Using salary sacrifice to reduce the costs of auto-enrolment

Here we identify one way in which using salary sacrifice arrangements when providing staff benefits can lead to cost savings for employers and employees.

What is pensions and salary sacrifice?

Salary sacrifice is a contractual arrangement between employer and employee. The employee’s pay is reduced before he or she receives it and a corresponding sum is paid by the employer into the pension scheme. Both the employee and employer save National Insurance on the amount sacrificed.

What if I want to use Salary Sacrifice for Auto-Enrolment?

There are a few things to think about if you want to continue to use Salary Sacrifice.

• You can’t make signing up to Salary Sacrifice a condition of membership of an Automatic Enrolment Scheme.
• If you want to use Salary Sacrifice you normally have to ask each employee to agree to it before you automatically enrol them or, where Opting-in applies, before they are eligible to join. If it helps you may want to consider postponing enrolment dates if available, this gives you more time to gain agreement.
• If an employee does not want to use Salary Sacrifice or fails to respond to your request to use Salary Sacrifice, you have to deduct pension contributions as prescribed in the new rules for pensions saving i.e from net pay.

We can assist you with a salary sacrifice scheme for your employees which could benefit both you and your employees. The scheme can be extended to additional benefits which, in some cases, will also obtain an income tax saving:

• Discounts on retail purchases
• Free eye test and dental cover
• Discounted gym membership
• Holiday exchange schemes
• Saving on the purchase of a new car
• Childcare vouchers

These popular schemes are easy to implement and have minimal administration. If you would like to know more about salary sacrifice, please contact us or visit our auto-enrolment homepage.