Salary Sacrifice Schemes: A Strategic Approach to Mitigating NIC Increases

Published: April 27, 2025

With the rise in Employer National Insurance Contributions (NICs) effective from April 2025, many UK businesses are exploring salary sacrifice schemes as a means to manage increased payroll costs.

Understanding Salary Sacrifice:

Salary sacrifice involves employees agreeing to reduce their gross salary in exchange for non-cash benefits, such as increased pension contributions. This arrangement lowers both the employer’s and employee’s NIC liabilities, resulting in potential tax savings for both parties.

Benefits and Considerations:

• Cost Savings: Employers can reduce their NIC expenses, while employees benefit from increased pension contributions without a significant impact on take-home pay.

• Compliance: It’s crucial to ensure that post-sacrifice salaries do not fall below the National Minimum Wage and that employees are fully informed about the implications of such arrangements.

According to recent reports, over 20% of small and medium-sized enterprises are now considering implementing salary sacrifice schemes in response to NIC increases .

At Mario Jacobs Ltd, we offer consultation and implementation services for salary sacrifice schemes. Contact us to explore how this strategy can benefit your business and employees.