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PBIs – 5 Tips on Negotiating Salary Packaging Contracts

Public Benevolent Institutions and Salary Packaging

If you are a Public Benevolent Institution (PBI) you are probably aware that you can provide fringe benefits to your employees free of fringe benefits tax to a capped amount.

As an employer, it may be efficient for you to negotiate a salary packaging contract with a provider to administer the salary packaging service along with any novated leasing options.

Salary packaging service providers generally provide a variety of services to employers which can include:Touchpoint Legal Charities Law

  • Administering the salary packaging process in compliance with FBT laws
  • Providing tools and guides to employees on salary packaging
  • Providing reports in relation to employee transactions
  • Providing meal and fuel cards
  • Sourcing vehicles and funders to provide novated leasing services.

Along with the general commercial terms that are common in most commercial contracts, here are 5 things that you should consider when negotiating a contract with a salary packaging provider:

#1 Liabilities of Ex-Employees

Sometimes an employee at termination of employment may have a deficit in their salary packaging account. Once terminated, it may become difficult to recover the deficit from the employee. When negotiating a salary packaging agreement it’s advisable to consider whether the agreement covers any procedures to recover the debt from the employee and, in the event of a failure to recover the liability from the employee, who should bear the responsibility for the liability.

#2 Change in Law

Sometimes the Australian Taxation Office (ATO) will issue a ruling which is at odds with the way in which a particular benefit has been administered. When negotiating with a salary packaging provider, it is important to consider which party will take the responsibility for any liabilities arising from a subsequent ruling issued by the ATO impacting the way in which a particular benefit has been administered.

#3 Interest and Fees

Salary packaging providers operate bank accounts that hold pre-tax employee funds provided by their employer.

Where a salary packaging bank account is operated, interest will accrue on the monies held in the account. In addition, bank fees and taxes will be incurred on the account. When negotiating with a salary packaging provider, you should consider which party should obtain the benefit of the interest on the money retained in the account and which party should pay the bank fees and taxes.

Privacy Law Touchpoint Legal#4 Privacy and Employee Information

As with any outsourced service, it’s imperative that a salary packaging provider has robust privacy compliance plans in place to protect your employee information. When reviewing a salary packaging contract, you should ensure that the provider agrees to have appropriate security protections in place and takes responsibility for loss or misuse of employee data held by them and their outsourced service providers.

# 5 Marketing to Employees 

A salary packaging contract may contain provisions about the right of the salary packaging organisation to market various products to your employees. Always review these provisions to ensure that you are comfortable with when and how marketing to your employees is permissible.

If you need help with negotiating a salary packaging agreement, our experienced lawyers would be happy to help you.  Contact us for an obligation free discussion about how we can help.

This blog is for information purposes only, does not constitute legal advice and should not be relied upon as such. If you require legal advice please contact us or another registered legal practitioner. 

About The Author

Angela Stackelbeck

Angela Stackelbeck is a Legal Director at Touchpoint Legal. She has practised law in Sydney in large corporates and private practice, for over 20 years. Angela’s broad experience allows her to uniquely offer the dual benefit of practical legal expertise gained in private practice and commercial pragmatism learned from the in-house environment. You can contact Angela at
angela@touchpointlegal.com.au or on 02 8005 0692 or 0404 872 644.