[UK] Less than half of companies offsetting NI costs with salary sacrifice

In the UK, increases in National Insurance (NI) contributions took effect on April 6. With employers and employees likely to feel the impact, new research has found that less than half (48 per cent) of UK companies offer salary sacrifice on their pension provision, HR News reports.

The annual research from Towergate Employee Benefits revealed the extent to which these businesses and their staff are missing out on offsetting the costs.

Sorangi Shah - Client Director at Towergate Employee Benefits - said, “Employers not currently utilising salary sacrifice for pensions are potentially missing out on savings for their business and their employees. Utilising it could be a very efficient way for them to make significant savings, particularly following the cost increases that have now come into force with the new National Insurance contribution levels.”

The likelihood of companies offering salary sacrifice on their pension provision reportedly increases with the size of the business. Just 38 per cent of companies with 20 employees or fewer offer salary sacrifice, compared with nearly half (49 per cent) of companies with 21-249 employees and over two-thirds (67 per cent) of larger corporates with 250+ employees.

According to Towergate Employee Benefits, it is surprising that more businesses are not utilising salary sacrifice. It stated that there is plenty of scope for experts to support companies of all sizes with implementing salary sacrifice and advised employers to review their existing arrangements to ensure they are maximising the options. 

Of those companies that offer salary sacrifice on pensions contributions, there was a varied response about what they do with the National Insurance savings they make as an employer.

Towergate Employee Benefits reportedly found that:

• 33 per cent give all the employer NI savings back to their employees

• 27 per cent share some employer NI savings with employees

• 21 per cent keep the employer NI savings within the business

• 12 per cent use employer NI savings to fund other benefits

• 3 per cent use the employer NI savings to fund their benefits platform

Ms Shah said, “The most surprising thing we found is that a third of employers give back all of the employer National Insurance savings to the employees, and only a fifth of employees retain the savings. This may well change over time, given the tighter budgets employers are likely to have going forward. We may well see a trend of more employers wishing to retain the NI savings.”

Employers with salary sacrifice schemes in place for their pensions provision can still use the increase in National Insurance contributions as an opportunity to review their pension and salary sacrifice arrangements, to ensure that they are compliant and are maximising value and engagement.

Ms Shah said, “Salary sacrifice is also known as salary exchange, and this is perhaps a better term as neither the employer nor the employee is actually sacrificing anything. In fact, they both gain from reduced National Insurance contributions and the employee will gain from tax efficiencies. With all this in mind, it is certainly something worth considering.”

Source: HR News

(Quotes via original reporting)

In the UK, increases in National Insurance (NI) contributions took effect on April 6. With employers and employees likely to feel the impact, new research has found that less than half (48 per cent) of UK companies offer salary sacrifice on their pension provision, HR News reports.

The annual research from Towergate Employee Benefits revealed the extent to which these businesses and their staff are missing out on offsetting the costs.

Sorangi Shah - Client Director at Towergate Employee Benefits - said, “Employers not currently utilising salary sacrifice for pensions are potentially missing out on savings for their business and their employees. Utilising it could be a very efficient way for them to make significant savings, particularly following the cost increases that have now come into force with the new National Insurance contribution levels.”

The likelihood of companies offering salary sacrifice on their pension provision reportedly increases with the size of the business. Just 38 per cent of companies with 20 employees or fewer offer salary sacrifice, compared with nearly half (49 per cent) of companies with 21-249 employees and over two-thirds (67 per cent) of larger corporates with 250+ employees.

According to Towergate Employee Benefits, it is surprising that more businesses are not utilising salary sacrifice. It stated that there is plenty of scope for experts to support companies of all sizes with implementing salary sacrifice and advised employers to review their existing arrangements to ensure they are maximising the options. 

Of those companies that offer salary sacrifice on pensions contributions, there was a varied response about what they do with the National Insurance savings they make as an employer.

Towergate Employee Benefits reportedly found that:

• 33 per cent give all the employer NI savings back to their employees

• 27 per cent share some employer NI savings with employees

• 21 per cent keep the employer NI savings within the business

• 12 per cent use employer NI savings to fund other benefits

• 3 per cent use the employer NI savings to fund their benefits platform

Ms Shah said, “The most surprising thing we found is that a third of employers give back all of the employer National Insurance savings to the employees, and only a fifth of employees retain the savings. This may well change over time, given the tighter budgets employers are likely to have going forward. We may well see a trend of more employers wishing to retain the NI savings.”

Employers with salary sacrifice schemes in place for their pensions provision can still use the increase in National Insurance contributions as an opportunity to review their pension and salary sacrifice arrangements, to ensure that they are compliant and are maximising value and engagement.

Ms Shah said, “Salary sacrifice is also known as salary exchange, and this is perhaps a better term as neither the employer nor the employee is actually sacrificing anything. In fact, they both gain from reduced National Insurance contributions and the employee will gain from tax efficiencies. With all this in mind, it is certainly something worth considering.”

Source: HR News

(Quotes via original reporting)