What is salary sacrifice?

Salary sacrifice is an increasingly popular way for businesses to offer workplace pensions while supporting employees' financial wellbeing. But what exactly is salary sacrifice, and how can both employers and employees’ benefit?

Salary sacrifice is an arrangement where an employee agrees to exchange part of their pre-tax salary for non-cash benefits, such as pension contributions, childcare vouchers, or cycle-to-work schemes. This method not only helps employees save on National Insurance and tax contributions but also provides access to valuable benefits that improve their quality of life.

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Key benefits of salary sacrifice

· Tax and National Insurance savings

· Improved employee financial wellbeing

· Boosted employee morale and retention

· Enhanced employer brand and talent attraction

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Case study: Salary sacrifice in action

A mid-sized tech company introduced a salary sacrifice scheme offering pension contributions and cycle-to-work benefits. Within the first year, employee participation reached 65%, with employees collectively saving over £50,000 in tax and National Insurance contributions. Staff satisfaction scores increased by 20%, demonstrating the positive impact on employee morale.

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How to implement salary sacrifice successfully

To implement a salary sacrifice scheme successfully, businesses must ensure that the benefits offered align with employee needs and that the scheme is communicated effectively. Employers should:

· Consult with employees to understand which benefits are most valuable

· Provide clear documentation outlining how salary sacrifice affects take-home pay

· Use digital platforms to manage salary sacrifice efficiently

· Offer regular financial coaching to help employees make informed decisions

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Common Questions:

· How does salary sacrifice impact pension contributions?

· What happens if an employee leaves the company?

· Are all benefits eligible for salary sacrifice?

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Book a Demo to discover how Thrive can help you set up salary sacrifice pensions that benefit both your business and your employees.

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