Salary Sacrifice Calculator

When your employees give up part of their salary to be paid into their pension, they pay less National Insurance on their income and so does your organisation. See how much everyone saves below.

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Tell us two things about your company

£
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Your results

With Salary Sacrifice your company could save
£34,500 per year

And, a combined saving for all employees of
£30,000 per year

Here's how we worked that out:

5%

This is the standard salary employees usually sacrifice

£345

This is how much you'll save in National Insurance contributions per employee

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Find out how to save £34,500 every year with salary sacrifice

Get in touch for a free consultation on introducing salary sacrifice where you work.

Speak to an expert Download our Salary Sacrifice Guide

How do I use the salary sacrifice calculator?

Just enter the number of employees on your payroll, along with your employee's average salary.
 
The calculator uses a standard value of 5% salary sacrifice to calculate the savings your organisation and its employees can make by reducing National Insurance contributions.

What is salary sacrifice?

Salary sacrifice is an arrangement where employees trade a portion of their salary for non-cash benefits, such as pension contributions or a company car, resulting in potential tax and National Insurance savings.
 
Despite offering a simple way to cut down tax bills and help employees keep more of their gross salary, salary sacrifice in the UK is only offered by 41% of SMEs.
 
Read more in our What is salary sacrifice? article.

How is salary sacrifice calculated?

Let's look at this from an employee's perspective and an employer's perspective.

Meet Rachel, who earns £50k per year.

  • She currently pays 5% of her earnings into a workplace pension scheme. Her employer adds a further 3%, so her total yearly pension contribution is £4k per year.

  • Rachel agrees to a 5% salary reduction with her employer. This works out at £2.5k, the the same amount she was contributing annually to her pension.

  • Her employer pays that £2.5k into the pension scheme directly. Her salary is now £47.5k. This is her salary sacrifice.

  • Because her gross salary is lower, she pays less tax, so her take-home pay increases by £300 per year. 
Meet Bauble, a B2C tech startup that helps people turn unloved jewellery into cash.
  • Bauble recently took on their 100th employee and their annual salary bill is £5m. This means they pay National Insurance of £564k each year.
     
  • To help employees take home more of their income, Bauble offer salary sacrifice.

  • If every employee took them up on 5% salary sacrifice their National Insurance bill is reduced to £530k.

  • Bauble stands to save up to £34.5k each year by introducing salary sacrifice.

This information is relevant for tax year 23/24, 6th July 2023 - 5th April 2024.

How do tax thresholds change how much my employees save?

For earnings above the primary National Insurance Contribution threshold of £12,570 employees can save 12% of the amount sacrificed on earnings. They can save 2% on earnings above the upper earnings limit of £50,270. These thresholds and limits are accurate for tax year 23/24, 6th July 2023 - 5th April 2024.

How is my pension calculated?

Salary sacrifice adds more funds to your pension. This increases the tax-free contributions made by your employer and helps your compound interest grow over time. If your pension makes money one year, there is more money the next year to make even more investments, and so on. Einstein called compounding the most powerful force in the universe, so we call this "Einstein Money"!

How much salary do employees usually sacrifice?

Most employees that opt for salary sacrifice contribute 5% of their gross income to their pension. That's why our calculator defaults to this value.

Is there anything else I should consider?

There are a few situations where salary sacrifice may not be the right choice:

  • You won’t be able to reduce an employee’s earnings below minimum wage

  • Any life insurance or loan applications that are linked to salary may be affected by salary sacrifice. This can usually be resolved with an additional letter to the lender explain the arrangement, but it’s worth double checking if employees are applying for a loan or mortgage.

  • Statutory maternity and paternity pay is usually calculated on average weekly earnings, so employees could receive less if your overall salary is reduced

How can Penfold help with salary sacrifice?

We love hearing from business leaders interested in exploring how they can introduce salary sacrifice with their teams, and we can help with that too with our workplace pension.
 
We’ve been launching salary sacrifice schemes since 2019, and can help you understand the savings to you and your employees with a free phone consultation with one of our pension experts.
 
Speak to a Penfold salary sacrifice expert. A member of our team will explain how to save money with tax efficient pension contributions at your business.