Written by Adrian Jubb, independent financial advisor at Champion Financial Planning
For many SMEs, the National Insurance Contribution (NIC) hike announced in last year’s Budget has added another layer of financial complexity to an already challenging economic environment. Rising employment costs, coupled with fresh tax increases, are leaving many business owners searching for strategies to manage expenses more effectively.
One solution gaining traction is salary sacrifice – a simple yet powerful tool to reduce costs while boosting employee benefits.
What is salary sacrifice?
Salary sacrifice is an arrangement where employees agree to exchange a portion of their gross salary, bonus, or redundancy package for increased contributions to their workplace pension. Similar to other salary-based benefit schemes like cycle-to-work or childcare vouchers, it delivers tax efficiencies for both the business and its people.
Why consider salary sacrifice?
Salary sacrifice offers a win-win for businesses and employees. Employers benefit from reduced NICs, which will rise from 13.8% to 15% in April 2025, while employees pay less income tax and NICs. Employers can reinvest these savings in several ways, whether offsetting costs, enhancing salaries, or funding business growth.
With the National Living Wage increasing to £12.21 per hour and NICs thresholds dropping from £9,100 to £5,000, the financial pressure on businesses – particularly those with lower-wage workforces – is mounting. Salary sacrifice provides a much-needed opportunity to mitigate these rising costs while enhancing your workplace benefits offering.
How to get started with salary sacrifice
Your first step should be to speak with your Champion accountant. They can calculate your potential savings based on your payroll data and help you design a scheme tailored to your business.
Next, determine how you’ll allocate the savings. You have the flexibility to reinvest them into the business, enhance employee benefits, or use them to support organisational growth. For example, the savings could offset rising NICs, fund salary increases, or even create new positions to help your company thrive.
It’s also worth consulting a financial adviser to review your existing workplace pension scheme. Improvements to your pension offering could enhance employee satisfaction and make your business more attractive to top talent.
Why salary sacrifice makes sense for SMEs
Businesses across sectors can benefit from implementing a salary sacrifice pension scheme. It’s a practical, efficient solution to rising costs and can foster greater employee engagement, retention, and satisfaction.
At Champion, we make it hassle-free by guiding you through every step, from calculating your savings to rolling out the scheme to your employees. We can also connect you with client-facing literature and presentations to ensure your team understands the benefits.
Discover how salary sacrifice could help your business mitigate rising costs while supporting your employees’ futures. Contact me to discuss your options and start reaping the benefits.
📧 Email: adrian.jubb@championgroup.co.uk
📞 Mobile: 07886 739738
Champion Financial Planning is a trading style of Cheetham Jackson Ltd (FRN514951) which is authorised and regulated by the Financial Conduct Authority.
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