotation.

IMPORTANT NOTEHMRC will collect the income tax charge on your “Benefit in Kind” by notifying you of a change in your tax code in the tax year after you have booked your holiday. Your employer will notify you of your charge by 6th July in the tax year after you have booked your holiday.

Your holiday quotation shows you how much the holiday will cost you, including the tax on your BiK, but the income tax on the BiK is paid via an adjustment to your tax code in the following tax year.

If you require further information you should contact your Payroll Department.

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CREDIT CARD BENEFITIt has long been recommended that Holidays should be purchased using a credit card, specifically for the additional protections afforded by using a credit card. The down side of using a credit card is that the average interest charge is around 21.9% per year (Barclays Purchase Credit Card - Mar 2019) therefore substantially increasing the cost of your holiday.

The good news is that your employer pays for holidays booked through the scheme using a credit card and therefore secures the same protections as if you had used a personal credit card but without the credit charge.

Using the example above.

Estimated Value of Credit Card Protection and 12 Monthly Salary ReductionsCredit Card Holiday Scheme

Based on Gross cost of Holiday £1,282.02 £1,282.02

Ave UK Credit Card APR (interest on credit) 21.90% 0.00%

12 monthly deductions (£119.93) £86.08

Estimated Total cost of holiday (£1,439.14) (£1,033.03)

Total Savings compared to Credit Card use £406.11

How it works

IMPORTANT - Pre-AuthorisationThe nature of the holiday and travel markets are different from traditional markets used in Salary Sacrifice Schemes. Pricing of holidays and travel services are dynamic and change minute by minute. Therefore, the traditional Salary Sacrifice process model of...

SELECT PRODUCT

APPLY FOR EMPLOYER AUTHORISATION

COMPLETE TRANSACTION

... doesn’t work on this scheme as the holiday may have been sold, or the price is likely to have changed whilst waiting for ‘employer authorisation’.

This scheme therefore requires ‘Pre-Authorisation’ from your employer BEFORE you can book your product.

(You will be able to apply for any amount up to your ‘Maximum Authorisation Limit’ which will be provided to you on the site and which is based on your income level and the authorisation policy of your employer).

Any “Pre-Authorisation” agreed by your employer will have a life span of 1 month. If a holiday is not successfully booked within that 1 month life span, the Authorisation will be cancelled and you will need to re-apply for ‘Pre-Authorisation’ in order to book a holiday.

The Authorisation is only valid for a single transaction. Once you have booked a holiday any authorised amount over and above the cost of your booked holiday will be cancelled. If you wish to purchase a second holiday, you will be required to apply for a ‘Pre-Authorisation’ amount to cover your second transaction.

1. Register your account on the website www.salarysacrificetravel.co.uk

You will need the VPD code for your organisation and your salary details, we recommend you have a payslip to hand. If you are a core Northumberland County Council employee, your VPD is X15. If you are a council employee with an NHS pension, your VPD is X26. The site has two registration options:

Guest Registration A short registration that allows you to browse

our range of holidays and get indicative pricing, but you will not be able to apply for ‘Employer Authorisation’ or book a holiday without completing full registration.

Full Registration A complete registration that allows you to browse our

range of holidays and get indicative pricing, but also apply for ‘Employer Authorisation’ and book a holiday.

2. After you have completed the registration, you will be sent a password (by email) to sign into your new account.

You will be encouraged to change your password to something memorable once logged in.

3. Once you have logged in to the Salary Sacrifice Travel website you can browse the holiday and travel products that are available through the scheme.

If you have completed ‘Full Registration’ you will be able to apply for an ‘Employer Authorisation Limit’ (up to your maximum) and will then be able to book travel and holiday products.

Northumberland County Council understands and respects the importance of your privacy and we are committed to safeguarding your personal information. Our Privacy notice details all of the information that we collect, use and otherwise process about you as a user of the Salary Sacrifice Travel Scheme website. You are advised to read this notice and ensure that you are happy for your data to be used in this way.

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4. Pricing For clarity, the pricing on the website is based on an estimate of the cost to you AFTER SALARY SACRIFICE.

i.e. the reduction in your take home pay over 12 months.

You can request a quotation for a particular holiday or travel product at any time and you will be emailed a full description of the product you are interested in, with a full financial breakdown of the Salary Sacrifice transaction required for that product.

8. Your salary sacrifice will commence the month following your order being approved and will be taken from your salary in 12 monthly equal reductions, for example if you place an order in May your salary sacrifice will begin in June.

5. When you have requested a booking, assuming you have the appropriate Pre-Authorised Limit from your employer, you will be emailed with the documentation for your records (Final Quote and Variation of Contract). This will also be displayed online.

In order to book your travel arrangements, you will need to approve and accept your agreement online.

6. Once the (electronically) signed agreement has been received it will be sent to the Travel Provider so they can complete your booking.

Remember, your booking will not be made until your accepted agreement has been received online. Delay could result in a price change or even a holiday no longer being available.

7. Once your booking has been completed the holiday provider will provide you with the details of your booking and will deal with your booking from that point forward.

EXAMPLE a. A holiday with an estimated price on the site of £1200 means that

it is estimated that your net take home pay would reduce by £100 per month for a period of 12 months for this holiday.

b. A holiday with an estimated price on the site of £3000 means that it is estimated that your net take home pay would reduce by £250 per month for a period of 12 months for this holiday.

IMPORTANT - Holiday ExtrasYour Quotation will NOT include any extras such as flight seat selection or flight meals on No Frills Airlines, as these items are selected as part of the booking process.

However, these items will be included in your final quote along with your ‘Variation of Contract’ when you finalise your booking.

IMPORTANTPlease note the commencement of the salary sacrifice arrangements (reductions in salary) are determined by the date of your booking and not the date of travel.

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SOME IMPORTANT POINTSa) You must read and be aware of the individual Terms and Conditions as provided by the scheme’s travel

provider and those providers of the individual elements of your travel arrangements.

b) You must carefully check all elements of your proposed travel arrangements as changes are not routinely allowed in Salary Sacrifice transactions.

c) Due to the dynamic nature of travel arrangements, both in terms of pricing and availability, on rare occasions your selected travel elements may no longer be available or the price might have changed by the time you approve and accept your documents – in these circumstances your proposed booking arrangements may be cancelled and you will be asked to submit a new booking.

d) Some airlines have budget fares which may not include baggage. Please ensure you check your baggage allowance to ensure you have the allowance required. Some airlines don’t support online baggage ordering in advance and you may be required to pay for baggage at the airport.

e) The airline operator of your proposed flights will be shown on the website, where the airline is shown as ‘Low Cost Airline’, in most cases, this is referring to the airline ‘Ryanair’.

f) Be aware, if you select a particular destination where the usual flight arrangements are fully booked, the system will try to meet your requirements by identifying flight routes that may include multiple flights. This can substantially increase travelling times and costs, so please check the number of flight connections prior to booking.

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CONTRACTUAL COMMITMENTOnce your travel arrangement or holiday has been booked and you have received a booking confirmation, you are then committed to that booking contract. It is a condition of the scheme that you have appropriate travel insurance which should include cancellation cover for any unforeseen circumstance that may prevent you from travelling or taking your holiday.

TAXATIONAlthough salary sacrifice arrangements may reduce Income Tax, pension and National Insurance (NIC) charges, the provision of travel and holiday solutions are taxable benefits.From the 6th April 2017, HMRC announced that they would limit the tax advantages that employees could make through certain salary sacrifice arrangements. You will therefore be liable to a tax charge on the Benefit-in-Kind, or salary forgone, whichever is higher. The amount of tax liability will be shown in your quotation.

Note that following the HMRC changes, although tax savings may no longer be achieved, savings in pension and NIC will remain.

NATIONAL MINIMUM/LIVING WAGEThe salary sacrifice cannot result in your Revised Basic Salary being below the prescribed National Minimum/Living Wage rates (i.e. so that the Revised Basic Salary would equate to less than the hourly legal minimum rate).For this reason, participation in the arrangements may be restricted to those employees earning at a rate that is higher than the current National Minimum/Living Wage rates and which will anticipate any potential increases in the rates during the period of the salary sacrifice agreement.

Like all travel and holiday bookings, it is very important that you read the standard travel terms and conditions provided by the scheme’s holiday provider, as provided on the website. These are general terms and conditions and your specific travel arrangement or holiday may have different and unique terms and conditions. You will be notified of specific terms and conditions at the time of booking.

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REDUCING YOUR SALARYEmployees accepting this proposal may pay a reduced amount of National Insurance Contributions (NIC) each month. However, a number of state benefits are dependent on paying a minimum level of NIC, for instance Statutory Sick Pay and Job Seekers Allowance.

TAX CREDITSFrom April 2003 the Government introduced Working Tax Credit (WTC) and Child Tax Credits (CTC) and in 2013 Universal Credits (UC).

You should consider the impact on such future contributory-based benefits if the salary sacrifice means that your Revised Basic Salary falls below the starting level for paying NIC. For further information on the current starting level for NIC please contact the Payroll Department.

You should be aware that agreeing a Revised Basic Salary may affect other company and state benefits such as Statutory Maternity Pay (SMP), sick pay and the level of entitlement in the event of death.

Agreeing a Revised Basic Salary might also affect more general financial matters such as mortgage applications. However, the majority of high street lenders take into account the arrangements outlined when making mortgage decisions, especially since many of the banking institutions already have similar salary sacrifice arrangements in place for their own employees.

It should be noted that quotations do not take into account the impact on WTC, CTC or UC which may mean that it may not be appropriate for some employees to participate in the scheme. WTC and UC are means tested and WTC affects the amount of CTC an employee may receive.

These credits consider the earnings and savings of both the employee and their spouse/partner. If participating in these arrangements were to alter the amount of credits an employee could claim, any loss of credits may be greater than the tax and NIC savings that may be generated. In principle a Benefit-in-Kind is considered earnings for the purposes of these credits.

Consequently each employee’s situation is different and it is necessary to take the spouse/partner’s salary and savings into account in order to estimate the most

realistic impact of participating in the Scheme. If you qualify for state benefits such as the Disabled Persons Tax Credit (DPTC) you may qualify for a higher level of credit.

Note that following the 6th April 2017 HMRC changes (see Taxation paragraph above), benefits provided under salary sacrifice arrangements are included in the calculation of income for Tax Credits. As such, reducing your salary through salary sacrifice may have little or no impact on your Tax Credit entitlement when the value of the taxable benefit is subsequently added back for the purpose of the income calculation.

If you are currently claiming WTC, CTC or UC you should consider very carefully the likely impact on your net disposable income before committing to any salary sacrifice.

IMPORTANTAny other payments (i.e. over and above basic salary) such as shift allowances, overtime payments and redundancy entitlements will continue to be calculated based on the Higher Notional Pay (i.e. the rate before the Revised Basic Salary was agreed). Any annual salary increments may be stated both in terms of the Higher Notional Pay and Revised Basic Salary.

It is important to note that percentage salary increases will be made by reference to the Higher Notional Pay.

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PENSION IMPLICATIONSIf you are a member of the local government pension scheme (LGPS), there will be implications to your pension. This factsheet therefore sets out the effect on your LGPS benefits.

Will I pay less contributions? If you join this salary sacrifice scheme, the deduction in respect of your travel/holidays will be taken from your monthly gross salary before any other deductions are made, therefore your taxable pay will be less, which means you will pay less pension contributions.

Your main scheme contribution rate may also change, as the rate payable will be re-assessed against your annual pensionable pay LESS the sacrificed amount. The contribution banding arrangement can be seen in the following table:

What about my additional contributions? Any additional pension contributions that you are making in respect of Additional Voluntary Contributions (AVC), Additional Pension Contributions (APC), Additional Regular Contributions (ARC) or towards purchasing ‘added years’ will continue to be taken from your gross monthly salary, after the deduction of the sacrificed amount, but before the income tax.

However, be mindful that if your AVC is currently expressed as a percentage of your pensionable pay, your AVC will be less due to the deduction of the sacrificed amount.

MEMBER CONTRIBUTION BANDS AND RATES FROM 1 APRIL 2017

Your actual pensionable pay In the main section, you pay a contribution rate of:

In the *50/50 section, you pay a contribution rate of:

Up to £13,700 5.5% 2.75%

£13,701 to £21,400 5.8% 2.9%

£21,401 to £34,700 6.5% 3.25%

£34,701 to £43,900 6.8% 3.4%

£43,901 to £61,300 8.5% 4.25%

£61,301 to £86,800 9.9% 4.95%

£86,801 to £102,200 10.5% 5.25%

£102,201 to £153,300 11.4% 5.7%

More than £153,301 12.5% 6.25%

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In contrast, the full pension build up for a LGPS member NOT contributing to a salary sacrifice scheme would be £20,000*1/49th=£408.16.

Therefore the impact on your pension (AT TIME OF PRINT) for each £100 sacrificed for a holiday would be 3.9p per week.

Will I build up less pension under the CARE scheme?Since 1st April 2014, your pension under the Career Average Revalued Earnings Scheme (CARE) is based on the pensionable pay that you have earned during each scheme year (1st April to 31st March).

Therefore, for the duration of the salary sacrifice agreement, your pension build up will be less as your pensionable pay will NOT include the sacrificed amount. For example:

Annual salary £20,000

LESS Sacrificed amount £100

Pensionable pay used in calculations £19,900

Pensionable build up for the scheme year £19,900*1/49th=£406.12

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Can I ‘make up’ this loss to my annual pension? You have the option to pay Additional Pension Contributions (APC) to purchase an additional annual pension amount. This amount is capped, for details please follow the link below.

You can then cover the loss to your annual pension. In order to do so, you will need to establish how much pension you have lost due to the agreement. You can find an online APC Modeller to calculate the cost of purchasing the additional annual pension amount: www.lgpsmember.org/more/apc/index.php

Should you wish to proceed, you must print the application form from the online Modeller and return a copy to Payroll. You will have the option to purchase the additional annual pension amount as a one-off lump sum or monthly over a minimum period of 12 months.

However, if you wish to pay monthly, you will have to certify that ‘you are in reasonably good health’ and may be asked to attend a medical.

Will my pre 1st April 2014 Final Salary benefits also be less?Possibly, as your final salary benefits in respect of your membership up to 31st March 2014 will be based on your pensionable pay, LESS the deduction of the sacrificed amount in the applicable final pay period (under the 2008 definition of pensionable pay i.e. without non-contractual overtime).

If you are still contributing to a salary sacrifice scheme in your final pay period, your Final Salary benefits will be affected. Your final pay period is normally the best year of your final three years of employment.

If you don’t have any salary sacrifices in the ‘Best year of your final three years of employment’ pre 1st April 2014 Final Salary benefits should not be affected.

Are there any other effects to my LGPS benefits?Yes, if you die whilst participating in a salary sacrifice scheme the lump sum death grant payable in the event of your death would be based on your assumed pensionable pay after the sacrificed amount has been deducted.

If your pension was to be at a level that incurred tax the impact would be reduced.

Please note these illustrations of pension impact are based on rates at time of print as all employees will have differing periods of time until they retire and we have no way of estimating salary growth for each employee or inflation rates.

FOR EACH £100 OF YOUR HOLIDAY COST; ESTIMATED IMPACT ON PENSION

Non tax paying pensioner 3.9p per week

20% tax paying pensioner 3.1p per week

40% tax paying pensioner 2.4p per week

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LONG TERM SICKNESS, MATERNITY LEAVE, REDUNDANCY OR RESIGNATION

The Council recognises that employees who are unable to work because of illness or incapacity, or who take maternity leave during the salary sacrifice, may have concerns. In these circumstances any employee who is absent from work for a period exceeding six months, will remain on their varied terms and conditions of employment throughout their period of absence. If the employee is unable to travel or take their holiday it is important that they claim from their cancellation insurance (which is a requirement of the scheme).

FURTHER INFORMATIONThe information in this document is for guidance only. For further information about your Local Government Pension, please call 0191 424 4141 or log on to www.twpf.info/mypension

IMPORTANTYou will need to make your own individual enquiries to identify any risks joining the scheme may present you with in the future.

If your period of absence is related to a “lifestyle event”, on your return to work the salary sacrifice arrangements may continue for an extended period that will include the duration of your period of absence. For example, if you had a holiday salary sacrifice arrangement scheduled for a 12 month period and you entered a period of absence for a year, after the first seven months had elapsed, on your return to work the salary sacrifice will be reinstated for a five month period. Under no circumstances will the cumulative periods of salary sacrifice extend beyond the period provided for by the Agreement.

If you are expecting a baby and are considering entering into a salary sacrifice for travel or holiday through the Salary Sacrifice Travel scheme, you must be aware that your Statutory Maternity Pay (SMP) - where payable - could be affected.

SMP is calculated on the amount of average weekly earnings during the eight week period preceding the 15th week prior to the expected date of childbirth. A salary sacrifice will reduce the amount of salary that is liable to National Insurance Contributions.

Therefore any salary sacrifice entered into during this eight week period will reduce entitlement to SMP (where payable). If you are pregnant and expect to have a period of maternity leave you should think carefully as to whether you should join the scheme during this period (please contact the Payroll department for further details).

If you are receiving SMP and maternity pay at present, you will not be eligible to enter into a salary sacrifice and take part in the Salary Sacrifice Travel Scheme.

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LEAVING THE COUNCILYour Salary Sacrifice Travel salary sacrifice agreement cannot be transferred between employers, even if your new employer is part of the Salary Sacrifice Travel scheme. If you choose to leave the Council during the agreement an early termination charge will apply.

EARLY TERMINATIONIf for any reason the salary sacrifice is terminated before the Expiry Date – i.e. your employment with the Council ends, you will be liable for an early termination fee. The fee will be based on the gross value of the travel/holiday(s) and the number of months remaining up to a maximum of the travel/holiday(s) gross cost. This amount will be deducted in a one off payment from your net salary. As a condition of the agreement, you give the Council permission to make such deductions from your net salary.

Where the Council has been unable to recover the outstanding balance from your salary, you agree to pay the outstanding amount by either cheque or credit/debit card.

It is important that you are aware that the Council will pursue any monies owed through its debt collection agency and ultimately through the courts.

Where the salary sacrifice is terminated early you will return to your original terms and conditions of employment and your Higher Notional Salary, unless of course you have left the Council.

You are liable to pay the early termination costs in all circumstances, including redundancy, if you terminate the Scheme early.

TRAVEL/HOLIDAY ARRANGEMENTS

When the booking has been confirmed, P&P Group will make all arrangements directly with yourself and will manage your travel arrangements directly with you.

RANGE OF PRODUCTSYour employer has arranged a wide range of travel opportunities and holidays across the world.

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CANCELLATIONSOnce your holiday or travel arrangements have been confirmed they cannot be cancelled.Where, for unforeseen legitimate circumstances, you need to cancel your arrangements and where these circumstances are acceptable as a “lifestyle” change as determined by HMRC, the council may agree to terminate the salary sacrifice agreement but only on full repayment of the gross cost of the travel arrangement as paid by your employer. (Hence the scheme requirement for full travel and cancellation insurance). Please be aware the Council will be informed of any arrangement cancelled by an employee.

INSURANCEIt is a condition of the scheme that you have appropriate travel insurance and that should include cancellation cover for any unforeseen circumstance that may prevent you from travelling or taking your holiday. Insurance will be available on the website as part of your travel or holiday costs.

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