Salary sacrifice schemes, also known as salary exchange, allow employees to receive part of their pay as non-cash benefits, making employee benefits more affordable. With the average cost of employing someone set to rise by £900 annually due to national insurance increases, these schemes – covering items like bikes, childcare vouchers, pensions, and holiday buy – are becoming increasingly popular.
Employers can save significantly on national insurance contributions by optimising their salary sacrifice arrangements. Here are five strategies to enhance participation:
1. Open year-round opportunities
Traditionally, salary sacrifice schemes are available only during specific periods, which may limit participation. Allowing employees to opt in throughout the year can increase engagement. Employee benefits software like Darwin can streamline this process, automatically managing deductions and stopping payments once a benefit is fully paid for.
2. Make it the default option
Many employees may not fully understand the benefits of salary sacrifice, leading to lower participation rates. By making core benefits, like pension contributions, a default salary sacrifice option (with an opt-out choice), more employees may remain enrolled. Tools like Darwin can help clarify options for employees.
3. Use clear language
The term ‘sacrifice’ can be off-putting. Reframing to schemes as an ‘exchange’ can help employees understand that they are trading part of their salary for valuable benefits. Additionally, using employee benefits software such as Darwin can clarify eligibility and potential savings, making the process less daunting.
4. Align with wider strategies
Linking salary sacrifice schemes to broader people or wellbeing strategies can enhance their appeal. For instance, promoting tax-free bikes aligns with environmental goals, while offering extra holiday days can help reduce burnout.
5. Communicate financial wellbeing
Highlighting the tax savings and benefits of salary sacrifice can improve financial wellbeing, encouraging employees to participate in pension top-ups and other financial benefits.
By implementing these strategies, employers can maximise the effectiveness of salary sacrifice schemes, benefiting both employees and the organisation.
FREE webinar: Offsetting Increased National Insurance Costs | Thursday 1 May 2025, 11am
