Pension Salary Sacrifice

We are introducing an additional pension scheme as many employees want to use salary sacrifice instead of the normal pension arrangement. After reading everything regarding salary sacrifice, two very important questions remained: 1) Can employees change their sacrificed amount periodically or should the agreement be fixed for a certain period of time i.e. are they limited on how many times they can change the amount? This one employee wants to double his sacrificed amount for the next 2 months but reverse back/ decrease it after these 2 months? What would the implication of that be, wouldn't HMRC want the missed tax and ni to be paid anyway? We are aware that the employment contract needs to be amended every time. 2)Another employee wants to do salary sacrifice but in his private pension provider. We can't find information if we are able to do that or salary sacrifice can be executed only when using the workplace scheme as this is an arrangement between the employer and the employee. We know that we are not obliged to pay in their private pots, but the company is willing to do so. I will be very grateful if you could respond to these 2 specific questions as we are unsure what the effect/ possibilities are? Thank you

Please can I have some thoughts and clarity, or directions for the appropriate place to ask for advice on these. Thank you

Hi petya.powell,

A true salary sacrafice must be a contractual change to the employees rate of pay, this means they cannot have any rights for their salary to increase back to what it was originally.

Also you cannot put an end date on a salary sacrafice.

You can however have contract reviews to review their rate of pay but this cannot be linked to changes to the salary sacrafice or benefit.

You would need to establish whether or not you could make an employer contribution to the employees private pension.

If you can then you should be able to make the payment after the salary sacrafice.

Thank you. 

Thank you so much for your reply. Knowing that the employees can't go up and down every month sacrificing different amounts really helps.

Hi, Please can I clarify the points above. Salary sacrifice is introduced at the start of 2023: In January 2023, an employee agrees to a change in their terms and conditions such that they exchange 10% of their salary for a employer contribution to their pension. In February 2023, that same employee agrees to a change in their terms and conditions such that they now exchange only 5% of their salary for a employer contribution to their pension. In March 2023, that same employee agrees to a further change in their terms and conditions such that they now exchange 10% of their salary for a employer contribution to their pension. I understand that this is okay, provided that each amendment is a formal change to the terms and conditions, AND provided that the employee has no unilateral right make month by month changes... Please would you confirm the position. Thanks

Hi,

In order to be a true salary sacrafice yes the employee cannot have any right to the money they have given up. However the fact that the employee appears to be able to just agree to a change in terms which results in them getting their salary returned to a higher amount could suggest they do have rights to this money. You would need to be able to justify this.

Thank you.