See your National Insurance savings with our pension salary sacrifice calculator

Discover how much your business could save with pension salary sacrifice

Pension salary exchange, also known as salary sacrifice, is a simple way to reduce National Insurance costs while boosting pension contributions. Use our calculator to see your annual savings in seconds. 

Pension salary exchange explained

Pension salary exchange allows employees to give up part of their salary in return for an equivalent employer pension contribution. Both the employer and the employee pay less National Insurance as a result.

It creates a clear benefit for everyone:

• Lower costs for employers
• Higher take-home pay or pension savings for employees
• Flexibility to reinvest savings into the pension plan

Implementation is straightforward, payroll changes are minimal, and clear communication helps employees understand the value.

Why choose pension salary exchange

Managing costs is a key priority for every business. Pension salary exchange helps reduce National Insurance on pension contributions, giving you room to reinvest in your team without increasing overall spending.

Key benefits

• Lower National Insurance costs for employers
• Higher take-home pay for employees
• Quick setup with a policy addendum and payroll update

How it works

• The Employee agrees to exchange a percentage of their gross salary in exchange for an additional employer contribution.
• The employee’s taxable salary is reduced by the exchanged amount, which means both they and the employer pay less National Insurance.
• You make the pension contribution on their behalf, matching the amount they exchanged from their salary.

Your pension salary sacrifice questions answered

Is pension salary exchange the same as paying more into the pension?

No. The total contribution stays the same unless you choose to share the employer National Insurance saving. The difference is in how it’s paid, via an employer contribution instead of employee salary deduction.

Do employees take home less pay?

Usually not. In fact, take-home pay often increases slightly due to lower employee NI. If you share the employer saving, pension outcomes improve even more.

Can pension salary sacrifice affect tax, benefits or statutory payments?

For most employees, income tax stays the same because pension contributions are still made before tax. However, some benefits and statutory payments like maternity pay, sick pay, or life assurance multiples are based on post-exchange salary. This means the reduced salary after exchange could affect how those are calculated.

We’ll help you communicate the details clearly to employees, including how salary exchange may affect benefits or statutory pay, so everyone understands the value and implications.

Can everyone make contributions using salary exchange?

Not always. Employees must remain above the National Minimum Wage after the exchange to be eligible. Those whose salary would fall below this threshold may need to stay on the standard contribution method.

We will help you manage this. Our team supports you in setting up the right monitoring measures, working closely with your payroll provider to ensure thresholds are respected, and salary exchange is applied appropriately. This helps you stay compliant while making the most of the opportunity.

Is there extra admin?

Once we’ve helped you set up the correct joining method for salary exchange and you’ve configured payroll accordingly, you’re good to go.

We also support you in managing eligibility thresholds and liaise with your payroll provider to ensure the right measures are in place for smooth, compliant operation. After setup, salary exchange runs automatically with minimal ongoing admin.

What if someone wants to opt out of pension salary exchange?

If an employee opts out of salary exchange, they can do that by notifying you in writing. They can then continue contributing to their pension using the pre-salary exchange method.

Ready to take the next step in employee benefits?

Let us simplify salary sacrifice for you. We’ll help you unlock savings and enhance employee outcomes. With our expert support, we can help you implement salary exchange smoothly. Contact the team today to learn more.