Employer savings on salary sacrifice (passing on to employee)

hugheskevi

poseidon1 said:

Shimrod said:

Zerforax said:

Grumpy_chap said:

Some employers pass the saving on.
Some employers don't.
Some employers split the difference.

To be honest, the employer does not need to operate SS and doing so incurs an admin cost so perhaps they need the NI saving to cover that burden.
That is your choice.  I'd expect a "computer says no" response but in a rather more blunt choice of words.  You asked the question once and received an answer.  Asking the question a second time is unlikely to be fruitful.

It's a big organisation across many countries. Previously I just had asked the UK HR team who said they don't do it as far as they are aware. It's about £5,500 they would be saving in NI employer costs. I guess I presumed when they make an offer, it would be based on what the overall employer cost is for them.

My current employer passes on the NI savings and as I contribute a substantial amount into the pension it provides a good boost to the employer contribution. My previous employer kept the savings but paid in 8% of salary compared to the 4% my current employer pays. They argued the I savings were included in their contribution, and for the average employee contribution that was certainly more generous.
Possibly your employer sees it the same way.
Alternatively, if a union is involved in pay negotiations it may be worth raising it that way as a part of a package.

Prior to my retirement, for years my employer ( a professional services firm) were happy to not only contribute directly to my HL SIPP ( in preference to the firm's Scottish Widows DC scheme for employees which I was not enamoured with) but also pass on their full employee's NI  savings on my salary sacrifice. That said, the employer's contribution was only 5% so not particularly generous.

Given the employer was operating salary sacrifice and passing on 100% of the employer NI savings, it is entirely sensible to have a low standard employer contribution.

All that having a higher standard employer contribution would do in this scenario is reduce employee choice in the pay/pension balance of remuneration. With a low standard contribution, employees are free to choose a higher contribution and receive all the benefits from income tax and NI. Or they can choose to retain low contributions if they prefer pay over pension. If it is assumed employees are well informed and can make optimal decisions about their pension, this is the optimal DC contribution design (but those are big assumptions!).

penners324

Zerforax said:

eastcorkram said:

I asked my employer too. Simply said they don't do it. 

Haha true I am expecting another "computer says no" response. I'm tempted to say, you can either increase my salary to £X or find another way to pass on the savings to me. Their net position would be the same if I wasn't using the salary sacrifice.

The answer could well be, the door is that way, thank you for everything you've done for us

vacheron

Our company matches any pensions contributions up to 5% of salary at a ratio of 1.6 to 1.

i.e. if we pay in the full 5% they pay in 8%. They also return 25% of their NI saving up to this amount. 

If we make any further Additional Voluntary Contributions (AVC''s) above this 5% our company will contribute their entire 13.8% NI Saving. 

 

techno12

Mine passes on all their NI saving, which is nice. They only pay in the default 3% though - not so nice.

I'm sacrificing over 60% to maximise this..

Shimrod

hugheskevi said:

poseidon1 said:

Shimrod said:

Zerforax said:

Grumpy_chap said:

Some employers pass the saving on.
Some employers don't.
Some employers split the difference.

To be honest, the employer does not need to operate SS and doing so incurs an admin cost so perhaps they need the NI saving to cover that burden.
That is your choice.  I'd expect a "computer says no" response but in a rather more blunt choice of words.  You asked the question once and received an answer.  Asking the question a second time is unlikely to be fruitful.

It's a big organisation across many countries. Previously I just had asked the UK HR team who said they don't do it as far as they are aware. It's about £5,500 they would be saving in NI employer costs. I guess I presumed when they make an offer, it would be based on what the overall employer cost is for them.

My current employer passes on the NI savings and as I contribute a substantial amount into the pension it provides a good boost to the employer contribution. My previous employer kept the savings but paid in 8% of salary compared to the 4% my current employer pays. They argued the I savings were included in their contribution, and for the average employee contribution that was certainly more generous.
Possibly your employer sees it the same way.
Alternatively, if a union is involved in pay negotiations it may be worth raising it that way as a part of a package.

Prior to my retirement, for years my employer ( a professional services firm) were happy to not only contribute directly to my HL SIPP ( in preference to the firm's Scottish Widows DC scheme for employees which I was not enamoured with) but also pass on their full employee's NI  savings on my salary sacrifice. That said, the employer's contribution was only 5% so not particularly generous.

Given the employer was operating salary sacrifice and passing on 100% of the employer NI savings, it is entirely sensible to have a low standard employer contribution.

All that having a higher standard employer contribution would do in this scenario is reduce employee choice in the pay/pension balance of remuneration. With a low standard contribution, employees are free to choose a higher contribution and receive all the benefits from income tax and NI. Or they can choose to retain low contributions if they prefer pay over pension. If it is assumed employees are well informed and can make optimal decisions about their pension, this is the optimal DC contribution design (but those are big assumptions!).

I'm not really sure that holds true as a good deal for the employee. I have to pay in 40% of my salary to gain an extra 4% of pension contribution via the employer NI savings. I'd much rather have an 8% contribution (or even 6.5% which used to be the average employer contribution before auto-enrolment) and the employer can keep their NI savings. I'm sure that would be a better deal for most employees paying the 'standard' contribution into their pension.

hugheskevi

Shimrod said:

hugheskevi said:

poseidon1 said:

Shimrod said:

Zerforax said:

Grumpy_chap said:

Some employers pass the saving on.
Some employers don't.
Some employers split the difference.

To be honest, the employer does not need to operate SS and doing so incurs an admin cost so perhaps they need the NI saving to cover that burden.
That is your choice.  I'd expect a "computer says no" response but in a rather more blunt choice of words.  You asked the question once and received an answer.  Asking the question a second time is unlikely to be fruitful.

It's a big organisation across many countries. Previously I just had asked the UK HR team who said they don't do it as far as they are aware. It's about £5,500 they would be saving in NI employer costs. I guess I presumed when they make an offer, it would be based on what the overall employer cost is for them.

My current employer passes on the NI savings and as I contribute a substantial amount into the pension it provides a good boost to the employer contribution. My previous employer kept the savings but paid in 8% of salary compared to the 4% my current employer pays. They argued the I savings were included in their contribution, and for the average employee contribution that was certainly more generous.
Possibly your employer sees it the same way.
Alternatively, if a union is involved in pay negotiations it may be worth raising it that way as a part of a package.

Prior to my retirement, for years my employer ( a professional services firm) were happy to not only contribute directly to my HL SIPP ( in preference to the firm's Scottish Widows DC scheme for employees which I was not enamoured with) but also pass on their full employee's NI  savings on my salary sacrifice. That said, the employer's contribution was only 5% so not particularly generous.

Given the employer was operating salary sacrifice and passing on 100% of the employer NI savings, it is entirely sensible to have a low standard employer contribution.

All that having a higher standard employer contribution would do in this scenario is reduce employee choice in the pay/pension balance of remuneration. With a low standard contribution, employees are free to choose a higher contribution and receive all the benefits from income tax and NI. Or they can choose to retain low contributions if they prefer pay over pension. If it is assumed employees are well informed and can make optimal decisions about their pension, this is the optimal DC contribution design (but those are big assumptions!).

I'm not really sure that holds true as a good deal for the employee. I have to pay in 40% of my salary to gain an extra 4% of pension contribution via the employer NI savings. I'd much rather have an 8% contribution (or even 6.5% which used to be the average employer contribution before auto-enrolment) and the employer can keep their NI savings. I'm sure that would be a better deal for most employees paying the 'standard' contribution into their pension.

Assume an employer has a remuneration package of pay, pension, and employer NI of £50,000 for an employee role.

They are considering a standard employer contribution rate of either 8% or 15% (using these figures to avoid complications with statutory minimum pension contributions from employee and employer combined).

• With no employer contribution the pay is £45,040 and the employer NI due is £4,960
• If they set an 8% contribution rate, the pay is £42,082 and the employer contribution is £3,367 and the employer NI due is £4,552
• If they set a 15% contribution rate, the pay is £39,795 and the employer contribution is £5,969 and the employer NI due is £4,236

All these packages come at a remuneration cost of £50,000 to the employer across pay, pension and employer NI (barring rounding errors as I have rounded to nearest £).

If the employee is offered the 8% employer contribution package, they can choose to sal sac an additional £2,286 into their pension, to which the employer adds £315 in saved employer NI contributions. This means their revised package is

Pay £39,795, employer pension £5,968.

As can be seen, the additional sal sac with employer NI refunded gives same result as the 15% option. Due to the employer choosing the 8% option, the employee can choose what balance of pay and pension they want above 8%, rather than it being mandated by the employer to be at least 15%. So the optimal remuneration offer would be statutory minimum pension and then the employee can choose their pay/pension package. Anything above this simply removes choice from the employee.

What you are saying in your response above is that you would like your employer to offer you an enhanced remuneration package via a higher employer contribution. Which would indeed be nice, but is a different issue.

molerat

And the latest speculation is that there won't be any employer NI saving after the budget anyway.

norsefox

Zerforax said:

400ixl said:

Most from what I have seen don't. Some do though.

You also have no right to it through extra employer contributions or by a salary increase. You can insist all you like but there is no obligation on them.

You have the option to find another employer though.

Haha probably not worth throwing my toys out of the pram over. I guess on the employer side it is probably a lot of faff to set up and then they would have to monitor and adjust etc. Helpful to know its uncommon though!

If you have SS setup on the payroll system, the 'pass on NI savings to employee pension contributions' is often just basically a radio check box that you either check, or leave unchecked.

What the finance team do in the background is probably a trifling matter, but from a payroll perspective it's basically a payroll software switch from on to off, or vice versa.

Zerforax

molerat said:

And the latest speculation is that there won't be any employer NI saving after the budget anyway.

Okay sounds like I need to wait to see what happens in the Budget then!

musol

My employer passes on the whole NI saving to me. I put most of my salary into my pension and therefore 13.8% of this is a lot of money. If, in the budget, they remove the NI saving on employer contributions then I'm bugg£red!