Smart Pension – workplace pensions and automatic enrolmentContact form - Employer
User Guide for Smart Pension models including: Short Guide To Salary Sacrifice, To Salary Sacrifice, Salary Sacrifice
File Info : application/pdf, 8 Pages, 3.18MB
DocumentDocumentShort guide to salary sacrifice For employers What is salary sacrifice? Salary sacrifice, also known as `salary exchange', is an arrangement with you and your employees where you agree to reduce your employee's salary by the amount you want to contribute to their pension. You will then pay this amount, plus your contribution, to their pension savings. Why should I choose salary sacrifice? Allows you to offer increased benefits for your employees, at no extra cost to you Both you and your employees pay less National Insurance contributions You can choose how to reinvest those savings Example yearly employer National Insurance Contribution savings Figures are based on an average salary of £30,000 per employee, and contribution rates of 5% of total pay. Salary sacrificed by employees Employer National Insurance contribution rate (2023/2024) 10 members 50 members £15,000 £75,000 13.8% 13.8% 100 members 200 members £150,000 £300,000 13.8% 13.8% Yearly employer National Insurance Contribution savings £2,070 £10,350 £20,700 £41,400 You can choose to pass on all or some of these savings into your employees pension savings, or alternatively you can decide to retain it for the benefit of your business. 2 How does it work? If you offer salary sacrifice, this is how it works: · you will reduce the employee's salary by the pension contribution they wish to pay. · the National Insurance contributions paid each month will be calculated on the employee's reduced salary figure. · the total regular amount paid into their pension plan will not reduce and may increase at no extra cost, depending on the basis of the arrangement. · the amount exchanged will be added to your existing employer contribution and result in a new total employer only contribution being paid into the member's pension. Some things to consider · increased level of administration and HR work required to set up salary sacrifice. · your payroll provider will need to display salary sacrifice correctly. · your employees' pre-tax salaries will reduce by agreeing to salary sacrifice which may impact their entitlement to statutory or salary benefits. · Salary sacrifice will affect the employment terms and conditions for your employees, which is a matter of employment law. · If you are unsure what you need to do, we recommend that you seek the services of a specialist employment lawyer and/or tax adviser. 3 How to set up salary sacrifice There are a few things you need to consider before you set up a salary sacrifice arrangement. Decide what you are going to do with the NI saving An important decision when setting up your arrangement is to decide if you will: · keep all of your National Insurance (NI) contribution savings · reinvest all of your NI savings into your employee pension plan · a bit of both - keep some for you and your business, but also pass some back to your employees 44 Decide who's joining your salary sacrifice scheme You can set it up so that some or all of your employees can join. Decide if you want to set a salary sacrifice limit This will keep their final take home pay above the National Minimum Wage or National Living Wage. Update your employment contracts You are legally required to update your employees' contracts. You will also need to let HM Revenue & Customs (HMRC) know. Give your employees choice You have to give your employees a choice when you set up a salary sacrifice. 55 66 Talk your employees through the change 7 Interested in finding out more? Get in touch by calling us on 0333 666 2323 or speak to your dedicated Smart Pension contact. You can also contact our employer support team by completing this online contact form. Smart Pension Limited The Smart Building, 136 George Street, London, W1H 5LD Website: smartpension.co.uk Telephone: 0333 666 2323 Company registration number: 09026697 8