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
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
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
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.
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