Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Pay & benefitsPensionsOpinionSalary Sacrifice

HR should spread the ‘salary sacrifice benefits pensions’ message

by John Charlton 11 May 2009
by John Charlton 11 May 2009

HR managers should be telling high earners in their organisations how to take advantage of salary sacrifice to boost pension contributions and cut tax and National Insurance (NI) contributions.

Changes to taxation on annual earnings of more than £100,000, due to come into effect next April, mean that using salary sacrifice to pay more into a pension fund could be almost self-funding. It would also cut employers’ NI bills.

Chancellor Alistair Darling announced the changes in last month’s Budget. Individuals whose gross income is more than £100,000 will lose £1 of their tax allowance for every £2 of income above £100,000, so those earning more than about £112,950 will get no personal allowance.







Jon Robinson says that changes announced in the budget which affect pension tax relief for higher earners has put the spotlight on salary sacrifice schemes for those earning more than £100,000 and represents a “win win” situation.

These changes mean that for a band of income between about £100,000 to about £112,600, the marginal rate of icome tax will be 60%. For example, someone earning £112,590 would pay tax of £38,240 while someone on £100,000 will pay £30,470 in tax.

But, should the higher earner sacrifice £12,950 of salary, to a pension fund, the tax savings would be about £7,770; they would be no worse off in their pocket, but their pension fund would enjoy a respectable boost.

Jon Robinson, tax specialist at Pinsent Mason, said: “The key for HR managers in all of this is that it is obviously an increase in the highest rate of tax for your high earners and a decrease in personal allowances, all of which will push up the overall tax bill for the highest earners.

“So, if salary sacrifice is not something you already have in place it is definitely something that employers should be considering more and more seriously.”

He added that salary sacrifice “saves employers’ NI contributions and these are scheduled to go up by 05% from 2011, from 12.8% to 13.3% of gross salary. So, salary sacrifice really is a win-win for both employer and the employee”.

Employers save because employees – after salary sacrifice – see their gross salaries fall which means employers’ NI contributions also drop.

The funds released could be used to finance other benefits or to enhance the employee’s pension fund, although, employers are not obliged to use them in this way, and could keep any savings generated.







Jon Robinson, tax specialist at Pinsent Masons, explains the simplest and most common form of salary sacrifice in favour of employer pension contributions.

Robinson also said that HR professionals need to make sure their employers “are on top of changes” to tax rates for those earning more than £150,000 per annum. One change will cut income tax relief on pension contributions made by these high earners.

It will mean their tax relief on pension payments will fall from 40% to 20%.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

“Employers need to make sure they have got the systems in place to process pension contributions correctly during this transitional period and, going forward, from 2011 onwards,” said Robinson.

The transitional rules have yet to be fully formulated, he added, but said they will certainly bear down on those earning £150,000 plus who want raise their pension contributions significantly.

John Charlton

previous post
British Airways calls for 100 pilots to volunteer for redundancy
next post
Nurses fear whistle-blowing on neglect will harm their careers

You may also like

Public sector workers gain pay rises of up...

22 May 2025

Next to improve wage-setting transparency after shareholder pressure

16 May 2025

Culture, ‘micro-incivilities’ and invisible talent

14 May 2025

TPT to launch multi-employer CDC pension scheme

12 May 2025

Rethinking talent: Who was never considered in the...

7 May 2025

Eight ways to best support grieving employees

6 May 2025

Ofgem workers ballot for strike action

2 May 2025

Top 10 HR questions April 2025: increases to...

2 May 2025

Millions at risk of retiring under-pensioned

30 Apr 2025

What will reward look like in 2035?

28 Apr 2025

  • 2025 Employee Communications Report PROMOTED | HR and leadership...Read more
  • The Majority of Employees Have Their Eyes on Their Next Move PROMOTED | A staggering 65%...Read more
  • Prioritising performance management: Strategies for success (webinar) WEBINAR | In today’s fast-paced...Read more
  • Self-Leadership: The Key to Successful Organisations PROMOTED | Eletive is helping businesses...Read more
  • Retaining Female Talent: Four Ways to Reduce Workplace Drop Out PROMOTED | International Women’s Day...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+