Employer FAQ: Pension Salary Sacrifice Implementation
1. Pre-Implementation: Strategy & Compliance
What are the primary benefits for the business?
Salary sacrifice is a "win-win" for both parties. Because employees "sacrifice" a portion of their gross pay, your National Insurance (NI) bill as an employer is reduced.
The Savings: Employers typically save 13.8% on every pound sacrificed.
Reinvestment: Many employers choose to pass some of these savings back to employees via higher pension contributions or other benefits, though this is entirely at your discretion.
Is "Auto-Enrolment" into Salary Sacrifice legitimate?
Yes. Under HMRC guidance (EIM24753), you can move all eligible employees to salary sacrifice provided you:
Inform them of the change in advance.
Provide a formal contractual change notice.
Give them the option to "opt out" and remain on a standard (non-sacrifice) scheme. Mintago manages this entire consultation and notification process for you.
Do we need to issue new employment contracts?
Existing Staff: No. The consultation email sent by Mintago includes a "contractual change clause." If the employee does not opt out, this acts as a legal variation to their existing contract.
New Hires: Yes. You should update your offer letters and contract templates for future employees to include salary sacrifice wording. Your pension provider can usually provide template language.
How does this affect Statutory Maternity Pay (SMP)?
The 90% Rule: SMP is calculated based on "average weekly earnings." If an employee is in a salary sacrifice arrangement during the assessment period, their SMP may be lower because their taxable pay was lower.
Employer Obligations: You cannot deduct salary sacrifice from Statutory Pay. During maternity leave, the employer must typically "top up" the pension contribution to ensure it remains at the level it would have been if the employee were still working at their full reference salary.
2. Technical Setup & Payroll
Will our pension provider or contribution amounts change?
Provider: No, your provider remains the same. Only the method of deduction changes.
Percentages: The total amount landing in the pot stays the same. For example, a 5% employee + 3% employer contribution simply becomes a single 8% employer contribution on your reports.
Understanding Pensionable Pay Basis
When setting up, you must ensure your "Pensionable Pay" definition remains consistent. Common bases include:
Qualifying Earnings: Includes salary, bonus, commission, and overtime (capped at specific thresholds). Total minimum 8%.
Basic Pay (Set 1): Uses base salary only. Total minimum 9%. Requires certification every 12–18 months.
All Pay (Set 3): Includes all earnings. Total minimum 7%. Requires certification.
What is the difference between "Net Pay" and "Relief at Source"?
Net Pay (NPA): Contributions are taken before tax but after NI. Moving to salary sacrifice saves these employees NI.
Relief at Source (RAS): Employees pay from take-home pay and get a 20% top-up from the government. Higher-rate taxpayers must manually claim back extra relief. Salary sacrifice automates this, giving them the full tax break instantly.
3. National Minimum Wage (NMW) Compliance
How do we ensure NMW compliance?
It is a strict HMRC rule that a salary sacrifice cannot take an employee's hourly rate below the National Minimum Wage.
Employer Responsibility: While Mintago provides guidance and eligibility assessments, the legal responsibility for NMW compliance rests with the employer/payroll provider.
The "Safety Net": If an employee's pay is too close to the NMW limit, they must remain on a non-salary sacrifice scheme. Even if an employee volunteers to go below NMW, you are legally prohibited from allowing it.
Do I need to keep two pension schemes open?
Technically, it is one scheme with the provider, but your payroll software will have two deduction setups:
A Salary Sacrifice group (for eligible employees).
A Standard (Net Pay or RAS) group (for NMW-impacted or opt-out employees).
4. Post-Implementation & Employee Lifecycle
Can employees sacrifice their bonuses or commission?
Yes, but this requires a written agreement signed before the bonus is processed. This is a highly effective way for employees to save tax and for the company to save NI.
How do employees change their contribution levels?
Employees can request changes (e.g., increasing their contribution to 10%) via the Mintago platform.
Once you approve the request, Mintago automatically generates and emails the required contractual change variation to both you and the employee, removing the admin burden from your HR team.
What happens if an employee wants to "Opt Out" or leave?
Within 30 Days: This is a formal "Opt Out." Any contributions made are refunded via payroll.
After 30 Days: This is "Ceasing Contributions." No refunds are given; the funds stay in the employee's pension pot until retirement.
How does Mintago support us during this?
We provide:
Collated lists of employees who chose to opt out during consultation.
Technical guidance for your payroll team on software configuration (Sage, Brightpay, etc.).
Post-implementation "Health Checks" on your first three payslips to ensure everything is running correctly.