A message for you to share with your SME clients now that they are feeling the higher NI cost

Enquiries about salary sacrifice schemes have rocketed since the Autumn Budget, according to advisers, who say more small and medium sized businesses (SMEs) need to “wake up” to the pension arrangement’s potential.

Wes Wilkes, CEO at IronMarket Wealth, told Newspage Media his team has been “rushed off our feet running clinics, webinars and workshops” about salary sacrifice, as firms look to mitigate against the additional employer National Insurance (NI) costs announced in last year’s Budget.

Other advisers are reporting the same. Anita Wright, Chartered Financial Planner at Bolton James, says she “will be proactively communicating salary sacrifice as part of efficient tax planning moving forward”.

Yet not all SMEs are aware of the advantages of salary sacrifice. Riz Malik, IFA at R3 Wealth, warned: "More SMEs need to wake up to its potential, both for their staff and cutting their own National Insurance bills."  

Advisers clearly have a role in introducing, or reminding, SME clients of the benefits of salary sacrifice schemes to reduce the NI contributions employers pay on their employees' salaries, currently set at 13.8%.  

Using some real world examples can bring these conversations to life during client meetings.  

To illustrate the potential savings, consider an employee earning £36,000 per year. Under the current NI threshold, the employer’s NI contribution would be £4,650 per year. By implementing a salary sacrifice arrangement where 10% of salary is sacrificed, this would reduce the employer NI contribution to £4,110, resulting in a saving of £540 per year PER EMPLOYEE.

 However, it’s important to flag that salary sacrifice may affect entitlements based on gross pay, such as mortgage applications, statutory benefits or death in service cover, so it is vital to tell SME clients to warn employees to consider their individual circumstances before opting in.

Ultimately, giving clients something to think about before you meet them is a great way to foster loyalty and action.

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