When an employee receives a termination payment, an employer has the option to calculate how much of the payment can be paid tax free using the Basic Exemption or the Standard Capital Superannuation Benefit (SCSB) options. The following question often arises: What effect does a salary sacrifice scheme have on an SCSB calculation?
Revenue have confirmed that if an employee opts for an approved salary sacrifice (travel pass, a bicycle under the Cycle to Work Scheme or Shares under an approved share scheme), this will not reduce their remuneration or emoluments for the purpose of calculating the SCSB in the event of an employee receiving a termination payment i.e. where an employee's gross salary of €50,000 is reduced by €1,000 in respect of a Cycle to Work Scheme, leaving him with taxable pay of €49,000, his gross salary of €50,000 can be used when calculating his average annual earnings over the last 36 months for the SCSB calculation.
Revenue have confirmed that if an employee opts for an approved salary sacrifice (travel pass, a bicycle under the Cycle to Work Scheme or Shares under an approved share scheme), this will not reduce their remuneration or emoluments for the purpose of calculating the SCSB in the event of an employee receiving a termination payment i.e. where an employee's gross salary of €50,000 is reduced by €1,000 in respect of a Cycle to Work Scheme, leaving him with taxable pay of €49,000, his gross salary of €50,000 can be used when calculating his average annual earnings over the last 36 months for the SCSB calculation.
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