My organisation has UK employees and is about to take on Isle of Man staff for the first time. What do I need to think about when deciding their benefits package?
There are a number of businesses with an Isle of Man presence that operate in the UK as well and it is sometimes assumed that the same benefits package can be extended to Isle of Man staff in a “cut and paste” fashion. However, there are a few things to bear in mind when catering for Isle of Man staff which may affect what exactly is offered as well as the drafting of benefit provisions in employment documentation.
| Lower taxation but higher cost of living…? |
| The Isle of Man has more favourable rates of personal taxation than some jurisdictions (lower rate is 10% and higher rate is currently 22%). However, the cost of living on an island is arguably higher than living in the UK taking into account travel, transportation, and relative cost of some imported retail/consumer items such as clothing and food.
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| Holidays |
| Statutory annual leave is 4 weeks, which can either be inclusive of, or in addition to, public holidays (the written terms of employment have to be clear either way). There are generally 10 public holidays per year (compared with 8 UK bank holidays). Market practice means that many employers “enhance” minimum annual leave entitlement.
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| Pension |
| Auto-enrolment does not apply in the Isle of Man so entitlement to pension contributions depends on the terms of the contract between the employer and the employee. That said, many companies offer retirement benefits as part of an overall remuneration package. Sometimes, this is via an employer scheme. Alternatively, payments may be made into a personal pension plan. Pension tax relief is available for contributions made into an approved pension scheme.
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| Medical & dental insurance |
| A scheme taken out by the employer which pays for the health screening, diagnosis and treatment of an employee who falls ill or needs dental work is an exempt benefit and not taxable for Isle of Man purposes. However, if the health or dental scheme covers not only the employee but also their spouse and/or dependants, the contribution the employer makes to cover the additional family members is a benefit in kind and must be reported accordingly. Where the employer already has a scheme in place for UK employees that it proposes to extend to Isle of Man based staff, it is important to check that the product will actually cover employees based in the Island and that access to designated healthcare providers “works” from an Isle of Man perspective.
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| Company car and fuel benefits |
| Private use of a company vehicle provided by the employer is chargeable as a benefit in kind. A car allowance, on the other hand, would be treated as additional earnings and have income tax and National Insurance contributions deducted on the full amount. The benefit in kind charge for the provision of a company vehicle will depend on the engine size and type of fuel and is determined in accordance with published tables. Mileage for genuine business travel may be reimbursed to an employee without deduction of income tax up to notified “pence per mile” rates.
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| Other points to note… |
| There are no statutory pay schemes administered through an employer in the Isle of Man (ie no SSP, statutory maternity, paternity or adoption pay). Instead, there are Government benefits available which are claimed directly by the employee (subject to meeting the qualifying conditions). Language providing that any employer enhanced pay for family leave is “net” of the relevant Government benefit may be required to ensure the employee receives the enhancement the employer intends and there is not an element of “double recovery”. |
| A number of benefits are expressly exempt from being taxed as a benefit in kind, subject to certain conditions and limits. These include:
· car parking (at work) · childcare to enable employees to attend work · Christmas party expenses up to £100 per head · cycle to work (provision of bicycle up to a specified value or cycle to work scheme) · meals in a staff canteen · sports and recreational facilities at an employee’s place of work |
| There is a further exemption for the first £600 of general benefits that an employer provides to an employee (not including accommodation and associated expenses, car benefit, fuel or bicycles). Where the aggregate amount of general benefits exceeds £600 per year, the balance will be taxable. |
It is usually worth consulting an Isle of Man benefits specialist to ensure that a proposed benefit package is appropriate and “fit for purpose” in light of Isle of Man tax rules and concessions. In addition, it can be helpful for an employer to have their contractual documentation and offer letters legally reviewed to ensure that these, also, “work” from an Isle of Man perspective. Elsewhere in the hub, we discuss annual and family leave entitlements (including specific, local, differences compared with the UK) which may, additionally, require adjustments in an employer’s group HR policies – eg if they seek to extend UK documentation to Isle of Man workers.
This note does not touch on bonuses or incentives such as share schemes which are also commonly considered as part of a total remuneration package. See separate materials on these topics within the hub for further information.
We regularly review and advise on employment documentation including written terms and conditions, handbooks and policies and are happy to discuss employer requirements, as needed.
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Useful Resources:-
https://www.gov.im/media/350893/gn40-benefit-in-kind-guide-2023-280323.pdf
