Pension salary sacrifice explained

12th February 2024

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.

Nick Bustin

Employment Tax Director
+44 20 7969 5578
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