Salary Sacrifice

An important part of our benefit benchmarking process is to analyse your current benefit spend and identify areas where tax savings can be made, or where increased benefit can be realised for the same cost. For example we now run a number of our clients pension schemes on a salary sacrifice basis.

Salary Sacrifice is an inland revenue approved initiative which occurs when an employee gives up the right to receive part of the cash pay due under his or her contract of employment. Usually the sacrifice is made in return for the employer’s agreement to provide the employee with some form of non-cash benefit, in this case a pension contribution.

The reduction in salary needs to be agreed in writing by the employer and the employee, the agreement being dated prior to the effective date of the scheme. Jigsaw specialise in administering pension schemes on a salary sacrifice basis and can assist with the preparation of all relevant paperwork for the scheme to remain compliant with HMRC legislation.

The benefits to employee (and employer if preferred can be huge)

For example a net employee contribution of £50 would usually produce a gross pension contribution of £62.50.

If this £50 were paid via salary sacrifice the gross contribution rises to £81.73, an increase of approximately 31% overnight – and this without cost to employer or employee.

Many of our clients choose not to pass on some or all of the benefit and use the savings in NIC contributions to offset the cost of providing an employer pension contribution. We are happy to run schemes to suit your requirements.

For a free, no obligation consultation, please contact us on 02380 004444 to see how we can help.

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