With employment costs continuing to rise and reward budgets under pressure, many employers are looking closely at where they can make savings without cutting back on what really matters to employees. Prior to the Autumn Budget, a workplace pension offered via salary sacrifice may have been a consideration for many.
With the changes to national insurance (NI) announced for 2029, employers are naturally feeling hesitant about implementing a salary sacrifice pension. But it is no longer about whether salary sacrifice is worth it, but whether holding off means missing out on savings that are available right now.
Time to make savings
At its simplest, salary sacrifice pensions are about making contributions work harder. Employees give up part of their gross salary, and the employer pays that amount into their pension instead. Because this happens before tax and national insurance is applied, both sides can reduce their NI costs and potentially increase pension contributions at the same time.
For employers, that means lower payroll costs at a time when wages, benefits and statutory expenses are all heading in one direction. For employees, it is often a more efficient way to build long-term savings, sometimes with little or no impact on take-home pay. These savings are available right now and remain uncapped for several years, so delaying action can quickly become an expensive decision.
Salary sacrifice savings to continue
Although changes to NI relief have been announced, they will not come into effect until 2029 and they do not remove salary sacrifice as an option. Until then, employers can continue to benefit from full NI savings on pension contributions made this way.
Here is a defined window in which salary sacrifice remains fully effective. Organisations that encourage participation now can lock in savings in the short and medium term, while giving employees time to grow their pension pots under favourable conditions.
Making a difference to employee retirement savings
Beyond the cost savings, salary sacrifice plays an important role in tackling a bigger challenge: helping employees save enough for retirement. Auto-enrolment has brought many people into pension saving, but minimum contribution levels are widely seen as falling short for long-term needs.
Salary sacrifice can help close that gap by making higher contributions feel more achievable. When employees understand how it works and why it benefits them, participation and contribution levels often improve. Acting sooner rather than later gives employers the space to communicate clearly and build understanding, rather than trying to make changes under time pressure.
Using savings to strengthen a benefits package
Many employers do not simply pocket the NI savings that come with salary sacrifice. Instead, they reinvest these, often by boosting employer pension contributions or supporting other wellbeing initiatives. This can significantly enhance the value of the overall benefits package without increasing headline costs.
From an employee point of view, this kind of reinvestment is often easier to see and appreciate, particularly at a time when financial security and long-term planning are top of mind.
The current timeline allows plenty of room for thoughtful planning. Employers that act now can make immediate savings, support better retirement outcomes and show that their benefits strategy is both practical and forward-looking.
Making the most of what is available today can have a real impact: for employees, for costs, and for the long-term strength of an employee benefits offering.
