Salary sacrifice

Osprey67 · 2024-05-07T08:48:38+00:00

Please can someone tell me if I have the wrong end of the stick. Googling isn't helping, neither are the payroll people my company use. If doing salary sacrifice, instead of going into my pension, can the amount saved go into my pay instead? So work pay 100% of my pension, I get paid 'less' but also get get the NI savings in my monthly salary so that my take home is higher. I've done two calculators which infers this is a thing.

whenwhenwhen · 07/05/2024 10:33

I think this is now being called "Salary Exchange" not that this is very important.

Anyway from my work they told me that:

"Salary exchange is an arrangement where an employee gives up part of their future earnings in exchange for a non-cash benefit, in this case an employer pension contribution. As the salary is being ‘exchanged’ rather than paid, neither the employee or employer pay NICs on the exchanged amount. The exchanged amount will be paid into the employee’s pension plan as an employer contribution – so contributions to the pension scheme remain the same – but take home pay could increase, marginally".

In my case my "gross pay" is lowered, but my after-tax "net pay" is slightly higher that it was previously, because I'm not having to pay my 50% pension contribution myself (my employer is now paying the entire 100% themselves), and also there's less NIC/tax for me to pay.

I don't think you can work this so that the amount you "saved" (by not paying your share of your pension) can go into your monthly payslip.

You could however opt out of your pension!!

Original poster

Osprey67 · 07/05/2024 10:46

whenwhenwhen · 07/05/2024 10:33

I think this is now being called "Salary Exchange" not that this is very important.

Anyway from my work they told me that:

"Salary exchange is an arrangement where an employee gives up part of their future earnings in exchange for a non-cash benefit, in this case an employer pension contribution. As the salary is being ‘exchanged’ rather than paid, neither the employee or employer pay NICs on the exchanged amount. The exchanged amount will be paid into the employee’s pension plan as an employer contribution – so contributions to the pension scheme remain the same – but take home pay could increase, marginally".

In my case my "gross pay" is lowered, but my after-tax "net pay" is slightly higher that it was previously, because I'm not having to pay my 50% pension contribution myself (my employer is now paying the entire 100% themselves), and also there's less NIC/tax for me to pay.

I don't think you can work this so that the amount you "saved" (by not paying your share of your pension) can go into your monthly payslip.

You could however opt out of your pension!!

That makes sense, thanks. I've mistaken the slightly higher take home to be something passed on rather than naturally occuring. It's 'only' £300 ish but pays few months of the kids swim lessons so I'm keen to do it!

OP posts:

whenwhenwhen · 07/05/2024 11:12

Osprey67 · 07/05/2024 10:46

That makes sense, thanks. I've mistaken the slightly higher take home to be something passed on rather than naturally occuring. It's 'only' £300 ish but pays few months of the kids swim lessons so I'm keen to do it!

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If it's an extra £300 over the year then that's probably about right. Yes, useful to have!

If it's an extra £300 monthly then that seems strange to me. I'm not an accountant though so am unsure.