The debt burden on young graduates in this country is already substantial and, with tuition fees only set to increase, those straight out of university face an uphill battle to clear their loans. They must do this while trying to establish their first step on the housing ladder.
We decided it was time for businesses to take the initiative to help graduate employees pay off student loans. From the start of April, all graduates of a UK university who are employed by Microgen and are repaying their student loans via employer deductions will have a matching contribution paid of up to £250 per month.
I anticipate the scheme will cost us in the order of £50,000 in the early years, but I believe this is the best way to help our young workers. Even though the cost of the scheme is expected to increase as we grow, I would like to see other UK companies seriously consider adopting similar schemes.
By specifically targeting the payment for student loans rather than simply adding the amount to an employee’s salary, we help avoid potential salary inflation which, if not addressed, could be a significant issue for the UK economy and international competitiveness.
Helping in this way is beneficial to our company and the UK tech industry as a whole, especially in a knowledge-based economy where incentivising higher education and retaining our UK graduates is so vital.
Matching payments will be incremental to the employee’s normal remuneration. However, these incremental payments are deemed as taxable income and therefore the amount of the student loan actually repaid via this scheme could be reduced by income tax and national insurance (NI). If not, the company incurs additional costs (in addition to the loan repayments) related to income tax and NI (employee and employer) by grossing up the matched payments. If such employer payments were treated as non-taxable, further adoption of such schemes could benefit all those involved.
Microgen has written a letter to Vince Cable detailing our scheme. His department has reportedly commended our initiative, and we await a formal response.
It is important that successful companies take the lead on this matter. Despite Microgen’s relatively small size, we repeatedly win contracts for enterprise software solutions against some of the world’s leading software companies, and this is largely down to our great staff. With this initiative, we hope to keep attracting the brightest graduates and retaining them as their careers develop.
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