New National Insurance Hike: Will It Stick a Pin in Everyone’s Wallet?
Starting 6 April, the government is upping National Insurance contributions, and that means businesses and employees alike feel the squeeze. It’s like a sudden budget garnish—no one asked for it.
Salary Sacrifice: The “Secret Sauce” That Most Companies Overlook
Towergate Employee Benefits’ latest research shows only 48 % of UK firms offer a salary‑sacrifice option for pensions. That boils down to a hefty missed opportunity for both side‑sides of the pay table.
Why You Should Care
- With higher NI, every pound stuck to payroll costs is a heavier dent in company coffers.
- Salary sacrifice lets employers cut their national insurance bill and gives employees more money in the pocket.
- It’s basically a free‑bie: the company saves on taxes while workers keep a bit more of their hard‑earned cash.
From the Expert Desk
Sorangi Shah, Client Director at Towergate Employee Benefits says: “If you’re not using salary sacrifice for pensions, you’re missing out on a real money‑mending trick—especially now that the new NI rates are in effect. It’s a straightforward, efficient way to make big savings for both the business and its staff.”
Bottom line? If your company isn’t exploring this option, you’re basically throwing bread crumbs away—while the new NI tax is a less friendly dog that’s chewing at your budget. Secure that loophole and keep the future financially fit!
Smaller companies and their employees are missing out
Pension Play: Why Some Companies Miss Out on Salary Sacrifice
Turns out the chances a business hooks onto salary‑sacrifice grow as the company bounces up the size ladder. Here’s the quick scoop:
- Small‑Biz: Only 38% of firms with 20 or fewer staff are making the move.
- Medium‑Mazillion: That climbs to 49% for teams between 21 and 249 people.
- Big‑League: Over two‑thirds—or 67%—of organisations with 250+ employees have joined the club.
Why So Few?
Towergate Employee Benefits is scratching its head—there’s even room for a friendly consultant to help both the curious small shop and the powerhouses unlock the perks.
“If you set your sights straight, you’ll snag real savings,” says a Towergate rep. “Advisors can fine‑tune your arrangements and make sure no opportunity slips by.”
The Numbers Game
Take for instance a typical employee earning £30,000 with a 5% pension contribution. Using Towergate’s handy calculator:
- Employer keeps £225 in National Insurance per year.
- Employee nets £120 in savings.
So, if you’re at the helm of a company—big or small—open the door, tap into some expert insight, and let your pension plans work smarter, not harder.
What companies do with the savings made from salary sacrifice
When companies slice a portion of pay into pension pots, they not only cut taxes, but also save on National Insurance (NI). The big question is: what do they do with that sweet extra cash? The numbers reveal a mix of generosity, strategic planning, and a dash of corporate mystique.
Employer NI Savings: The 4‑Prong Split
- 33 % reward their folks by giving the entire paycheck back.
- 27 % share a slice, but not all the crumbs.
- 21 % keep the money for themselves, adding a bit more into the firm’s pot.
- 12 % juggle the savings into other employee perks—think gym memberships or tech gadgets.
- 3 % channel the cash into sizzling new benefits platforms.
Industry Insight from Sorangi Shah
Shah’s take? “We were shocked that a full third of employers took the entire NI saving and handed it right back to employees. Only a fifth of firms kept the money. That’s bound to shift as budgets tighten. It’s only a matter of time before we see a broader trend toward conservation of NI savings.”
Why the Shift Matters
In a climate of frugal growth, keeping NI savings could mean more flexibility for a company’s future projects—or a quick dip into the reserve during a downturn. For workers, the same savings represent a tangible boost that’s usually better than a mere tax deduction.
Bottom Line
Employers are walking a tightrope, juggling generosity against business hunger. The die is currently in the balance: are we looking at a future where more leeway goes back into employee pockets, or a reality where employers tighten their belts with the NI cookie?
Actions for employers with salary sacrifice in place
Time to Re‑think Your Pension Plans
Even if you’ve already rolled out a salary‑sacrifice scheme for your staff’s pension, the recent rise in National Insurance (NI) contributions gives you a nudge—or a shout—to double‑check everything.
Why It Matters
Higher NI means both sides pay more in taxes, but with a well‑structured salary‑exchange arrangement you can actually cut that cost.
What is “Salary Exchange” Anyway?
What most people call salary sacrifice is better described as a salary exchange. The magic word is “exchange” because nobody actually gives up anything—both the company and the employee walk away a bit richer.
Benefits for Everyone
- Less NI for the company, freeing up cash for other projects.
- Lower personal tax bills for employees, improving take‑home pay.
- Job‑level engagement goes up; workers feel they’re getting real value for their effort.
Make Sure It’s Compliant
Before you roll out a new scheme, double‑check the legal framework. It’s easier to stay on the right side of tax law than to pay the penalty.
Take the Leap, It’s Worth It!
With the double advantage of savings on NI and tax, salary exchange is worth considering. Don’t wait for the next tax bill—take the opportunity to maximise value now.
