1 in 6 people in the UK currently have a gym membership[1].
And since enhancing health and wellbeing in the workplace remains high on many employers’ agendas, offering staff gym memberships can be a popular addition to your benefits mix.
Nearly a quarter of the companies that provide their staff with a gym membership do so via salary sacrifice[2]. It’s not hard to see why they might take this route when employers and employees derive tax and national insurance benefits from offering pensions, cycle-to-work schemes, and electric vehicles via this method.
But is salary sacrifice the right way to go when it comes to gym membership?
The Disadvantage of Salary Sacrificed Gym Memberships
The main downside to offering gym memberships via salary sacrifice is that it provides no income tax savings. Though they are offered through work and regular exercise could certainly be seen as beneficial for the health of the workforce, HMRC does not recognise gym memberships as business expenses that are necessary for work performance.
Instead, gym memberships offered via salary sacrifice are taxable benefits that must be reported on a P11D form, making them subject to employer national insurance contributions (NIC). Unlike other salary-sacrificed benefits, the employer makes no NIC savings. And even though employees can save up to 12% on NIC with this method (soon to be lowered to 10% this April), employees only receive this saving if they make less than £50,000 gross per year. If the employee finds themselves over this £50k plus threshold, their saving crashes down to just 2%.
The (Perceived) Upsides of Salary Sacrificed Gym Memberships
Gym memberships are, for the most part, expensive. They often require some form of significant outlay in terms of a “paid-up-front” annual fee or at least a commitment to pay monthly for a specified, fixed period.
For employers opting to offer gym memberships via salary sacrifice, a perceived benefit can be that it spreads this cost over 12 months. However, although it becomes a benefit in kind, and employees will benefit from the aforementioned 12% or 2% saving on their NIC over the year, they’ll soon be hit with a P11D the following year. So, if an employee lets their membership lapse, they’ll still end up paying tax on the premium even after they’ve stopped paying the premium.
Alternatives to Salary Sacrificed Gym Memberships
If it aligns with the needs and interests of your employees, gym memberships can be a great addition to your benefits package. They show that you are committed to the health and wellbeing of your employees, and in return, you can benefit from the reduced stress and increased energy of your team members that often comes with regular exercise. However, this does not have to be offered via salary sacrifice, and other options are available depending on your desired spend and perhaps even avenues that are already open to you:
- Wholly or Partly Subsidised Gym Memberships
Depending on which gym you choose for your corporate membership, you may be able to take advantage of discounts or free trial periods. Then, if health and wellbeing is a priority in your employee benefits strategy, you may choose to invest in it by wholly or partly subsidising memberships. - Health Insurance / Cash Plans
If you already provide health insurance or a health cash plan to employees, gym membership can often be included in these policies as a value-added benefit. Using this method, employees can enjoy heavily discounted membership rates and can often choose which gym is best for them. - Onsite Facilities / Hosting Classes
Though it will heavily depend on how much you want to invest, an onsite gym can be a real attraction for new, athletically-minded recruits. If you don’t require a large offering or your team is small, adding a machine or two to an unused space could be enough. Alternatively, investing in a few yoga mats and a screen could provide the perfect space for employees to participate in online fitness classes.
Whichever route you choose for offering health and wellbeing benefits, engagement with your staff is key. By understanding what they would value most in an employee benefits package, you can begin to form a cost-effective strategy that suits their needs, evolves with your company’s growth, and provides lasting benefits for you and your team.
[1] ‘The UK Fitness Report – 2023/2024 Gym Statistics’, Pure Gym, November 2023
[2] Employee Benefits/Xerox HR Services, June 2016
Editor’s notes:
February 2024
The information provided is the opinion of Acumen Employee Benefits and should not be regarded as advice or recommendation. Readers should seek appropriate guidance from their employee benefits consultant.