Aon: Forget SalSac – get ready for OPRA

Employers must face up to potentially significant and costly changes to salary sacrifice as the new Optional Remuneration Arrangements (OPRA) take effect says Aon Employee Benefits.

Aon says employers should not put off changes to their benefits packages in the hope of a government rethink as while many clauses of the Finance Bill were cut before it received Royal Assent, the OPRA elements have remained largely intact. The measures came into effect on 6 April.

OPRA is the new term for salary sacrifice, and introduces the concept of Type A and Type B arrangements.

Organisations need to be aware of the remaining difference in treatment for life assurance provided on a registered and excepted basis, the taxation changes for group income protection, excepted group life assurance and employee health screenings provided via Type A or Type B OPRA arrangements, as well as the changes to the taxation of mobile phones and home technology, among others.

Polls from an Aon briefing in March and a webinar in April showed that 40 per cent of employers are adopting the short-term stance of locking down flexible benefit choices until next renewal while 25 per cent are capturing the changes via P11D and dealing with offline communications. A further 5 per cent will absorb the HMRC debt at the end of the year, and another 5 per cent are bringing forward the tax charge. Just 25 per cent are catering for changes.

Aon Employee Benefits principal Jeff Fox says: “The Finance Bill 2017 underwent significant changes as a result of the snap election, and many of the proposed measures were cut, resulting in a much shorter Bill. However, the Bill is now legislation and the changes offer little reprieve around OPRA. It means we still have work to do.”

“Polls run at Aon’s briefing in March showed that the majority of employers are locking down the ability for flex choices to be made (by new or existing employees) until the next renewal date. This means, while they’ve taken action in the short term, they need to decide whether the tax changes affect their long-term strategy and if so, how.

“We urge employers to review their employee benefits schemes without delay if they have not done so already. For those considering the grandfathering option, we would remind employers that it is fragile, and is at best a short-term option.”