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Tax tip #1: Designing a tax-efficient remuneration package

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3 minute read.

A typical remuneration package comprises a number of elements. Some of these are subject to legislative control. For example, employers must pay employees in accordance with the National Minimum Wage legislation, paying at least the National Living Wage to workers aged 25 and older and, for workers under the age of 25, at least the National Minimum Wage for their age.

In addition, employers must comply with the equal pay legislation and provide paid holiday at least equal to the statutory minimum. However, other aspects of the remuneration package are at the discretion of the employer. 

In setting the remuneration package, the employer must have regard to a range of factors, including the culture of the organisation, market conditions and industry norms.

Within these parameters there are opportunities to structure the package to take advantage of the various tax and National Insurance exemptions and reliefs available. These can generate tax and National Insurance savings for the employee and National Insurance savings for the employer.

The opportunity to save tax and National Insurance should be taken into account when designing a remuneration package. However, as always, this is only one element and all factors affecting the pay and performance culture of the organisation should be considered.

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