Salary Sacrifice Research

What's this all about?

His Majesty’s Revenue and Customs (HMRC) has published research it commissioned on how employer’s use salary sacrifice for pension contributions. The findings indicate that salary sacrifice is primarily valued for the National Insurance (NI) savings it provides to both employers and employees. However, most of the employers surveyed reported using their share of the savings to cover general operating expenses rather than to boost pension contributions.

The study also explored employers’ responses to hypothetical changes to the current salary sacrifice rules. The findings show that salary sacrifice is widely used and valued, particularly following recent increases in NI rates. While most employers understand the basics, some lack awareness of its full financial benefits. All proposed changes were unpopular, with concerns raised about higher costs, reduced staff retirement savings and lower morale.

What does this mean for UK employers?

If any changes are made to the rules on salary sacrifice, they may take time to implement. However in the meantime, it's worth considering the potential impact on budgets should an announcement be made.