is used for example in contribution to pension fund - so you waive the receipt as taxable and the gross amount goes into your pension - eg if you get a bonus you might want to put this in the pot.
What you should also note is that the employer also saves on employers NI contributions by not paying the money in the usual way through the PAYE system and some employers may "share" the saving they have made with the employee.
Exactly so. Gross pay can only be used to pay into a company occupational scheme - which are getting fewer & fewer. With a SS scheme the gross payment can go to a pension scheme and it results in lower NI for employer & employee. Some employers will pass all or some of the saving into the pension scheme also - many don't though. The main advantage is for higher rate tex payers who dont have to claim higher rate tax relief any longer.
Hope that all makes sense.
Not quite. The main advantage and the motivation from the employer is the reduced NI bill across the workforce. Employees only need to claim back higher rate tax relief for contract based pension schemes ( personal pension and stakeholder). For occupational schemes where there is a trust (these can be final salary or money purchase) then full tax relief is given at higher rate through PAYE so there is no need to claim.
salary sacrifice roughly means lower Ni contributions for employee and employer BUT slighly lower state second pension. "typically" the reduced NI is worth more than the loss of state pension so it is thought to be an overall good deal.
It does not work for people on national minimium wage as they cannot agree with their employer to sacrifice some of their agreed salary and be paid less than national minimum.
HTH
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Topic: salary sacrifice (Read 1039 times)