Record low unemployment levels are fantastic for individuals wishing to work, but they often lead to pressure to increase employees' gross wages, which results in a reduction in a business’ hard earned profit margin. Giving special consideration to how you structure the pay of key employees may be a win-win for employers and employees alike.

Rob Giffard, senior tax and salary packaging advisor from GiffardSim Accountants Nowra, said that the need to reconsider the salary packages of key employees was emphasised when Australia’s seasonally adjusted unemployment rate to December 2006 was announced as being 4.6 per cent. “This low figure means that employers need to continue to take initiative and review the salary package of key employees before one of their competitors realises the employee is undervalued by their current employer."

Despite the obvious benefits of retaining key employees, Mr Giffard said that only proactive business operators have been using salary packaging as a way of proactively retaining and recruiting high quality staff. “I have one client, Box Built Pty Ltd, that engages me to review employee salary packages to ensure their employees are legitimately maximising their after tax income." Roger Till, Director of BoxBuilt Pty Ltd said that the Company’s board of directors puts a high value on retaining and rewarding employees, “We are a large employer with interests in several states; retaining and rewarding key employees, while at the same time minimising the overall impact on our profit margin is critical to our customers’ expectations and corporate objectives."

Salary packaging options vary according to each employer's and employee's circumstance. However, the common items provided include motor vehicles, laptop computers, and mobile phones. Other non-common areas which are being used by proactive small and medium businesses include the payment of living away from home allowances, airline memberships and compassionate travel, where applicable. “Employers are taking the opportunity to demonstrate to personnel that they care about their personal financial circumstances. Box Built Pty Ltd has been doing this for the last two years and I can see how grateful and loyal their employees are because their employer genuinely cares about them,” Mr Giffard said.

Mr Giffard advised that employers establish a strategic relationship with a proactive tax advisor to ensure effective tax strategies are identified early.