Does it matter if an employee’s payslip still shows the old salary as gross pay and the sacrificed salary as a deduction?
• In the event of any dispute about the pay and benefits an employee is entitled to, the employment contract is the first thing to consider. If the employment contract has been effectively varied and the employee is entitled to a reduced level of salary and specified benefits it is not important what data is shown on the payslip. However, if changes to the employment contract have not been made or are ambiguous, HMRC will consider all available information when making a decision about the earnings an individual is entitled to. The payslip may be a piece of evidence that would be considered in these circumstances. • Some payroll software can only hold one value as gross pay. This causes problems when overtime and other pay is calculated on the basis of the pre-sacrifice, higher salary. However, if the contract is clear this does not invalidate the salary exchange. (See EIM42770) • There are some important points that employers are advised to consider though: Non-taxable benefits-in-kind
