Salary sacrifice secrets: how the right benefits can add up to NICs savings

Описание: Major changes are coming soon to National Insurance Contributions (NICs), with an increase to the rate of employer NICs, a reduction in the secondary threshold and an increase in the National Minimum Wage – all from April 2025.

All this means it’s more expensive to employ your staff (let alone hire any new ones). So smart employers are looking for ways to reduce their NICs liability and find ways to boost reward packages without increasing salaries.

A salary sacrifice scheme might just be the key to solving this puzzle. Select the right portfolio of benefits, and you’ll not only save on tax and NICs, but you’ll enhance your reward packages in ways that suit your employees’ individual needs.
_____________________
What’s in this webinar?

NIC Changes and Cost Impact
Employer NICs Increase: Class 1 employer National Insurance increased from 13.8% to 15% [03:11].
Threshold Reduction: The point at which employers start paying NICs reduced from £9,100 to £5,000 [03:24].
Significant Cost: The effect of these rises is a 2.9% increase in cost for an employee earning £30,000 (before any pay rise) [03:49].

Salary Sacrifice Basics
Salary sacrifice is a variation to an employment contract where an employee gives up a portion of their contractual pay in return for a non-cash benefit [05:14].
Employee Savings: The key benefit is savings on tax and national insurance.
Basic-rate taxpayers save 28% (20% tax, 8% NIC) [05:59].
Higher-rate taxpayers save 42% (40% tax, 2% NIC) [06:10].
Employer Savings: For a truly tax-free benefit (like Cycle to Work), the employer saves 15% on the cost of the benefit through NICs savings [06:20].
Limitation: Benefits that are convertible to cash (eg paying a mortgage) will not work, or will be subject to National Insurance [14:14].

Permitted Salary Sacrifice Benefits
After the introduction of Optional Remuneration Agreements (OpRA) in 2017, the fully tax-exempt schemes were limited to the following [09:31]:
Pension contributions [09:57].
Cycle to work [08:10], [11:17]
Electric vehicles (EVs) [11:38], [18:12].
Childcare vouchers [10:48].
Workplace nurseries [11:02].
Holiday trading [12:15].
Private medical insurance and tech schemes [12:34], [19:14].

Implementation and Platform Benefits
While it is possible to set up salary sacrifice schemes directly with a provider, using a dedicated benefits platform (like Ciphr Benefits) offers significant advantages [20:43]:
Single Database: Brings together all benefits (salary sacrifice and non-salary sacrifice, like Employee Assistance Programs) in one central place [21:07].
Compliance: Systems can be adjusted to stop employees from sacrificing salary if it takes them below the National Minimum Wage (NMW) [15:44].
Digital Process: Agreements are done electronically, and the system generates the necessary payroll deduction output file and reports for providers [16:21], [17:07].
Speed: Implementation of the platform and setup of providers can typically be done in six to eight weeks [22:11].

______________

Want more great HR webinars from Ciphr? Check out our upcoming webinars here: https://www.ciphr.com/webinars