Salary sacrifice benifits

danechkin

Hello! Recently I started working in the new place and new employer has auto enrolled me into salary sacrifice scheme. I've read all the plus and minuses of it (especially related to taxes). But I still do not understand few things.
Salary sacrifice is beneficial for both employee and employer (both are paying less taxes) so ideally the employer should pay more than 3% in case of sacrifice scheme (which it is obliged to pay). And my employer is paying exactly 3%.
I was wondering if the employer doesn't share the benefit of paying less taxed in the form of bigger top up percentage, wouldn't it be better to switch to deductions scheme and have 3% from bigger salary (although I would get 5% from taxed salary). It is so complicated, would be good to have a tool to calculate those numbers.

MallyGirl

with salary sacrifice you benefit from avoiding paying NI too which is another 12% if you are a basic rate tax payer

AlanP_2

There is a tool, it's called Excel or GoogleSheets.

SS saves you 12% NI over and above a standard deduction system, both save you income tax.

It also saves your employers NI contribution but they are not obliged to share that with you although some do.

Dazed_and_C0nfused

The employer doesn't save any tax via salary sacrifice.

They do save National Insurance but this can mean the employer sometimes pays the NI saving (or part of it) into the pension.  I don't think they generally pay an extra % due to this.

CookieMonster

I use
Annual Salary Sacrifice Calculator | 2021/22 Tax Calculator (icalculator.info)
which is spot on for me.

jamesd

Your employer seems to think that they are better off keeping most of the 13.8% employer NI that they save, paying only 3% in. That might be true.

Say most employees are taxed at higher rate on their pension contribution money. They save only 2% NI on their contributions above their matching level so they might as well make extra contributions to a non-work scheme to get maximum flexibility. In this case, the employee gets the full income tax saving and loses the 2% NI saving but the employer loses the whole of their 13.8% NI saving.

For basic rate employees the employee saves 12% NI above the matching level. That's a bigger loss than 2% so it's more likely to be enough to get their contributions paid into the work scheme.

When my former workplace consolidated schemes I used this logic to get them to share half of the saved employer NI to encourage higher rate tax payers to use the work scheme for extra contributions. If your place similarly has lots of higher rate tax payers they might change. If most are basic rate they might rely on the 12% employee NI to do the job. No harm asking.

Even if you are a higher rate tax payer you can usually save some 12% employee NI by concentrating your sacrifice into as few months as possible near to minimum wage.

Thrugelmir

danechkin said:

Recently I started working in the new place and new employer has auto enrolled me into salary sacrifice scheme. 

Doesn't sound like like a salary sacrifice scheme. Just a standard work place scheme. Salary sacrifice schemes will always be optional.