Enhance your organisation’s and employees’ financial wellbeing

Salary Sacrifice (increasingly known as Salary Exchange) is a fantastic financial opportunity for employers to save money and employees to boost their pension funds – at no extra cost. Our Workplace Pension Consultants can design a Salary Sacrifice scheme for your Workplace Pension that is Auto Enrolment compliant and manage the technical and legal requirements so that you and your employees can benefit together.

Using Salary Sacrifice as a means for employees to pay their pension contributions is a win-win situation. It allows employers to achieve significant savings in National Insurance Contributions, reducing the overall cost of their Workplace Pension contributions. Employees benefit from paying less tax and National Insurance Contributions and Higher Rate Tax Payers will automatically receive the full benefit of their contributions, meaning they do not need to complete a Self-Assessment Tax Return each year in order to get the full tax relief on their pension contributions.

How does Salary Sacrifice work?

A Salary Sacrifice or ‘Salary Exchange’ occurs when an employee agrees to give up the right to a proportion of their pay. This represents a change in the Terms and conditions of their employment. In return for this reduced salary, their employer provides them with an additional employee benefit. Using a Salary Sacrifice arrangement can therefore be used to make Workplace Pension Schemes more cost effective and be used to purchase various flexible and voluntary benefits.

What are the advantages of Salary Sacrifice?

By giving up an amount of their pay before they would otherwise receive it, an employee benefits from a reduction in both their Income Tax and National Insurance Contributions. This makes their pension contributions far more effective.

Additionally, employers will pay less Employer National Insurance Contributions as a result of agreeing a reduced salary with each employee. This saving can be used to reduce the overall cost of managing the Workplace Pension or it can be used as an additional incentive to employees, boosting their contributions even further.

As a result, Salary Sacrifice is the most effective way for employers and employees to save together and encourage employee engagement with the value of savings into their Workplace Pension.

What else should be considered?

When introducing a Salary Sacrifice scheme there are a number of considerations for employers to ensure there are no unexpected effects on pay and benefits.

For example, by reducing an employee’s gross salary for an employee, the rate at which overtime is paid or bonuses are calculated may be affected. Similarly, it may mean that Death in Service (Group Life Insurance) or Sick Pay (Group Income Protection) benefits are based on lower earnings than they would otherwise have been.

The good news is that, with the help of an experienced Employee Benefits Consultant, there are solutions to all these issues. They shouldn’t present any challenges on a day to day basis or be a barrier to helping employers and employees make their money go further.

Let Creative help you harness Salary Sacrifice to everyone’s benefit

Creative offers you the end-to-end expertise needed to manage your Employee Benefits and Workplace Pensions together effectively and simply. We can help you harness all the benefits of Salary Sacrifice, reducing your costs and giving your employees a welcome boost to their savings at no extra cost to them.

Salary Exchange needn’t be a sacrifice – we have the know how to give you the benefits as efficiently as possible. So let’s make your money go further. Talk to Creative today.


Important information about Salary Sacrifice Schemes

  • Because a Salary Exchange agreement reduces salary, it can have an impact on some State Benefits or State Credits. For example, Statutory Sick Pay and Statutory Maternity Pay may be reduced while Child Tax Credits may be increased
  • If anyone is considering starting a Salary Exchange agreement, they should take into account the impact on such benefits and credits

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