HI - no, holiday isn't a benefit in kind. Buying and selling holiday is just a contractual arrangement between the employer and employee (although if you include the ability to sell holiday, technically the individual will pay tax on it, but that's just because their taxable pay will be higher).

You just need to work out the 'price' you charge for each additional day. At my last organisation, it was 1/260th of gross pay for each extra day. It does get complicated if people change their hours during the year.

In reply to Teresa:

Hi Tersa, thanks for coming back to me on this. Did you previously spread the cost across the year or is it possible just to deducted as a monthly payment or a lump some, regards Andy

In reply to Andy Dodd:

Hi Andy - we calculated the total amount and then divided it by 12 and deducted an amount each month.
You just need to be a little bit careful when someone leaves midway through the year - you can't just pro-rata it as you normally would as they are entitled to the total amount they have bought at that point.

So for example, if someone buys 3 days and then leaves exactly 6 months through the leave year, they will have actually paid for 1.5 days. So when calculating their annual leave on leaving, you pro-rata their main allowance and then add 1.5 days on.

Alternatively, you add the amount they would have paid for had they stayed to the end of the year and then pro rata the total.

Andy

Late reply to your question but I hope it adds to Teresa's suggestions

IMHO you could go down the salary sacrifice route (but see later), where you jointly agree to reduce the annual salary from X to Y, and at the same time the company agrees to increase annual holiday entitlement from A to B (this removes the problem of reconciling outstanding leave/salary deductions, provided your payroll system can cope with different numbers days of annual leave for different people).

However.... you should note that HMRC is ending salary sacrifice arrangements in 2018 for all benefits except a few, so such an approach would almost certainly make the extra holiday a benefit in kind  (unless agreed and suitably recorded before starting employment). Details can be found here

In reply to Teresa:

Hi Teresa
I am also looking at introducing such a scheme. Does anyone have a policy they are happy to share on this as it would be really helpful?

In reply to Ray:

Hi Ray

It's my understanding that pensions, bonus waivers into pensions, childcare vouchers, cycle to work schemes, buy/selling holidays and GAYE will largely be unaffected by the changes to salary sacrifice.

For buying/selling holidays specfically, the Government consultation on the new arrangements from Dec 16 (Pg6) comments

Alongside annual leave, are there any other salary sacrifice arrangements that the government should be made aware of that do not strictly involve receipt of a benefit?

This question was intended to ascertain whether, apart from annual leave, there were any other instances where salary was being sacrificed in exchange for intangible benefits.

A number of respondents confirmed that salary sacrifice arrangements are used to increase flexible working, for example by exchanging salary for annual leave or the ability to vary working hours. Beyond these arrangements, which are perceived as helping employees to maintain a good work/life balance, there was no evidence of salary sacrifice being used in return for intangible BIK's.

Government Response:

The government has noted these comments. There will be no change where salary is sacrificed in return for intangible benefits such as additional annual leave or flexible working benefits.

Full paper at: www.gov.uk/.../Consultation_on_salary_sacrifice_for_the_provision_of_benefits-in-kind_-_summary_of_responses.pdf

 

IMO, that's a good move by the Government.. I think a lot of staff who benefit from flexible holidays really appreciate the value of it and would be an emotional topic for us if we had to abolish the scheme based on the new legislation.

Regards

Sarah

In reply to Jane Hudson:

any luck with a policy?