Salary Sacrifice. 50:50 sharing of Employers NIC?
Discussion
My employer offers a 50:50 sharing of the Employers NIC avoided under salary sacrifice.
i.e. for every £1,000 sacrificed, there is £138 less Employers NIC payable and so the employer trousers £69 and the employee sees an extra £69 paid into their auto-enrolment scheme.
What arguments do companies have for maintaining this sort of 50:50 arrangement. It seems a bit rich to me as the costs (in terms of management time) in facilitating this must be minimal...
Is it widely accepted that 50:50 is reasonable?
To put this in context, my employer operates in wealth management and has several hundred employees and doesn’t offer any enhancement to their contribution if an employee increases theirs...
i.e. for every £1,000 sacrificed, there is £138 less Employers NIC payable and so the employer trousers £69 and the employee sees an extra £69 paid into their auto-enrolment scheme.
What arguments do companies have for maintaining this sort of 50:50 arrangement. It seems a bit rich to me as the costs (in terms of management time) in facilitating this must be minimal...
Is it widely accepted that 50:50 is reasonable?
To put this in context, my employer operates in wealth management and has several hundred employees and doesn’t offer any enhancement to their contribution if an employee increases theirs...
Edited by Mogul on Thursday 23 January 10:10
bmwmike said:
My employer trousers 100% of the saved ER NIC.
This.They also benefit from paying less pension contributions.
Our company seems to target the lower paid employees offering iPhones etc on salary sacrifice, selling them as basically 0% finance deals but bundled up with non negotiable Apple care/insurance.
All feels a bit like Littlewoods catalogue and feels rather underhand, as the loss of pension is buried away.
My employer pays-in 4% (a generous 1%, or perhaps 25% as they see it!) more than the statutory requirement with no further enhancement for those who contribute more than the 4% that they are required to - ie. 8% min total contribution).
I take the point that the ERNIC avoided is the employers’ gain, but as they haven’t earned it, the argument that it is reasonable to pass on 50% of the benefit (and not 100%) is either generous or runs the risk of giving the impression that the Company is profiting from employees’ prudence, depending on one’s point of view.
I take the point that the ERNIC avoided is the employers’ gain, but as they haven’t earned it, the argument that it is reasonable to pass on 50% of the benefit (and not 100%) is either generous or runs the risk of giving the impression that the Company is profiting from employees’ prudence, depending on one’s point of view.
Edited by Mogul on Thursday 23 January 11:39
Mogul said:
My employer pays-in 4% (a generous 1%, or perhaps 25%33% as they see it!) more than the statutory requirement with no further enhancement for those who contribute more than the 4% that they are required to - ie. 8% min total contribution).
Are you sure that 1% isn’t the tax relief.Employer 3%, employee 4% and tax relief 1% is exactly the minimum 8% breakdown on the pension advisory service website.
1% would be 25% of the total, but would be 33% more than they have to, if they are indeed adding a voluntary 1% on the top.
foiled said:
This.
They also benefit from paying less pension contributions.
Mine pockets 100% of the ER NIC but their pension contributions is still 7% of my pre salary sacrifice salary. I save on EE NIC also. I believe I am 2% worse off for not getting the ER NIC and that goes into funding benefits across the all employees, which I think is good.They also benefit from paying less pension contributions.
33% yes as in 4% is 33% greater than the 3% statutory minimum employer contribution.
Good point above about some employers finding the wherewithal to fund higher than minimum contributions for all staff and clawing some of this back by trousering 100% of the ERNIC on those who are in a position to leverage SS.
I guess my employer is in that boat. They are paying in 33% more than they are obliged to, and recovering a small portion of that cost from 50% of the ERNIC avoided from those of us in SS.
Good point above about some employers finding the wherewithal to fund higher than minimum contributions for all staff and clawing some of this back by trousering 100% of the ERNIC on those who are in a position to leverage SS.
I guess my employer is in that boat. They are paying in 33% more than they are obliged to, and recovering a small portion of that cost from 50% of the ERNIC avoided from those of us in SS.
Edited by Mogul on Thursday 23 January 12:14
My employer splits the 13.8% employer NIC 50:50. For higher paid employees other than the incremental 2% NI saving that is the only reason to opt in to SS.
The company's financial advisors said to me that many businesses keep the numbers simple and increase the pension contributions by 10% and keep 3.8% for administering the scheme in this way.
The company's financial advisors said to me that many businesses keep the numbers simple and increase the pension contributions by 10% and keep 3.8% for administering the scheme in this way.
The ERNIC benefits that we are discussing here are just one of the available benefits from SS.
Take the example of someone with kids on £60k. they will be paying some 40% tax and no net child allowance will be due.
If that person switches to salary sacrifice and can sacrifice £10k, not only will they end up paying no 40% tax, they will get what ever child allowance is due to them without having to pay any of it back..
This is all before we consider the guaranteed and and discretionary NI benefits.
Take the example of someone with kids on £60k. they will be paying some 40% tax and no net child allowance will be due.
If that person switches to salary sacrifice and can sacrifice £10k, not only will they end up paying no 40% tax, they will get what ever child allowance is due to them without having to pay any of it back..
This is all before we consider the guaranteed and and discretionary NI benefits.
Edited by Mogul on Thursday 23 January 15:30
Remember that however they divvy up the 13.8% avoided, we are only ever talking about 13.8% of the sacrificed amount and not 13.8% of gross pay.
E.g. Mr £60k who sacrifices 15% (£12k) will have taxable income of £48k and a discretionary share of the £1,656 (13.8% of £12k) ERNIC avoided.
E.g. Mr £60k who sacrifices 15% (£12k) will have taxable income of £48k and a discretionary share of the £1,656 (13.8% of £12k) ERNIC avoided.
Ian350 said:
My employer splits the 13.8% employer NIC 50:50. For higher paid employees other than the incremental 2% NI saving that is the only reason to opt in to SS.
The company's financial advisors said to me that many businesses keep the numbers simple and increase the pension contributions by 10% and keep 3.8% for administering the scheme in this way.
Not the only reason - I don't care about the ER NIC I just care about getting as much away from the taxpersons as possible.The company's financial advisors said to me that many businesses keep the numbers simple and increase the pension contributions by 10% and keep 3.8% for administering the scheme in this way.
bmwmike said:
Ian350 said:
My employer splits the 13.8% employer NIC 50:50. For higher paid employees other than the incremental 2% NI saving that is the only reason to opt in to SS.
The company's financial advisors said to me that many businesses keep the numbers simple and increase the pension contributions by 10% and keep 3.8% for administering the scheme in this way.
Not the only reason - I don't care about the ER NIC I just care about getting as much away from the taxpersons as possible.The company's financial advisors said to me that many businesses keep the numbers simple and increase the pension contributions by 10% and keep 3.8% for administering the scheme in this way.
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