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Salary sacrifice offers ‘lifeline’ ahead of employer NI rises

by Benefits Expert
17/03/2025
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Employers have been urged to leverage pension salary sacrifice to potentially save thousands of pounds ahead of the rise in employer national insurance next month. 

Consultancy Hymans Robertson said that employers could make huge savings if they offset the impending increase in employer NI by moving to salary sacrifice for their staff pension contributions.

The firm calculated that for every £100,000 of salary employees sacrifice into their pension, the saving in employer NI will be £15,000 from 6 April. Employers should seriously consider implementing this change, which benefits both employers and staff, it said.

Employer NI will increase from 13.8 percent to 15 percent on April 6, 2025. At the same time, the threshold at which NI is paid will drop by nearly 50 percent, from £9,100 to £5,000, meaning more employees will be included under employer NI, further increasing the cost for employers. 

Hannah English, head of defined contribution (DC) corporate consulting at Hymans Robertson, said “The savings employers could benefit from, by introducing a salary sacrifice system for employee pension contributions, should not be understated. For every £100,000 of salary sacrificed, a £15,000 saving unlocks doors for businesses at a time where costs are being squeezed.

“Employers who already have a salary sacrifice system in place should maximise employee pension contributions in this way. They could also encourage further savings into a pension through other means – for example, through bonus sacrifice. This would help mitigate the changes that come into place in early April while improving the retirement prospects of existing employees.

“Some employers already make pension contributions on a matching basis. They could consider a different design structure – or else any savings in NI will be offset by an employer pension contribution cost increase.

“By increasing default employee contribution levels annually and providing staff with meaningful retirement guidance and advice support, employers could offset their looming NI costs while improving the retirement prospects of their employees.

“These simple changes could provide businesses a lifeline as the purse strings are tightened in the new financial year.”

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Benefits Unboxed

The podcast from Benefits Expert, the title for HR, reward and benefits professionals.

Seasoned professionals examine the challenges and innovations in today’s employee benefits, reward and HR sector. Every episode, they will unbox a key issue and unpack what it really means for employers and how they can tackle it.

The regulars are Claire Churchard, editor of Benefits Expert; Carole Goldsmith, HR director at the Royal Horticultural Society, and Steve Herbert, consultant and rewards & benefits veteran.

Benefits Unboxed – Wellbeing: HR is supporting everyone, but who’s supporting HR?
byBenefits Expert from Definite Article Media

As the professionals responsible for helping their organisations navigate NI hikes, rising employee stress levels and looming redundancies, the pressure on HR, reward and benefits teams has never been greater. 

HR is expected to lead with strength and compassion. But who is supporting the supporters?

In this episode of Benefits Unboxed, co-hosts Claire Churchard, Carole Goldsmith and Steve Herbert explore the emotional and ethical pressures HR face today, from managing redundancies to implementing complex legislation. They discuss why HR’s own wellbeing may not be the first topic of conversation, the risks that poses to employers, and the practical steps businesses can take to better support the wellbeing of the people who support everyone else.

This conversation shines a light on the resilience of the profession and why looking after HR is not just the right thing to do, but a business imperative.

Benefits Unboxed – Wellbeing: HR is supporting everyone, but who’s supporting HR?
Benefits Unboxed – Wellbeing: HR is supporting everyone, but who’s supporting HR?
22/05/2025
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