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Salary sacrifice offers ‘lifeline’ ahead of employer NI rises

by Benefits Expert
17/03/2025
tax, salary sacrifice
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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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