Husky Finance (Husky) has partnered with Swoop Funding (Swoop) to raise awareness of the benefits of pension salary exchange for SMEs.
Salary exchange is standard practice among larger employers, but most smaller employers are missing out on the savings it offers them and their employees, Husky said.
Under the partnership, Husky, a pension technology firm that manages workplace pensions, payroll and salary exchange for more than 2,000 SMEs, will work with Swoop to make salary exchange simpler and easier by offering a single, integrated platform.
Businesses that implement salary exchange can benefit from reduced national insurance contributions (NICs). This can be particularly helpful for companies with outstanding loans, as the additional savings may enhance their financial health and loan affordability, Husky said.
What is salary exchange?
Salary exchange, also known as salary sacrifice, enables employees to contribute to their pension schemes in a tax-efficient manner.
An employee will need to agree to give up a portion of their salary or bonus before it is paid to them. The employer then contributes this amount directly into the employee’s pension scheme. This means that the employee’s gross salary is reduced by the amount they have sacrificed. As the pension contribution is made before tax is deducted, employees benefit from paying less income tax and NICs on their reduced salary.
Employers benefit from an annual reduction in NICs because they are based on the reduced salary. Employers can use this saving to increase their employees’ pension contributions or invest the savings back into their business.
Pension contribution salary exchange is widely viewed as beneficial for employees and employers, however, it is important to consider the potential impacts on overall compensation and benefits, particularly those calculated on gross salary.
Non-compliance risks
The technology platform can also help SMEs comply with auto-enrolment regulations, Husky said.
Non-compliance can lead to potentially significant fines, impacts for future due diligence and credit checks, and could expose company directors to the risk of criminal charges with up to two years in prison.
From July to December 2023, The Pensions Regulator issued 27,938 automatic enrolment penalties.
Failure to comply with statutory notices can result in a fixed penalty notice with a fine of £400. However, continued failure to meet regulations can result in fines up to £10,000, depending on the number of staff in the business.
Husky said its tech is designed to mitigate these risks by providing reliable, automated support to ensure businesses remain compliant with legal requirements.
Financial health
Brendan Shanks, CEO and co-founder of Husky, said: “We are excited by this partnership not least because it is formal recognition of the unique strength and value of the service we have built, but also because Swoop are so focused on providing their customers with the best possible range of funding and savings solutions to help them protect the financial health of their businesses, while removing all of the jargon and empowering businesses to grow.”
Ciaran Burke, COO and co-founder of Swoop Funding, added: “The Husky service is a perfect fit for us, enabling us to offer all our clients the level of support and assistance they require to take care of their workplace pensions, payroll obligations, as well as adding salary sacrifice for both the business and employees to benefit from. Husky’s uniquely comprehensive service and incredibly fair commercial model made it an easy choice. A large quantity of our around 20,000 plus UK SMEs are now set to benefit enormously from Husky’s services.”
Olga Sala, COO of Husky, said: “This partnership is crucial for raising awareness about salary exchange among SME owners, and staff. Many are either unfamiliar with or have misconceptions about it, and those who do understand it often face challenges. These can include adjusting payroll systems, managing complex documentation, handling high implementation fees and communicating effectively with employees. Outdated systems may further complicate integration.
“Husky’s solution addresses these issues with a streamlined, app-based system that automates and simplifies the entire process. Interest and inquiries from SMEs are increasing significantly and it is encouraging to see more UK companies taking full advantage of salary exchange as a result.”
