Salary Sacrifice Scheme Policy

Original Paul Roberts: March 2011
Updated Malcolm Gray and Ross Torkington March 2016 for the PCC

Adopted by the F&S on behalf of the PCC 10/03/2016

Introduction

The PCC operates two salary sacrifice schemes: one for payment of pension contributions, and the other for charitable donations to the PCC of St. Andrew the Less, Cambridge.

Salary sacrifice schemes are tax advantageous to both employer and employee because they allow the employee to sacrifice salary at source, without income tax or NI liability.  The employer benefits because the employer is not liable for NI contributions either.

There are certain rules which govern salary sacrifice schemes, the key rule being that the employee must genuinely sacrifice (i.e. relinquish all legal right to) the portion of their salary being sacrificed.  This means that there must be no material benefit received in exchange for salary sacrificed.

This also has impacts on how much control the employee has – the amounts cannot be freely changed month by month.

However, an employee cannot sacrifice their salary to a level whereby their salary post-sacrifice is less than the national minimum wage.

Two areas where the HMRC accepts that a genuine salary sacrifice can occur are charitable donations, when donated to a charity of the employers choosing; and pension contribution to a suitable personal pension plan.

For both schemes employer’s pension contributions will continue to be calculated on the nominal, pre sacrifice, level but the agreement will act as an amendment to their contract to set their actual post sacrifice salary.

The PCC’s salary sacrifice schemes will now be explained in further detail.

 

Charitable donations

An employee of the PCC can request that a portion of their salary be donated to the PCC of St. Andrew the Less, Cambridge, donations to be used at the discretion of the PCC (the trustees).

The amount can be specified as either a percentage of nominal salary or an exact monetary amount.

The employee can revise the amount of the contribution, or cancel the contribution with effect from the annual review date (1st June) or following a significant change of personal circumstances.

 

Pension contributions

An employee of the PCC can request that a portion of their salary be contributed to a personal pension scheme.  If the employee is entitled to a contribution to their personal pension scheme by the PCC then this amount will also be contributed to the employee’s personal pension scheme.

The amount can be specified as either a percentage of nominal salary or an exact monetary amount.

The employee can revise the amount of the contribution, or cancel the contribution with effect from the annual review date (1st June) or following a significant change of personal circumstances.

For example, Liz earns £10000 per annum, and the PCC is contracted to contribute 10% of her income to her personal pension scheme, subject to Liz contributing 3%.

Liz chooses to contribute 3% to her personal pension scheme via the PCC’s salary sacrifice scheme.

The PCC will therefore deduct 3% from Liz’s salary, and pay 13% of Liz’s salary into her personal pension scheme. Liz’s salary for tax an NI purposes will therefore be £9700 per annum and her pension scheme will receive £1300 per annum.