The cost of employing an individual includes both employers and employee’s national insurance contributions (NICs). Employers pay 13.8% on the salary paid and the employee pays 12% after an initial NIC free allowance.
As employers now have a duty to make pension contributions for their employees it may be worth employees considering salary sacrifice to make their contributions to the pension.
Under a salary sacrifice arrangement the salary is reduced by the pension contribution to be made, there is no NIC for the employer or for the employee on the salary forgone. The employer then makes the total pension contribution – both the employers and the employees contributions.