When the Treasury announced changes to salary sacrifice with effect from 2017, many businesses feared it sounded the death knell for this popular loophole. In fact, the continued commitment to support salary sacrifice for pension scheme contributions has been the catalyst for many businesses reconsidering previous thinking and now deciding to implement this valuable tax concession.
Salary sacrifice (also known as salary exchange) is an agreement between an employer and its employees, whereby employees agree to reduce their gross salary in return for their employer making an equivalent pension contribution. This method achieves National Insurance Contributions (NIC) savings for both the employer and the employee.
The employer savings are usually 13.8% on every pound of salary sacrificed. The illustrations below show how a typical employer operating a scheme with 100 members could be saving £13,800 per year (assuming 100% take up and all employees’ earnings above relevant thresholds), if all employees were making pensions contributions of 4%.
How can Finch Employee Benefits help your business?
Our team have extensive experience of helping businesses successfully implement salary sacrifice schemes and communicate these benefits to employees to support maximum take up.
In our experience, the savings made in the first year alone can often mitigate any costs to the employer of setting up the scheme.
What if you already operate salary sacrifice arrangements?
If your business has already implemented a salary sacrifice arrangement, is it achieving its potential? We often find that existing schemes are not reviewed on a regular basis, nor promoted effectively.
This means there could be additional savings to be made – especially with many schemes needing to increase contributions in April 2018 to meet automatic enrolment legislation.
Our free of charge Pensions Audit will establish if your current policy and procedures actively encourage your employees to join the scheme, and that you are compliant with ever changing legislation, to give you extra peace of mind.
If you would like to find out how we could help your business with your salary sacrifice arrangements, please contact Employee Benefits Specialist David Vose on 07860 803876 or email firstname.lastname@example.org.