What is Salary Sacrifice?
It’s an arrangement between an employer and an employee to change the terms of an employment contract for financial benefit. Under this arrangement, an employee gives up some of their cash earnings, for new or increased entitlements to non-cash benefits provided by their employer. This can lower the amount of tax and National Insurance an employer deducts and pays to HMRC against the employee’s remuneration package.
Under a salary sacrifice arrangement, an employee gives up some of their cash earnings in return for new or increased entitlements to non-cash benefits provided by their employer. Apart from pension contributions, such non-cash benefits include childcare vouchers, cycle schemes, travel, subsistence allowances and others.
Salary sacrifice can be financially beneficial for both employers and employees as it can reduce the amount of tax and National Insurance (NI) an employer deducts and pays to HMRC against the employee’s remuneration package. This happens when part of an employee’s remuneration changes from cash, for which tax and NI contributions are due, to non-cash benefits which are wholly or partially exempt from tax and NI contributions.
Opera 3 Payroll has been enhanced in order to automatically calculate both percentage-based and fixed-value sacrificed pension contributions and include them within the associated pension contribution files and reports.
There are many benefits to salary sacrifice in Opera 3 Payroll:
- It’s very quick and simple to set up
- Salary sacrifice can be used for both pension and non-pension sacrifices
- A pension salary sacrifice can be based either on a defined value or on a percentage
- Salary sacrifice information is printed on the payslip
- Sacrificed values are included in pension contribution reports and pension contribution files
- Pension salary sacrifice values are shown on the Employee History form
- The employer’s NI saving can be added to the contribution
- It’s included as standard with Opera 3 Payroll
If you decide to introduce salary sacrifice, Opera 3 Payroll will help you make a smooth transition, and you’ll be able to start benefiting from reduced costs simply and quickly.
Contact us for further information on Opera 3 Payroll & Salary Sacrifice.