Nick Bustin, Employment Tax Director, explains what a pension salary sacrifice is and the considerations employers should take into account.
What is a pension salary sacrifice?
In this video, Nick shares the valuable benefits of a pension salary sacrifice exchange for both employers and employees, especially during difficult economic times. Traditionally, employees pay pension contributions from net earnings. However, with a pension salary sacrifice, employees agree to a reduced salary in exchange for employer-managed pension contributions, resulting in lower Income Tax and National Insurance contributions (NICs), and increased take-home pay.
Watch the video to understand:
- Advantages for employees who can see immediate tax relief.
- Advantages for employers, including reduced taxable earnings.
- The importance of maintaining compliance with the National Minimum Wage.
- Potential downsides of the scheme, such as the impact on state-related benefits.
Employers can take away actionable steps when considering and implementing a pension salary exchange, and our Employment Tax team can assist with the planning and consultation of such a scheme, as well as supporting employers with staff engagement and how the scheme is received by employees. If you need further advice on a pension salary exchange, get in touch with Nick at nbustin@haysmacintyre.com or your usual haysmacintyre contact.
