I know someone whose HR have their company making pension contributions via net pay rather than salary sacrifice.
as far as I can see they’re getting full tax relief (good) but the employees are still paying 8 or 2% depending on salary in NI on the amount they’re contributing, and the employer has a paying 15% NI too, for no benefit to anyone but the Exchequer AFAIK.
Any upside to this choice that I’ve missed? Is it better in some way for basic rate tax payers? As far as I know they’re getting full have no employees earning below the 12k tax threshold.
As far as i'm aware the whole point of salary sacrifice are those pension contributions are taken from your gross earnings before any taxes are applied (Income or NI)
If those contributions are taken afterwards, then it would disadvantage lower earners more, as once you're at the higher tax rate the NI% drops.
Aaaaw. Chew's broken ranks
OP. I think the reason nobody else has replied is because they can't think of any reasons.....ie SS is indeed best
Net pay is better because the employee and employer will be chipping in more tax and NI to keep the nation running
once you're at the higher tax rate the NI% drops.
Not so much for the employer
It can have an affect on for example mortgage applications if they see your reduced salary than the “actual” gross salary.
However, I do this at work and the salary on my payslip shows as still being the gross salary. So I assume they’d have to go through my payslip in detail and work out what tax etc is being paid to determine if it’s correct or not. And other than saving tax/NI, I can’t see how it’s any different.
Luckily those of us at my office that do it via salary sacrifice are given a 0.5% bonus contribution from work, presumably because they save more themselves if you choose to do it that way.
Luckily those of us at my office that do it via salary sacrifice are given a 0.5% bonus contribution from work,
Tight bastards!
Our work gives us the full 13.8% on top. Fair enough it really should be 15% now but we let it pass
The only downsides are potentially reduced borrowing capacity and reduced income based life assurance e.g. death in service benefits.
Er, net pay gives you money you can exchange for goods and services not available through salary sacrifice? I hesitate to say ‘coke and hookers’ but those and other things.
If it’s like cycle to work then if you are on (or close to) minimum wage SS causes a problem because it appears you are then earning below the required level.
Thanks all, it’s a mystery why they’re doing it that way!
it involves HR and finance working together and in many orgs that’s enough to scuttle it!Thanks all, it’s a mystery why they’re doing it that way!