Many businesses are exploring salary sacrifice schemes as a strategic response to the upcoming increase in National Insurance Contributions (NICs) according to a survey conducted by BDO, involving 500 mid-market companies.
Tracy Gill, Payroll Manager at Whitley Stimpson Accountants and Business Advisors, says:
“Nearly half of these businesses are considering this approach to mitigate the financial impact.”
The survey revealed that 47% view salary sacrifice as a viable option to counterbalance the rising NIC costs set to take effect in April. This trend reflects a broader movement among employers to adapt to the new tax measures, with 44% of respondents planning to outsource or offshore work as an alternative cost-saving strategy. Additionally, 24% are contemplating reducing or eliminating planned pay increases or bonuses, while 21% are considering scaling back on hiring.
Overall, a significant 95% of those surveyed acknowledged the need to take action in response to the Budget changes.
Tracy said:
“Salary sacrifice schemes can offer National Insurance savings for both employers and employees, with options including pensions, electric vehicles, and cycle-to-work initiatives. For businesses not currently offering these schemes, now is an opportune time to start, especially as many employees reduced their pension contributions during the pandemic. There are potential benefits for higher-earning employees, particularly those near critical income thresholds. By participating in salary sacrifice programmes, these workers might lower their adjusted gross income, thereby maintaining access to benefits such as child benefit and free childcare.”
The survey results also indicate that the Budget changes may drive businesses to seek additional strategies to manage fixed costs. Employers must ensure that participation in these schemes does not reduce an employee’s earnings below the National Minimum Wage, which could lead to serious repercussions.
Whitley Stimpson, with its dedicated payroll team, is ready to assist businesses in navigating these changes. The firm supports a wide range of payroll clients, from small businesses to larger enterprises, and is committed to improving efficiencies to limit payroll costs.
As the April 2025 deadline approaches, the decisions made by businesses could significantly influence their operational strategies and impact employee remuneration in the coming months.
If your business requires help with its payroll process, contact the Whitley Stimpson payroll experts.