Skip to content
Salary Sacrifice
This page explains salary sacrifice pension schemes
Salary Sacrifice - What is it?
A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit such as pensions or Cyclescheme.
The overall effect is a tax saving on payroll taxes such as National Insurance. This can be seen in the table below:
Benefits
Disadvantages
Table showing impact of Salary Sacrifice
The below tables shows the overall impact of salary sacrifice on a higher rate employee at £49,000.
The scenario’s presented are if the Company passes on the saving (scenario 1) or the Company keeps the NIC saving (Scenario 2)
Scenario 1 -Before salary exchange - saving to employee
Scenario 1 - After salary exchange - Saving to employee
Scenario 2 - Before salary exchange - Savings retained by Ori
Scenario 2 - After salary exchange - Savings retained by Ori
Salary
£49,000.00
£46,117.00
£49,000.00
£46,550.00
Employee
Pension contribution
£2,450.00
£0.00
£2,450.00
£0.00
Income tax payment
£7,286.00
£6,709.00
£7,286.00
£6,796.00
NIC
£4,731.00
£4,385.00
£4,731.00
£4,731.00
Employer
Pension contribution
£2,450.00
£5,730.00
£2,450.00
£4,900.00
NIC
£5,542.00
£5,144.00
£5,542.00
£5,204.00
Outcome
Employee take home pay
£35,022.00
£35,022.00
£35,022.00
£35,316.00
Total pension contributions
£4,900.00
£5,332.35
£3,920.00
£4,900.00
Cost to employer (including salary)
£56,992.00
£56,992.00
£56,992.00
£56,654.00
There are no rows in this table
Want to print your doc?
This is not the way.
This is not the way.
Try clicking the ⋯ next to your doc name or using a keyboard shortcut (
CtrlP
) instead.